ALEX BRUMMER: Warren Buffett defies governance mavens

Many years have passed since I attended the ‘Woodstock of capitalism’ that is the annual meeting of Berkshire Hathaway in Omaha, Nebraska. 

As much as we all care about climate change and corporate governance, one suspects that almost all the shareholders present this weekend will be more interested in the investment wisdom of the 91-year-old executive chairman Warren Buffett than anything else. 

The governance mavens at Calpers, which manages pensions of California state workers, are demanding that Buffett steps back and appoints a chief executive to run things. An endearing quality of American capitalism is that the boards of some of the biggest corporations do not turf directors out on age grounds but treat the views of wise heads with respect. 

What one has to understand about Buffett is the esteem in which he is held. Personally, I was first advised to buy Berkshire Hathaway when they were trading at around a $100 each. As a buyer of shares priced at less than a pound I could never imagine laying out that kind of money. 

Who imagined that three decades later those shares would be worth $458,675 each? The friend who bought a dozen or so Berkshire Hathaway shares for each of his offspring never had to worry about putting them through some of the US’s best universities and being able to climb the housing ladder in New York. 

One of the groups represented in Nebraska each year are the Buffett billionaires. These are the investors, their children and grandchildren, who bought Buffett shares early and never looked back. 

There have been complaints recently that Berkshire Hathaway missed out on the start of the tech revolution because Buffett declined to buy shares in companies which do things he didn’t understand. 

Over the decades, his portfolio of companies has been dominated by fast-moving consumer goods firms such as Coca-Cola – he is a huge fan of Cherry Coke – and the insurance world, where his career began. 

Returns in recent times may have been less exciting. The bigger the portfolio, the harder it becomes to repeat past triumphs. Buffett’s investment in Kraft-Heinz turned out to be disappointing. 

However, his much-criticised stake-building in Occidental Petroleum, when it was in deep difficulty because of the slump in energy prices, has proved well-timed, even if it aggravates climate change zealots. 

No one, including Buffett, is immortal. He and his youthful 98-year-old collaborator Charlie Munger will eventually step away. 

In anointed successors Greg Abel and vice-chairman Ajit Jain, a next generation is already lined up. Contrary to Calpers charges, Berkshire is already spending £3.1billion on renewables in neighbouring Iowa. That is a good start.

Angst-ridden 

Even before the first newly capped energy bills arrived, opposition parties had talked the country into a cost-of-living crisis. 

So effectively, that Chancellor Rishi Sunak came up with a £9billion self-help package and ministers are scrambling for ways to cut consumer costs. 

The curiosity is that the ‘huge anxiety’ reported by NatWest boss Alison Rose is not translating into problems among the bank’s customers. 

So while the other banks are making provisions for inflation and Ukraine harms, NatWest is releasing Covid set-asides. 

As a consequence, it has unveiled a 41 per cent jump in first-quarter profits. It has a healthy platform which should help the Government sell down its remaining 48 per cent stake. 

NatWest is confident that, in spite of forecasts of rising insolvencies, its army of small business customers are not yet feeling the pain. In the 2007-9 financial meltdown, NatWest was the outlier, making the worst of all lending and asset decisions.

Rose plans to be in a very different place should slowdown turn to slump.

Health warning 

After the gift to the health of the nation provided by the Oxford AstraZeneca vaccine, it is extraordinary that the Government has turned its back on evusheld, its medicine for patients with low immunity. 

The drug received rapid approval from Medicines and Healthcare products Regulation Agency, and Astra chief executive Pascal Soriot says that it can deliver up to 2billion doses worldwide. 

How short-sighted of the Department of Health to boycott the pandemic saviour.