Warren Buffett: Coca-Cola Is Bulletproof | May 5, 2014 | Summary and Q&A

Transcript

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Summary

In this video, Warren Buffett discusses various topics including the success of Nebraska Furniture Mart, interest rates, Coca-Cola's equity plan, corporate governance, Berkshire Hathaway's cash on hand, Bank of America's recent regulatory issue, Pfizer's acquisition of AstraZeneca and the topic of inversions in corporate tax.

Questions & Answers

Q: How much business has Nebraska Furniture Mart done in one week?

Nebraska Furniture Mart has done over $40 million in one week, which is a lot considering most furniture stores don't reach that amount in a year.

Q: How many shareholders attended Berkshire's shareholders meeting this year?

The numbers were estimated to be between 38,000 and 40,000, making it the biggest meeting in the company's history.

Q: Why does Warren Buffett think interest rates will change in the future?

Warren Buffett believes that interest rates will change in the future because historical trends show that rates do not remain constant, and it is unlikely they will stay at the current levels of 2.57%.

Q: Does the declining tenure rate catch Warren Buffett's attention?

Although it is surprising, Warren Buffett is used to being surprised in Parkinson and it does not significantly affect his business decisions. Lower rates actually benefit Berkshire because it allows them to issue more bonds at more favorable terms.

Q: Would a tenure rate at the current level change Berkshire's behavior?

No, Berkshire does not alter its behavior based on macro factors like interest rates. Their guiding principle is the belief that the country will do well over time, which guides their decision-making process.

Q: What is Warren Buffett's outlook for the tenure rate at the end of the year?

While he does not spend much time thinking about it, if he had to make a guess, Warren Buffett believes that the tenure rate will be higher at the end of the year.

Q: Why did Berkshire raise concerns about Coca-Cola's equity plan?

Berkshire had concerns about Coca-Cola's equity plan being excessive, but they did not want to go to war with the company. They expressed their opinions privately to the management and abstained from voting at the meeting.

Q: What does Warren Buffett think about Carl Icahn's criticism of his stance on Coca-Cola?

Warren Buffett believes that his style of engagement will be more effective in the situation compared to Carl Icahn's style. He believes that their styles differ as Icahn goes into businesses with problems, while Coca-Cola did not have a problem, just an excessive plan.

Q: Has Warren Buffett spoken with Coca-Cola CEO Muhtar Kent since the shareholders meeting?

No, Warren Buffett has not spoken to Muhtar Kent since the meeting, but he expects to have constructive discussions with Coca-Cola before they implement any plan.

Q: Should shareholders be concerned about Howard Buffett's voting for Coca-Cola's equity plan?

No, Warren Buffett explains that he has voted for plans he did not like in the past, and it is common for directors to vote in favor of proposals they may not fully agree with to maintain their effectiveness.

Q: Why does Warren Buffett believe that corporate boards are not more strident in challenging management?

Warren Buffett points out that boards are both business organizations and social organizations, and individuals on boards tend to behave in a socially acceptable way rather than maximizing business decisions. He believes that individuals' behavior is influenced by their past experience and their desire to get along with others.

Q: Should corporate governance be different in terms of individuals being more strident in expressing their views?

While it would be ideal to have more open and transparent dialogue, Warren Buffett believes that people's behavior will not change significantly in board meetings due to their past experiences and the desire to get along with others.

Q: How does Warren Buffett handle situations where the board opposes a proposal?

Warren Buffett explains that he has been in situations where the board rejects proposals, but it requires someone to initiate that opposition. The first person to speak up often faces resistance initially, but once one person challenges a proposal, others may join.

Q: Should board members be more willing to challenge proposals?

Warren Buffett believes that boards should encourage dialogue and constructive criticism, but it is challenging to change the behavior of individuals who have decades of experience. He asserts that it is necessary to pick battles wisely and save objections for situations that genuinely matter.

Q: Would Berkshire consider pursuing a deal like the inversions seen in certain mergers?

No, Berkshire would not pursue a deal like an inversion because they do not meet the criteria of having a significant number of shareholders outside the US.

Q: Why wouldn't Berkshire pursue an inversion to lower taxes?

Warren Buffett explains that Berkshire does not feel burdened by federal income taxes and believes that they are not at a competitive disadvantage with the rest of the world. He acknowledges that some companies are engaged in inversions to pay even lower taxes, but Berkshire has a wonderful business under US corporate tax rates.

Q: Would Warren Buffett support overall corporate tax reform?

Warren Buffett believes that corporate tax reform will be a significant source of contention in corporate America, as companies have different viewpoints on how tax rates should be changed. He suggests that changes to corporate taxes will face opposition and further lobbying efforts from different companies.

Takeaways

Warren Buffett discusses various topics including Berkshire's successful event at Nebraska Furniture Mart, interest rates, Coca-Cola's equity plan, corporate governance, and inversions in corporate taxes. He highlights Berkshire's financial position and its relationship with 3G Capital. Furthermore, he expresses his confidence in Bank of America's CEO Brian Moynihan, discusses the purpose of inversions, and shares his perspective on corporate tax reform.