Shareholder Activism Quotes

There are only two ways to influence human behavior: you can manipulate it or you can inspire it. Very few people or companies can clearly articulate WHY they do WHAT they do. By WHY I mean your purpose, cause or belief - WHY does your company exist? WHY do you get out of bed every morning? And WHY should anyone care? People don’t buy WHAT you do, they buy WHY you do it. We are drawn to leaders and organizations that are good at communicating what they believe. Their ability to make us feel like we belong, to make us feel special, safe and not alone is part of what gives them the ability to inspire us. For values or guiding principles to be truly effective they have to be verbs. It’s not “integrity,” it’s “always do the right thing.” It’s not “innovation,” it’s “look at the problem from a different angle.” Articulating our values as verbs gives us a clear idea - we have a clear idea of how to act in any situation. Happy employees ensure happy customers. And happy customers ensure happy shareholders—in that order. Leading is not the same as being the leader. Being the leader means you hold the highest rank, either by earning it, good fortune or navigating internal politics. Leading, however, means that others willingly follow you—not because they have to, not because they are paid to, but because they want to. You don’t hire for skills, you hire for attitude. You can always teach skills. Great companies don’t hire skilled people and motivate them, they hire already motivated people and inspire them. People are either motivated or they are not. Unless you give motivated people something to believe in, something bigger than their job to work toward, they will motivate themselves to find a new job and you’ll be stuck with whoever’s left. Trust is maintained when values and beliefs are actively managed. If companies do not actively work to keep clarity, discipline and consistency in balance, then trust starts to break down. All organizations start with WHY, but only the great ones keep their WHY clear year after year.

Shaping the company's future requires actively engaging with shareholders and other stakeholders to build trust and understanding.

Corporate governance involves its fair share of shareholder activism, but proactive engagement can build trust and mitigate conflict.

Despite our policy of candor, we will discuss our activities in marketable securities only to the extent legally required. Good investment ideas are rare, valuable and subject to competitive appropriation just as good product or business acquisition ideas are.

The right to issue unlimited quantities of anonymously tradable shares, along with the institution of a liquid market for them, created something new: corporations with power so immense, it dwarfed that of their countries of origin, and could be deployed in faraway places assiduously to exploit people and resources. Shareholding and well-governed share markets fired up history, separating ownership from the rest of the East India Company’s activities unleashed a fluid, irresistible force. Unchecked, the East India Company grew more powerful than the British state, answerable only to its shareholders. At home, its bureaucracy corrupted and largely controlled Her majesty’s government. Abroad, its 200,000-strong private army oversaw the destruction of well-functioning economies in Asia and a number of Pacific islands and ensured the systematic exploitation of their peoples.

So I’m just proposing that we level the playing field and make those woke shareholders, like BlackRock or Al Gore’s Generation Investment Management, bear the same liability as any ordinary social activist when they engage in ordinary social activism through the companies that they invest in. Limited shareholder liability was never meant to protect well-heeled woke investors from the consequences of their actions during PR stunts at woke parades.

If you don’t feel at home in your body, you will never feel at home in the world. Up till now, Facebook’s own business model encouraged people to spend more and more time online even if that meant having less time and energy to devote to offline activities. Can it adopt a new model that encourages people to go online only when it is really necessary, and to devote more attention to their physical environment and to their own bodies and senses? What would Facebook’s shareholders think about this model?

A central tenet of the traditional command-and-control mentality is management by the numbers; this is the basis and means for decision making. The numbers are largely financial and activity-related (what people do), which may or may not be of value to understanding and improving the system. With a proclaimed interest in ‘shareholder value,’ senior managers sit astride a system that they make more unstable and suboptimal through financial interference. Almost without thinking about it, the purpose of the organization becomes ‘make the budget.’ As

According the name "investors" to institutions that trade actively is like calling someone who repeatedly engages in one-night stands a romantic.

When Charlie and I finish reading the long footnotes detailing the derivatives activities of major banks, the only thing we understand is that we don’t understand how much risk the institution is running.

We’ll see that executive pay, shareholder activism and share repurchases – often thought to serve CEOs and investors at the expense of stakeholders – can grow the pie for all. But the important word is

Shareholders imply passive holding of an enterprise’s stock. Investors highlight their responsibility to invest in the long-term success of a firm through active monitoring or engagement.

For example, until the mid-2010s many senior executives in traditional companies cackled that Amazon’s business still showed no profits. They felt it was a low-margin activity propped up by a hyperinflated share price. And within their traditional way of understanding corporate performance, they were right. But seen through a different frame, they were utterly wrong. Jeff Bezos had reframed the idea of commercial growth, away from producing annual returns for shareholders (and handing about a third of the profits to governments in the form of tax) and toward reinvesting every penny of net income to establish adjacent business lines, from Kindle books to cloud services. People see it plain as day in hindsight, but the new frame was incomprehensible to many in the moment.

corporation ought to be free to pursue activities that go beyond the pursuit of profit—America is a free country, after all—but to the extent that it does, its social-activist shareholders shouldn’t receive any special protection from direct liability. There is no government regulatory action needed here. Just a simple legal fix—arguably a form of deregulation—that clarifies that the construct of limited liability is… well, limited.

A by-product of our managerial style is the ability it gives us to easily expand Berkshire’s activities. We’ve read management treatises that specify exactly how many people should report to any one executive, but they make little sense to us. When you have able managers of high character running businesses about which they are passionate, you can have a dozen or more reporting to you and still have time for an afternoon nap. Conversely, if you have even one person reporting to you who is deceitful, inept or uninterested, you will find yourself with more than you can handle.

theory of shareholder primacy that is at the heart of so much finite-minded business practice today. “In a free-enterprise, private-property system,” he wrote, “a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.” Indeed, Friedman insisted that “there is one and only one social responsibility of business, to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.

The profit-first, profit-only view of business under the Reagan Revolution raised new concerns about the social obligations of corporations beyond shareholders to constituencies like employees, creditors, customers, and local communities. This was motivated in part by the fact that despite significant stock market increases and income growth for the wealthy, many working-class Americans were left behind in the economic growth.

Corporate social responsibility alone seemed too passive, too insular, and too self-serving. In a world that seemed to be literally on fire from climate change and social unrest, corporate social responsibility appeared to many as a privileged exercise in self-improvement, however sincere or not. Corporate self-improvement was not enough for many engaged consumers and citizens; active corporate social improvement through activism was desired and called for.

Contentious social issues like racial justice, income inequality, gun violence, immigration reform, gender equality, and climate change have all become part of many corporate agendas. Silence and indifference are becoming less the norm. The days of simply ignoring social issues or writing a check are gone. Corporations are now frequently expected to engage in social issues through public statements, sponsorships, partnerships, and policies supporting a position or a cause. Being a socially responsible corporation now also means being a socially active corporation.

This longstanding bipartisan revolving door between government and business reflects the inconvenient realities of life in a capitalistic democratic republic. On the one hand, when work- ing well, this revolving door allows businesses and government to draw on talented, ethical individuals from the private and public sectors to serve the interests of both shareholders and citizens. On the other hand, this revolving door can lead to corrosive cronyism and corruption that eats away at the integrity of both business and government as narrow interests are served, to the detriment of shareholders and citizens.

Most institutional investors in the early 1970s, on the other hand, regarded business value as of only minor relevance when they were deciding the prices at which they would buy or sell. This now seems hard to believe. However, these institutions were then under the spell of academics at prestigious business schools who were preaching a newly-fashioned theory: the stock market was totally efficient, and therefore calculations of business value—and even thought, itself—were of no importance in investment activities. (We are enormously indebted to those academics: what could be more advantageous in an intellectual contest—whether it be bridge, chess, or stock selection than to have opponents who have been taught that thinking is a waste of energy?)

In a watershed article from 1970, Milton Friedman, the Nobel Prize–winning economist, who is considered one of the great theorists of today’s form of capitalism, laid out the foundation for the theory of shareholder primacy that is at the heart of so much finite-minded business practice today. “In a free-enterprise, private-property system,” he wrote, “a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.” Indeed, Friedman insisted that “there is one and only one social responsibility of business, to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.” In other words, according to Friedman, the sole purpose of business is to make money and that money belongs to shareholders. These ideas are now firmly ingrained in the zeitgeist. Today it is so generally accepted that the “owner” of a company sits at the top of the benefit food chain and that business exists solely to create wealth, that we often assume that this was always the way that the game of business was played and is the only way it can be played. Except it wasn’t . . . and it isn’t.

We neither understand the adding of unneeded people or activities because profits are booming, nor the cutting of essential people or activities because profitability is shrinking. That kind of yo-yo approach is neither business-like nor humane.” -1987 letter

With wisdom, we recognise that our employees, members, owners, customers, shareholders, suppliers, creditors, society and other stakeholders are after all people just like us. All of them are seeking this wholeness through so many endeavours, ideas, activities, relationships, etc. Recognising this universal fact allows us to respond with compassion.

Differentiation is Survival and the Universe Wants You to be Typical. If living things [don’t] work actively to prevent it, they eventually merge into their surroundings, and cease to exist as autonomous beings. The world pull[s] at you in an attempt to make you normal. You must work to maintain your distinctiveness. We all know that distinctiveness—originality—is valuable. We are all taught to ‘be yourself.’ What I’m really asking you to do is to embrace and be realistic about how much energy it takes to maintain that distinctiveness. The world wants you to be typical—in a thousand ways, it pulls at you. Don’t let it happen. The world wants you to, as Alec Benjamin sings, change what you are for what it wants you to be. You have to pay a price for your distinctiveness, and it’s worth it…don’t expect it to be easy or free.

Scholars have turned up a mass of personal records from the man’s lifetime—more, it is often said, than exist for other writers of the period. They show his theatrical activities, his financial and property transactions, his lawsuits. They show that he was a businessman, an actor, a shareholder in an acting company, and a property investor. But they don’t show that he wrote. As the Oxford historian Blair Worden laments, “the extent and loudness of the documentary silence are startling.” This silence aggravates scholars in the extreme.

In a narrow decision, the Supreme Court determined that MCFL had violated the FECA by engaging in express advocacy with its treasury funds, but more importantly, that the FECA ban on independent expenditures amounted to an unconstitutional impediment to corporate speech. However, the Court held that only a narrow set of corporate organizations were exempt from the ban on direct corporate expenditures. Specifically, the Court formulated the “MCFL Test” that deemed only expenditures from nonprofit, politically oriented corporations allowable for express advocacy. For a corporate organization to fit this definition, the Supreme Court held that three criteria must be met: First, the main purpose of the organization must be “promoting political ideas,” and not “business activities.” Second, the group may have no shareholders that can take a part of its assets or income. Third, the group must not be affiliated with a business corporation or labor union, and may not accept contributions from those entities (see: Askin 2002).

The Economics of Property-Casualty Insurance With the acquisition of General Re — and with GEICO’s business mushrooming — it becomes more important than ever that you understand how to evaluate an insurance company. The key determinants are: (1) the amount of float that the business generates; (2) its cost; and (3) most important of all, the long-term outlook for both of these factors. To begin with, float is money we hold but don't own. In an insurance operation, float arises because premiums are received before losses are paid, an interval that sometimes extends over many years. During that time, the insurer invests the money. Typically, this pleasant activity carries with it a downside: The premiums that an insurer takes in usually do not cover the losses and expenses it eventually must pay. That leaves it running an "underwriting loss," which is the cost of float. An insurance business has value if its cost of float over time is less than the cost the company would otherwise incur to obtain funds. But the business is a lemon if its cost of float is higher than market rates for money. A caution is appropriate here: Because loss costs must be estimated, insurers have enormous latitude in figuring their underwriting results, and that makes it very difficult for investors to calculate a company's true cost of float. Errors of estimation, usually innocent but sometimes not, can be huge. The consequences of these miscalculations flow directly into earnings. An experienced observer can usually detect large-scale errors in reserving, but the general public can typically do no more than accept what's presented, and at times I have been amazed by the numbers that big-name auditors have implicitly blessed. As for Berkshire, Charlie and I attempt to be conservative in presenting its underwriting results to you, because we have found that virtually all surprises in insurance are unpleasant ones. The table that follows shows the float generated by Berkshire’s insurance operations since we entered the business 32 years ago. The data are for every fifth year and also the last, which includes General Re’s huge float. For the table we have calculated our float — which we generate in large amounts relative to our premium volume — by adding net loss reserves, loss adjustment reserves, funds held under reinsurance assumed and unearned premium reserves, and then subtracting agents balances, prepaid acquisition costs, prepaid taxes and deferred charges applicable to assumed reinsurance. (Got that?)

The higher the level of their investment activity, the greater the cost of financial intermediation and taxes, the less the net return that shareholders—as a group, the owners of our businesses—receive.

It pays to be active, interested and open-minded, but it does not pay to be in a hurry.

As Robert Kiyosaki learned during his study of admiralty law, corporations came into common usage in the 1500s to protect investors in maritime ventures. Prior to the popular use of corporations, investors would come together as a partnership, outfit a ship, and send it out for trading purposes. If the ship was lost at sea, the investors could not only lose everything but also be personally sued by various creditors. Of course, this exposure deterred people from risk taking and discouraged economic activity. Seeing this, the English Crown and courts allowed for the charter of corporations whereby risks and liabilities could be limited to the corporation itself. The shareholders, the investors in the corporation, were liable only to the extent of their contribution to the business. This was a significant development in world economic history.

Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained. By that standard, purportedly “risk-free” long-term bonds in 2012 were a far riskier investment than a long- term investment in common stocks. At that time, even a 1% annual rate of inflation between 2012 and 2017 would have decreased the purchasing-power of the government bond

Consistency ensures that the competitive advantages of activities cumulate and do not erode or cancel themselves out. It makes the strategy easier to communicate to customers, employees, and shareholders, and improves implementation through single-mindedness in the corporation. Second-order

Forming a corporation is simple. Essentially, you file a document that creates an independent legal entity with a life of its own. It has its own name, business purpose, and tax identity with the IRS. As such, it—the corporation—is responsible for the activities of the business. In this way, the owners, or shareholders, are protected. The owners’ liability is limited to the monies they used to start the corporation, not all of their other personal assets. If an entity is to be sued it is the corporation, not the individuals behind this legal entity.