The Role of Quality Shareholders in Berkshire's Success

1. Intro.
2. (1:32) - Start of interview.
3. (2:10) - Larry's "origin story." He grew up in Wilmington, Delaware ("which explains why I have corporate governance in my blood.") He attended Girard College in Philadelphia, then went to the University of Delaware (BA Economics) and Cardozo School of Law (JD). After graduation he worked as an associate at Cravath for 6 years and then joined academia with Cardozo (10 years) moving later to Boston College Law School. He later switched to George Washington University Law School where he's been for the past 10 years.
4. (6:04) - He is the founding faculty director of GW in NY (now in its 6th year).
5. (8:46) -  His experience serving on boards of directors. Currently with Constellation Software. In the nonprofit sector, he is a Trustee of the Museum of American Finance, a Smithsonian affiliate; Member of the Dean's Council of Lerner College of Business of the University of Delaware; a Member of the Editorial Board of Financial History, the magazine of the Museum of American Finance; and a Member of the Advisory Board of the Ben Graham Centre for Value Investing at the Ivey Business School, University of Western Ontario.
6. (10:42) - How he got started researching Warren Buffett and Berkshire Hathaway: In 1996 he organized a conference at Cardozo Law School on Warren's letters to Berkshire shareholders. This resulted in the publication of The Essays of Warren Buffett: Lessons for Corporate America (now in it's 5th edition).
7. (15:33) - His article on "Warren Buffett's 10 Commandments for Corporate Directors" (2017):
   1. Select an outstanding CEO.
   2. Set CEO performance standards.
   3. Adopt an owner orientation.
   4. Replace managers promptly when needed.
   5. Speak up to colleagues.
   6. Reach out to shareholders.
   7. Adjust social atmosphere of the boardroom.
   8. Compensation Committees: Negotiate.
   9. Audit Committees: Pry.
   10. Choose Well. Warren adds these qualifications that make for high-quality directors: 1) business savvy, 2) a strong interest in the specific company, and 3) an owner-orientation.
8. (32:12) - Origin and scope of the "Quality Shareholder Initiative" focused on long-term concentrated shareholders. Dubbed "high quality shareholders" by Warren Buffett in 1978, the initiative takes its title from that designation.
9. (38:42) - His take on the meme stock phenomenon: "I'm concerned about it, particularly its form of 'grievance capital' (there is a political aspect to it, for some it's not only about money)."
10. (41:34) - His take on ESG. Two different aspects:
    1. Why indexers choose ESG: 'they have a systemic business model.' They need a universal set of principles.
    2. Quality shareholders have been seeking 'doing good' for ever.
11. (48:12) - His take on dual-class share structures. There is no correlation between dual-class shares on quality shareholders. There is no particular preference for dual class shares one way or another. ["Given the wide variety of approaches to shareholder voting, quality shareholders examine dual class structures on a case-by-case basis. Among companies with dual class structures are a substantial cohort with high quality shareholder density."]
12. (52:67) - The books that have greatly influenced his life:
    1. Economics, by Paul Samuelson (1948)
    2. Economic Analysis of Law, by Richard Posner (1973)
13. (54:14) - His mentors:
    1. Originally, his headmaster at Girard College. Particularly on "values of loyalty and honesty."
    2. Warren Buffett.
    3. Lester Brickman.
14. (55:32) - His favorite quotes:
    1. "You can't soar like an eagle if you're surrounded by turkeys" by his father-in-law.
    2. "Only go into business with people you like, trust and admire" by Warren Buffett.
15. (58:00) - His "unusual habit" that he loves: raking leaves, grass or twigs.
16. (59:04) - The living person he most admires: his wife, Stephanie Cuba.

Lawrence A. Cunningham is the Henry St. George Tucker III Research Professor of Law at George Washington University;  Director of C-LEAF and the Founding Faculty Director, GWinNY. You can find him at lacunningham@law.gwu.edu or on Twitter @CunninghamProf

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Music/Soundtrack (found via Free Music Archive): Seeing The Future by Dexter Britain is licensed under a Attribution-Noncommercial-Share Alike 3.0 United States License