National Investor Relations Institute President and CEO Jeff Morgan follows up on Warren Buffett’s public comments about communicating with investors (see “Buffett takes a poke at IR”) today in NIRI’s IR Weekly e-newsletter.
The Berkshire Hathaway CEO, you may recall, told CNBC in a recent interview that as an investor he doesn’t need to be “schmoozed.” And he’s sympathetic with CEOs who don’t like meeting with analysts or investors. Buffett does his annual letter to shareholders (which I’ve often noted is enlightening and entertaining), and he and Charlie Munger answer questions for hours at their annual meeting.
Beyond that? Contrary to what IR people advise, as Buffett describes it, “I don’t think it’s important to schmooze investors.” In his 2010 shareholder letter, he boasts that top managers enjoy working for Berkshire in part because they’re “not subjected to … Wall Street harassment” – that is, meeting with investors or analysts.
Morgan provides an update from an executive in the Berkshire family – one who works with IR people - elaborating on Buffett’s philosophy. From the IR Weekly:
While his comments may have surprised you, Mr. Buffett considers the IR function to be very important, indicates Cathy Baron Tamraz, Chairman and CEO of Business Wire (a Berkshire Hathaway company), so much so that Buffett is Berkshire Hathaway’s primary IR contact. Cathy told me that Mr. Buffett’s core principles are that all investors (no matter the size) be treated the same, and they should all have the same access to information and the C-Suite. Mr. Buffett is in the unique position to do this largely through his candid and thorough annual report and the time he spends on Q&A at his annual meeting.
OK … I’m cool with the egalitarian ideal. In theory at least, the retail owner of 100 shares (or maybe one share, in Berkshire’s case) is as important as an institutional holder of 100,000. But Buffett tells CNBC the annual meeting and report are really his answer to IR. “I spend no time, for example, with any specific analyst,” he says.
That still seems odd to me. Or perhaps exceptional is the word. If your CEO is a legend in the investing world, then your company is exceptional – and Buffett’s IR approach may work fine. But I don’t think most companies have the cachet of Berkshire Hathaway. And so most of us, in my opinion, ought to talk to investors or analysts when they call, go out to tell our story, and maybe even “schmooze.”
I really have no quibble with Buffett (not that the opinion of a flea would matter to a giant, anyway). My concern is that CEOs and CFOs of companies across America should not take Buffett’s dismissal of standard practice in investor relations as the standard for all companies. Small and medium cap firms, especially, will hurt themselves if they shun contacts with investors.
Speaking of philosophy, consider this comment by Benjamin Graham, the father of value investing, to whom Buffett gives much credit for his own investing acumen. Graham and David Dodd wrote in their seminal work Security Analysis (1934):
Published information may often be supplemented to an important extent by private inquiry of or by interview with the management. There is no reason why stockholders should not ask for information on specific points, and in many cases part at least of the data asked for will be furnished. It must never be forgotten that a stockholder is an owner of the business and an employer of its officers. He is entitled not only to ask legitimate questions but also to have them answered, unless there is some persuasive reason to the contrary.
I know disclosure has changed since Graham – we have all these laws like the ’33 and ’34 Acts, Sarbanes Oxley and Reg FD – but I still like his reminder of who the owners are. And if it means employing an IRO or two to talk to investors, so be it.
What’s your opinion? Interesting comments on the prior post – feel free to weigh in.