FOCUS REPORT

Berkshire Hootenanny Goes Electric with Q&A

 Rick Wilking/Reuters

Berkshire Hathaway presented the ultimate example of an annual meeting designed to maximize shareholder participation, attracting a record crowd of 37,000 to an extravaganza of shopping and entertainment that some say challenges the Christmas season. But while the company still did not webcast this 30-year-old annual ritual, it made clever use of modern electronic participation, harnessing the efficiency of email and the experience of three journalists to manage and prioritize shareholder questions.

Shareholders (and non-shareholding investors) were directed to email questions to one of three Berkshire-designated financial journalists – Carol Loomis of Fortune, Becky Quick of CNBC, and Andrew Ross Sorkin of the New York Times –  who would then select questions to be presented in the live meeting. The process is described in the “Procedure for Q&A Period” section on page 9 of the company's “2010 Annual Meeting Visitor's Guide.” CEO Warren Buffet and Vice Chairman Charles Munger then answered the questions during the meeting’s two sessions of two-and-a-half hours each, or a total of five hours.

The process, used the first time in 2009, replaced the earlier conventional format, when shareholders would line up in one of several zones of a giant convention center and take turns asking questions, the company said. But the first-come-first-served process was inefficient according to observers, and so the company replaced it with the current method using email and journalistic judgment to bring forth the most interesting and important questions.

Besides the innovative Q-and-A, Berkshire continues to demonstrate its unique approach to shareholders. While many public companies accept meager attendance as a given, Berkshire views and nurtures its shareholders as an affinity group of investors – and customers. It not only benefits by developing loyalty, but also from the millions in sales the event generates for its own businesses and for Omaha. An Omaha Chamber of Commerce spokeswoman did not have an estimate as to the sales the event generates for the city – "that's one of the age-old questions," she said – but some estimate the impact at around $50 million.

Offering discounts to its own retailers which include Borsheim's Jewelry, See's Candies and Nebraska Furniture Mart, Berkshire makes little secret that it loves when its shareholders spend money, even opening the doors to the giant Qwest Center as early as 7 a.m. for an extra dose of pre-breakfast shopping. It displayed everything from two black Coachman Recreational Vehicles and a replica of Burlington Northern Santa Fe engine to Kirby vacuum cleaners and Ginsu knives.

Drawing 37,000 attendees did not happen overnight. Berkshire has been nurturing attendance since 1981, when the annual meeting drew 12 participants. Berkshire recently made stock ownership easier by issuing a lower priced Class B retail alternative to its famously expensive, never-split common stock, and then added more shareholders with its Burlington acquisition. The combination of practices that encouraged participation and a greatly expanded shareholder base did their magic – boosting attendance to what’s assumed to be the world record.