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Companies can stay off the radar of activist investors without having to enlist the services of Wall Street advisers, Warren Buffett said Tuesday.
The billionaire CEO of Berkshire Hathaway told Fortune’s Most Powerful Women Summit in Washington that he had “zero” interest in joining the ranks of activists himself, and corporate executives who are seeking to fend them off should return to the basics.
“The best way to keep activists away is to perform reasonably well in your business and also to communicate well with your shareholders,” he said. “You’ve got a bunch of owners out there and, on balance, they’re going to be on your side. After all, they’ve got their money with you.”
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As Bloomberg reports, Buffett has long been a critic of Wall Street excesses, becoming increasingly outspoken in recent years about activist investing. In his comments Tuesday, he said even well-run companies are being targeted.
“They’re like sharks: they’ve got to keep swimming,” he complained, adding that some activists are paid fees tied to how much money they manage. “They stretch for targets, and you’re seeing that.”
Some American businesses, Buffett conceded, “are not being run in the interest of their shareholders with really capable management. When that happens, change is needed.” But, he suggested, companies should be wary of hiring Wall Street advisers to come up with anti-activist defenses.
“It’s in Wall Street’s interest to scare managements about activists,” Buffett said. “They’re not dying to have an activist knock on your door, but it doesn’t cause them to break out in tears either, because you take them on and they get all involved in your strategy. And it’s their job, to some extent, to make you worry even more than you probably should.”
Buffett said his preferred approach to investing is to back companies where he can “join in the spirit of the whole organization.” For people who go into relationships seeking change, he noted, “You’ll be miserable the rest of your life. I’m just not looking for that kind of trouble.”
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