The Snowball_ Warren Buffett and the Business of Life - Alice Schroeder [329]
However, right now the candy factory was having a bad year. See’s was going to lose money and its employees would suffer a cut in wages. The compensation committee was talking about lowering the price the workers would have to pay for candy to make up the difference. Buffett argued against this. The candy factory belonged to the owners—the shareholders—not the employees.16 He wanted the employees’ share of candy trimmed by exactly the amount that earnings had declined.17 The other members of the committee, however, felt the workers had been promised candy worth a certain amount when Gutfreund announced their packages a couple of months before, and when the candy went on sale, they were obligated to make up the difference. Perhaps they were trying to forestall the traditional Wall Street bonus-day stampede that occurs whenever people are unhappy: Take the money and run.
Buffett felt this was morally wrong. Since the shareholders weren’t getting their earnings, why should the employees get their candy? The others outvoted him two to one. He was outraged.18 But his role on the Salomon board was mostly titular. His advice was rarely sought and less often taken. Even though Salomon stock by then was starting to recover, the repricing of the stock options, he says, “almost immediately” made his investment in Salomon “way less attractive financially than it had been.
“I could have fought harder and been more vocal. I might have felt better about myself if I did. But it wouldn’t have changed the course of history. Unless you sort of enjoy combat, it doesn’t make sense.” Buffett’s willingness to do combat—even in a roundabout way—had diminished markedly since the days of Sanborn Map, Dempster, and the Buffetting of Seabury Stanton.
“I don’t enjoy battles. I won’t run from them if I need to do it, but I don’t enjoy them at all. When it came to the board, Charlie and I didn’t even vote against it. We voted yes. We didn’t even abstain, because abstaining is the same thing as throwing down the gauntlet. And there were other things at Salomon. One thing after another would come up that I thought was nutty, but they didn’t want me to say anything. And then the question is, do you say anything? I don’t get in fights just to get in fights.”
Buffett had been originally attracted to Gutfreund, the reserved, thoughtful man in love with his work, who arrived every day at seven a.m., lit up the first of his huge Temple Hall Jamaican cigars, and wandered among the shirtsleeved traders to tell them, “You’ve got to be ready to bite the ass off a bear every morning.”19 Indeed, it appeared to employees who made presentations in board meetings that Buffett was a “relatively passive” board member.20 He seemed to understand little of the details of how the business was run, and adjusting to a business that wasn’t literally made of bricks-and-mortar or run like an assembly line was not easy for him. 21 Since he had made the investment in Salomon purely because of Gutfreund and now didn’t like the way it was working out, he always had another choice, which was to sell his investment and resign from the board.22 Wall Street boiled with rumors that Buffett and Gutfreund had had a falling out; that Buffett was either going to sell or to fire Gutfreund and bring in someone else to run the firm.23 But it hadn’t come to that. Someone as prominent as Buffett selling and resigning from the board as a major investor would be a shocking gesture that would drive down Salomon’s stock price and cost his own shareholders, as well as make him look capricious or vindictive or unreliable. By now his reputation had become part of Berkshire’s value. Moreover, he hadn’t given up on Gutfreund. His whole reason for investing was Gutfreund, and when Buffett threw his arms around someone, it took an ax to split them apart. Thus, as the holidays approached, he