Lawrence Cunningham on Attracting and Retaining Quality Shareholders

Gabelli100 | Nov 13, 2020 | Gabelli School of Business

In a letter to shareholders in 1983, Warren Buffett described the type of investors he sought to attract to Berkshire Hathaway Inc., the company he built into the multi-billion-dollar holding company and conglomerate it is today.

“Buffett coined the term ‘quality shareholders,’” explained Lawrence Cunningham during his Nov. 12 Centennial Speaker Series’ session with financial correspondent Astrid Doerner. The webinar, co-sponsored by the Museum of American Finance and the CFA Society of New York, marked the second time this fall that Cunningham, noted author, professor, and corporate governance consultant spoke to Gabelli School audiences.

What exactly is a quality shareholder?

“They are patient, focused, and constructive,” Cunningham said. Referring to these investors as the “secret sauce” in Berkshire Hathaway’s recipe of success, he credited Buffett’s extraordinary skillset and investment savvy for driving the company to the top.

“But I don’t think he could have accomplished nearly as much if he didn’t have platoons of quality shareholders who gave him the time, the patient years, the conviction, support, and focus.”

Cunningham cited other companies as examples to illustrate the difference that loyal, patient shareholders can make on long-term profits in his book Quality Shareholders: How the Best Managers Attract and Keep Them. He also compared this shareholder class to others, described the types of companies that attract them, and discussed the creative strategies—extra voting rights, additional dividends, and loyalty programs—some companies use to reward them for their staying power.