The highly influential proxy advisory service Institutional Shareholder Services, whose voting recommendations many institutional investors slavishly follow, is urging shareholders of Coca-Cola to withhold their votes for director Warren Buffett:
ISS recommends shareholders withhold their votes for Buffett because he is an affiliated outsider and sits on the Coke board's audit committee. ISS's corporate governance policy guidelines call for completely independent board committees, a spokeswoman said.
Not to put too fine a point on it, but this is insane. Warren Buffett is probably the most respected investor of all time. Not only is he tremendously successful as an investor, but his integrity is remarkable for a businessman of his stature. Buffett owns almost 10% of Coke's stock, moreover, which means that his personal financial interests are closely aligned with those of other shareholders (albeit not perfectly). Finally, Buffett qualifies as an independent director under the NYSE's listing standards. To rigidly apply ISS' more demanding standards to Buffett is absurd. If a sizeable percentage of Coke shareholders end up withholding their votes from Buffet, it will prove that the institutional investor community's unthinking reliance on ISS has become a danger to good corporate governance and that ISS has become too powerful for the good of the capital markets.
