(May 1, 1995) Buffett explains why he's confident in Berkshire Hathaway's structure and corporate culture. He also outlines the thinking behind his Helzberg's Diamond acquisition, reveals the secret to avoiding lawsuits, and tells business schools what they should be teaching.
Berkshire racked up a 13.9 percent gain in per-share book value in 1994, while the S&P only edged 1.3 percent higher. In his annual letter, Buffett criticized stock option plans that reward managers when companies retain earnings rather than distributing them to shareholders. "The combination of a ten-year option, a low dividend payout, and compound interest can provide lush gains to a manager who has done no more than tread water in his job."READ 1994 LETTER (DATED MAR. 7, 1995)