Book Review: Dear Shareholder

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Book Review: Dear Shareholder

Richard Gill, CFA, reviews Dear Shareholder: The Best Executive Letters from Warren Buffett, Prem Watsa and other great CEOs. 

Most annual reports are dreary affairs, packed full of corporate nonsense, PR gloss and business clichés. How many chief executives do you think actually feel the emotion of delight when they say for the fifth year running that they are “delighted” to announce adjusted EBITDA is down by 25%?

Nevertheless, there are a select few directors whose yearly ramblings are well worth a read – for instance founder and chairman of Wetherspoon, Tim Martin. While a divisive figure, he often packs a lot of puns and entertaining anti-establishment rants into his shareholder letters. Others like to be creative, with Robin Parish of mining investor El Oro once quoting the Bob Dylan lyrics: “I didn’t know you were saying ‘Goodbye’ for good…” when discussing the Scottish independence referendum. And who could forget Warren Buffett’s iconic shareholder letters which have produced many pearls of wisdom and some of the best known quotes in finance.

It is with the latter director and his ilk in mind that editor Lawrence A. Cunningham has curated what he considers to be some of the best executive letters of the last 40 years or so. Dear Shareholder covers the writings of a diverse range of industry leaders, providing a rich source of business and investing wisdom. Topics covered include company culture, capital allocation, competitive pressures, corporate strategy and much more, all from the finest writers in the genre of the shareholder letter.

Readers may know Cunningham from his previous books, namely The Essays of Warren Buffett, which Buffett himself calls the “gold standard” in books of the genre and Berkshire Beyond Buffett. The ‘Sage of Omaha’ has both on sale at the Berkshire Hathaway Annual Meeting. As well as being a prolific author, Cunningham is also a business-law professor and consultant based in New York City and Washington DC, and the founding faculty director of GWinNY, an intensive training programme in New York, for aspiring Wall Street lawyers.

From Buffett to Bezos

In putting together Dear Shareholder Cunningham has taken the best excerpts from the best writers in the shareholder-letter genre. Covering 20 business leaders from 16 companies, the book is arranged into three parts according to when the authors’ first letter was published. The excerpts for each company are also arranged chronologically, allowing readers to see how the writers progress over time and adapt to new conditions.

Part one covers the ‘Classic’ period − letters from the heady days of the 1970s and 80s. No book on shareholder letters would be complete without Warren Buffett, so it is apt that chapter one kicks off with a letter from the man himself.

Cunningham has taken the best excerpts from the best writers in the shareholder-letter genre.

Part two covers the ‘Vintage’ period, that of boybands, Blair and stock-market booms – the 1990s. No company exemplifies the 90s internet boom better than Amazon, and this chapter features founder Jeff Bezos. Bezos is well known for his focus on the long term, and his initial letter in 1997 emphasises this. The concept of the long term is a fundamental focus for many authors in the book, with Cunningham implying that it is in fact a quality of the best business people.

Part three looks at  authors from the early 2000s and beyond. Perhaps the best-known writers in this section are Larry Page and Sergey Brin, co-founders of Google, now Alphabet. Like Buffett, they are known for caring about shareholder communications, even including an ’owners’ manual’ in their IPO registration statement. While Google is by no means a conventional company, some of the main themes elsewhere in the book run through Page and Brin’s writings, including that ubiquitous focus on the long term. However, being a unique business, it is interesting to read about Google’s unconventional dual share structure and how it was communicated to shareholders at IPO.

Yours Sincerely

Many investors might not think of shareholders letters and management discussions  a riveting read. But Cunningham’s excellent collection should prove them wrong. Indeed, in 2016 The New Yorker went as far as saying that the field was a literary genre in itself. Indeed, the best shareholder letters convey the personality of the writer as well as the story of the company they are in charge of, providing more information for investors to add to the more mundane statutory facts and figures.

The best shareholder letters convey the personality of the writer as well as the story of the company.

This is a chunky volume, coming in at over 300 pages, and packed with insights from some of the best business operators in modern history. It will definitely make you a better investor, covering more mainstream topics along with some that might sometimes be ignored. As well as investors, this book is ideal for business leaders of both large and small companies, providing valuable insights into how to run a company and to communicate effectively with its owners.

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