In 1991, Warren Buffet's Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) first took a significant ownership stake in M&T Bank (NYSE:MTB). At that point, M&T had been run by Robert Wilmers for about nine years.
Buffett preaches the value of strong leadership in the companies he owns. He doesn't really make it a habit to buy a company and immediately retool leadership -- except, perhaps, when he's partnering with the 3G Capital guys.
He'd rather invest in a company that isn't broken -- a company that has a competent, competitive, and experienced management team. In other words, a company run by someone exactly like Robert Wilmers.
Who is Robert Wilmers?
Wilmers, a graduate of Harvard undergrad and business school, has been running the ship at M&T Bank since 1982 when he was first elected to the board of directors. At that time, M&T Bank had about $2 billion in total assets. As of the third quarter of 2014, the bank reported $97 billion.
Shareholders, too, have been rewarded by Wilmers' performance. The stock has returned more than 23,500% since 1980 and has endured and prospered through the two most significant economic collapses since the Great Depression. It has done so by being exactly the kind of bank stock that has made Warren Buffett, well, Warren Buffett!
Wilmers is clearly a banking star, but he's much more than that. He really is a model of the CEO we should all hope to find leading the companies we own.
He's a shareholder
What exactly does that mean? First of all, it means that he puts shareholders first because he is one. He owns more than 2.6 million shares of M&T, which is about 2% of the entire company. His $950,000 salary is literally chump change next to the wealth he generates from the bank's long-term success. When shareholders win, Wilmers wins, and that's a good thing.
Even better still -- he's been a shareholder for more than 30 years. You don't have to worry about Robert Wilmers making questionable decisions just to keep analysts happy every quarter; he's thinking about the long term.
Examples of his hard-earned wisdom
By taking the long view, Wilmers has learned some serious lessons -- and he isn't shy about sharing them. What does he think of the megabank business model? It's "unsafe" and a "virtual casino."
What about those complex derivatives that were so central to the financial crisis? "I would put derivative trading in a subsidiary and tax it at a higher rate. If they fail, they fail," he told The New York Times.
In his view, what should a bank be? Banks should exist "for people to keep their liquid income, and also to finance trade and commerce." We should note that trading for profits, betting on derivatives, and making loans to borrowers who can't repay the debt are omitted from his vision.
What about building a culture at the bank? In last year's annual report, he said [emphasis added]:
Be it risk management or any other matter, we have long held the
view that, at M&T, the proverbial "buck" stopped with the CEO and the Management Committee. Put plainly, I understood my own role to include that as the chief risk officer and expected other members of management to focus as keenly on risks, defined broadly, as they did on their other responsibilities. This discipline of owning risk, which has come to characterize M&T employees, we hope would not be foreign to those who have interacted with us in some capacity. As we expand our risk management culture to include quantitative modeling and other evolving risk management techniques, we are training the next generation of future leaders to ensure that they are prepared to understand this new formulaic approach to risk management, but without forgetting the value of good judgment. As we have in the past, we are willing to invest the time and patience necessary to build such a culture.
How many other modern bank CEOs would put themselves in the cross hairs like that in a manner as public as the company's annual report to shareholders!?
The biggest reason Berkshire Hathaway owns more than 5% of this company
When analyzing a business, it's easy to focus intensely on the financials and forget to step back and think about the bigger picture. But in the end, the financial results on the income statement, balance sheet, and statement of cash flows are a direct result of management decisions. It's just that simple.
These human beings control how the business interacts with the marketplace, how it seeks to achieve a competitive advantage, and how it allocates its capital. This is the reason why Warren Buffett focuses so much energy on evaluating the leadership involved in his investments.
In a sense, he isn't so much investing his capital into a corporation; he's investing it into the people who lead the company. And there is hardly a person more worthy of that kind of confidence than M&T Bank's CEO, Robert Wilmers.
Jay Jenkins has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway. The Motley Fool owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.