Quality Sharedholders: How the Best Managers Attract and Keep Them
Lawrence A. Cunningham
Columbia Business School Publishing (November 2020)

Why managers in public companies usually get the shareholders they deserve, for better or worse

Years ago, Jackie Huba and Ben McConnell co-authored a book in which they explain how to create what they characterize as “customer evangelists.” I was again reminded of their book as I began to read this one. Most of what Lawrence Cunningham recommends can help prepare those who read his book to attract and keep the shareholders their organizations need.

Berkshire Hathaway offers an excellent case in point and few know more about that company than Cunningham does. If you had purchased a share of stock in Berkshire Hathaway in 1964 when Warren Buffett took over the company, it would have cost $12.37; today, a share of stock is valued at $399, 447.

According to Cunningham, “Buffett has tried to attract only what he calls ‘high quality’ shareholders [QSs]. These are defined as shareholders who buy large stakes and hold for long periods. They see themselves as part owners of a business, understand their businesses, and focus on  long-term results, not short-term  market prices.” (Pages 4-5)

How can having a substantial number of QSs be beneficial to a publicly traded company? First, “they will balance the shareholder mix and counteract [various] liabilities…As to curbing overzealous activism, QSs can be white squires [who] study company specifics that indexers, being stretched thin, cannot…Being long-term, QSs offset short-term preferences of transients…For officers and directors, having the right shareholders makes the difference not only between corporate prosperity and failure but personal success and setback…Finally, the long-term concentrated strategy of the QSs offers the potential for superior returns.”

Cunningham wrote this book in order to stress and explain “the untapped potential of QSs [by explaining] methods to attract and cultivate them.” His goals are to “enlarge the cohort of QSs, to continue the education of current practitioners, and to add to the elite group of companies and leaders who attract them. While not strenuous, being a QS requires patience and diligence. While not arduous, attracting [and then developing them as ‘evangelists’] is an ongoing project.”

Although no one — at least no one of whom I am aware — holds Warren Buffett and Berkshire Hathaway in higher esteem than Cunningham does, it would be a mistake to assume that he relies entirely on them to serve as exemplars. Yes, valuable lessons can be learned from each but also from other leaders and other companies that he also discusses in this book. They include Jeff Bezos (Amazon), Ian Cummings and Joe Steinberg (Leucadia), Kay Graham (Washington Post Company), John Templeton (Morningstar), and Prem Watsa (Fairfax Financial).

Credit Lawrence Cunningham with another brilliant achievement. Quality Shareholders offers to all executives (including C-level executives) and to organizations (including publicly traded companies) business knowledge and wisdom of incalculable value. Bravo!

FYI: This is volumed is part of a continuing research project, through the Quality Shareholders Initiative at George Washington University and through his independent consultancy, Quality Shareholders Group.