Recently a client said to me, "writing is thinking."
Brilliant.
Writing is thinking.
Writing is clarification.
Writing is action.
And few documents are more potent than a well-crafted and well-executed shareholder letter.
Lawrence Cunningham has recognized the value of a shareholder letter for years.
Cunningham is an authority on corporate governance, corporate culture, and corporate law, and teaches business-related courses at George Washington University that span these fields. He has written dozens of books and scores of articles on a wide range of subjects in law and business. These include the leading textbook on accounting used in law schools, a popular narrative on contracts, and best-selling books on Berkshire Hathaway and Warren Buffett (The Essays of Warren Buffett: Lessons for Corporate America and Berkshire Beyond Buffett: The Enduring Value of Values).
When individual investors ask what resources to consult when hunting for great companies, Cunningham's advice: read the shareholder letter that the company sends out every year.
Next to the financial figures, it is probably the most important and most accessible source of valuable information.
These communications reveal a lot about a company and its CEO. In well written and purposeful shareholder letter, the CEO's commitment, desires, goals, and long-term visions are all visible.
Some CEOs use their shareholder to obfuscate, others patronize, and many appear to be ghostwritten, but the best ones share business insights that help readers understand a company.
Use these clues as filters, just as you would the company's financial statements. Many companies post such letters on their websites, and they are usually part of the annual report.
The gold standard of the genre is Warren Buffett, whose pithy statement from his 1997 letter to shareholders of Berkshire Hathaway sums it up:
"When you receive a communication from us, it will come from the fellow you are paying to run the business. Your Chairman has a firm belief that owners are entitled to hear directly from the CEO as to what is going on and how [he/she] evaluates the business, currently and prospectively. You would demand that in a private company; you should expect no less in a public company."
In Dear Shareholder, Cunningham's latest book holds letters by more than 20 different leaders from 16 companies - several of my favorite companies, including Amazon, Google, Coca-Cola, and Pepsi.
I have found this book to be a powerful goto for inspiration, creativity, and patience. Written to be consumed more like an encyclopedia, you can quickly jump topics, companies, and leaders and read for 30 minutes or three minutes.
Cunningham's collection of the best in class shareholder letters provides valuable insights - be it better company management or how to better communicate.
-Marc | Founder @ Caracal
