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NEW YORK - When Warren Buffett promotes two long-serving lieutenants to senior roles at his conglomerate, the obvious question is whether one might be his successor. A better question is whether he even needs one. In a way, the sage of Omaha would do well to make his role as redundant as possible.
Berkshire Hathaway named Greg Abel and Ajit Jain as vice chairmen on Wednesday, adding both to an expanded 14-person board. In a traditional company, that might look like a way of auditioning a future leader. Think of co-Presidents David Solomon and Harvey Schwartz at Goldman Sachs, either of whom could succeed chief Lloyd Blankfein, who has held the job for 12 years. This method has the advantage of ensuring that dueling executives are focused on besting each other rather than ousting their mentor.
Things are different at Berkshire, though. Buffett has championed a model of extreme decentralization - his holding company has just a couple of dozen staff. As chairman and chief executive, he makes the critical capital-allocation decisions but doesn’t engage in operational questions at the group’s 90-plus divisions, which include clothing brand Fruit of the Loom, car insurer Geico and See’s Candies.
If replacing an investing legend is futile, the smartest idea might be to not even try, and instead disperse power at Berkshire after Buffett is gone. That’s effectively what he’s already doing. He has named his son, Howard, as a potential chairman, and in recent years added two senior money managers to one day report to an unnamed chief executive. That could now be Abel, or Jain, or even both. It might sound like a fudge – but it’s also a sensible division of labor, allowing Buffett himself to recede into the distance.
Whichever constellation of executives takes Buffett’s place, they will have to convince investors that the company he and longtime partner Charlie Munger built should outlive him. That won’t be easy: Most conglomerates trade at a discount for a reason, and Berkshire itself has outperformed the S&P 500 only modestly in the past 15 years. Buffett’s best bet is to make regime change all but imperceptible, and lead by barely leading at all.
CONTEXT NEWS
- Berkshire Hathaway's board voted to promote two senior executives in what the investment company’s chairman, Warren Buffett, described to news network CNBC as “part of the movement toward succession over time.”
- Utilities head Gregory Abel will become vice chairman for non-insurance businesses operations, the company said on Jan. 10. Ajit Jain, who oversees reinsurance activities, was named vice chairman of the group’s insurance division.
- Their promotion would increase the size of Berkshire Hathaway’s board from 12 to 14 people.
- Buffett is both chairman and chief executive of Berkshire Hathaway, while Charlie Munger is vice chairman. The group has more than 90 operating units including clothing brand Fruit of the Loom and See’s Candies.
- Berkshire Hathaway’s class A shares were up a little over 1 percent in afternoon trading at $307,900.
(Editing by Tom Buerkle and Martin Langfield)
© Reuters News 2018
Berkshire Hathaway named Greg Abel and Ajit Jain as vice chairmen on Wednesday, adding both to an expanded 14-person board. In a traditional company, that might look like a way of auditioning a future leader. Think of co-Presidents David Solomon and Harvey Schwartz at Goldman Sachs, either of whom could succeed chief Lloyd Blankfein, who has held the job for 12 years. This method has the advantage of ensuring that dueling executives are focused on besting each other rather than ousting their mentor.
Things are different at Berkshire, though. Buffett has championed a model of extreme decentralization - his holding company has just a couple of dozen staff. As chairman and chief executive, he makes the critical capital-allocation decisions but doesn’t engage in operational questions at the group’s 90-plus divisions, which include clothing brand Fruit of the Loom, car insurer Geico and See’s Candies.
If replacing an investing legend is futile, the smartest idea might be to not even try, and instead disperse power at Berkshire after Buffett is gone. That’s effectively what he’s already doing. He has named his son, Howard, as a potential chairman, and in recent years added two senior money managers to one day report to an unnamed chief executive. That could now be Abel, or Jain, or even both. It might sound like a fudge – but it’s also a sensible division of labor, allowing Buffett himself to recede into the distance.
Whichever constellation of executives takes Buffett’s place, they will have to convince investors that the company he and longtime partner Charlie Munger built should outlive him. That won’t be easy: Most conglomerates trade at a discount for a reason, and Berkshire itself has outperformed the S&P 500 only modestly in the past 15 years. Buffett’s best bet is to make regime change all but imperceptible, and lead by barely leading at all.
CONTEXT NEWS
- Berkshire Hathaway's board voted to promote two senior executives in what the investment company’s chairman, Warren Buffett, described to news network CNBC as “part of the movement toward succession over time.”
- Utilities head Gregory Abel will become vice chairman for non-insurance businesses operations, the company said on Jan. 10. Ajit Jain, who oversees reinsurance activities, was named vice chairman of the group’s insurance division.
- Their promotion would increase the size of Berkshire Hathaway’s board from 12 to 14 people.
- Buffett is both chairman and chief executive of Berkshire Hathaway, while Charlie Munger is vice chairman. The group has more than 90 operating units including clothing brand Fruit of the Loom and See’s Candies.
- Berkshire Hathaway’s class A shares were up a little over 1 percent in afternoon trading at $307,900.
(Editing by Tom Buerkle and Martin Langfield)
© Reuters News 2018
