Buffett Reveals Succession Plan At Berkshire
It’s roughly seven weeks to when Warren Buffett releases his annual letter to shareholders with Berkshire Hathaway’s 4th quarter and annual results, but the Sage of Omaha has made sure his latest missive will be examined more closely than ever by making his most definite move so far on succession.
In a statement and interview on Wednesday, Buffett revealed that he had promoted two of his top executives to new vice-chairman roles at Berkshire Hathaway.
55 year old Greg Abel, CEO of Berkshire Hathaway Energy (which is one of Buffett’s most successful moves), and 66 year old Ajit Jain, the Omaha-based group’s reinsurance chief, were added to Berkshire’s board of directors.
Mr Abel was named vice-chairman of non-insurance business operations while Mr Jain (who is a legend in insurance, especially in re-insurance an catastrophe bonds) was elevated to vice-chairman of Berkshire’s huge insurance group.
Analysts immediately saw the move as positioning one or both of them as eventually succeeding Buffett at the top of the sprawling conglomerate which is now valued a $US505 billion.
87 year old Mr Buffett will continue as chairman and chief executive of the company that he has led over the past 50-plus years.
94 year old Charlie Munger, Berkshire’s long time vice-chairman, will remain in his current role.
Mr Buffett’s further comments on the appointments in his letter to shareholders will be closely watched for any hint of which of the duo are favoured to be the successor.
Berkshire shares are up more than 25% in the past year (slightly ahead of the S&P 500) and topped $US300,000 each for the first time in December. After the announcement on Wednesday, they were up around 1% at $US306,819.
In an interview on CNBC, Mr Buffett said the decision was “part of a movement towards succession over time”. However he noted that there was “nothing magic” about the timing of the latest announcement.
Mr Munger said that while Mr Buffett still had more time to give to Berkshire, there were “not very many” more years he himself had left to offer the company. “Three vice-chairman look peculiar, but Berkshire has always looked peculiar,” Mr Munger added.
Buffett, who first publicly raised the succession issue more than a decade ago, says he is in “remarkably good health” and that his health was not a factor in making the announcement, but said “maybe six weeks ago, I just decided, ‘Why not now?’”
He declined to say how long he expected to remain at the helm but said: “Ten years would be a long time.”
Mr Buffett praised Mr Abel and Mr Jain, calling them “key figures” at the company. “They’ve both got Berkshire in their blood, they know the company . . . so it’s very good for Berkshire and even better for me.”
Abel grew up in Alberta, Canada and joined Berkshire Hathaway Energy in 1992. His Iowa-based unit now runs several power companies in the United States, Canada and Britain, as well as natural gas pipelines and solar and wind farms.
Jain joined Berkshire in 1986, runs the reinsurance operations, providing coverage against major catastrophes and generating tens of billions of dollars of premiums for Berkshire to invest. Under him Berkshire’s re-insurance business has grown to be one of the largest in the world.
In a statement, Berkshire said the Buffett-Munger duo would still be responsible “for significant capital allocation decisions and investment activities”. Some of that activity has been taken over by fund managers Todd Coombs and Ted Weschler. They seem to handle deals and purchases up to $US1 billion.
The most recent major play overseen by Mr Buffett was the investment in Apple starting in early 2016 that has seen Berkshire become the iPhone company’s largest shareholder.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.