A ‘seamless’ transition is expected at Berkshire.
Billionaire investor Warren Buffett, the chief executive of Berkshire Hathaway, has been under increased pressure for sometime regarding a potential successor. Now, in his annual letter to shareholders, Buffett for the first time, says the company has selected his successor. It is not, however, telling shareholders who that successor is, not least because Buffett has no plans for stepping down anytime soon.
For years, Berkshire investors have expressed deep concerns over the future leadership of the billion-dollar enterprise. Succession planning is seen as a key function of the board but is not that easily implemented, especially if a company’s success is closely identified with its chief executive. In many cases when an iconic leader steps down they leave behind nagging doubts about successors.
‘Effective succession planning enables governance to proceed uninterrupted,’ says John McGuire, a partner focusing on corporate law matters at Ohio-based law firm Calfee, Halter Griswold. ‘A well-communicated succession plan means that internal resources and external business contacts know who is in charge and how decisions are made. That predictability generally lends comfort to all involved.’
But this year, the legendary investor’s first order of business in his annual shareholder letter was reassuring investors about his succession plans. In the statement, Buffett announced that directors are ‘enthusiastic about my successor as CEO, an individual they have had a great deal of exposure to and whose managerial and human qualities they admire.’ Without providing much more detail, he adds, ‘[when] a transfer of responsibility is required, it will be seamless and Berkshire’s prospects will remain bright.’
Previously, Buffett had said the board had three internal candidates for the CEO position. But following this recent announcement industry observers and news sources claim that the potential leading successors are: Ajit Jain, who runs Berkshire's reinsurance division, Greg Abel, president and CEO of MidAmerican, Tony Nicely, chief executive of Geico; and Matt Rose, Burlington Northern Santa Fe CEO.
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According to the Economic Times, Berkshire’s stock trailed the Standard & Poor’s 500 index last year as Buffett was under fire for his oversight of David Sokol, a former manager who was accused of violating the company’s insider trading policies. Sokol, who made an unexpected exit last April, was once seen as a possible candidate to lead the company.
Berkshire is currently valued at roughly $198 billion. Buffett, who is also head of investments, manages a $77 billion stock portfolio and operating units with more than 270,000 workers.Â
