Buffett Update and Survey Results
Recently, Berkshire Hathaway sent the business world buzzing after announcing that the company’s board had chosen a successor to its legendary CEO, Warren Buffett. In his annual letter to shareholders, Buffett detailed a plan to split his role into three: a CEO, a chairman and several investment managers. The letter also promised a “seamless transition” but did not identify the potential successor or a timeframe. Investor reactions to Berkshire’s announcement have been apprehensive—the labor union AFL-CIO submitted a proposal that would require the company to disclose a succession plan that details the qualities sought for the next CEO and identifies potential internal candidates.
Without any legal requirements or generally accepted best practices in this situation, NACD went to the experts for an opinion—our members. A one-question survey in last Friday’s Directors Daily asked: Do you think the Berkshire board’s choice to not disclose the identity of Buffett’s successor was appropriate? The majority of respondents, 66 percent, agreed with the board’s decision. Several respondents noted the difference between want and need. While the investors and public would like to know the eventual successor to the Oracle of Omaha, Berkshire does not need to disclose.
Other respondents who agreed with the company’s choice noted the issue of time. Unless Buffett plans to retire in the near future, announcing his successor may encourage competing internal candidates to prematurely leave the company. Furthermore, such a disclosure would effectively lock Berkshire to a candidate who—with an undefined timetable—may be unable to take the position at Buffett’s departure. Lastly, several members responded that they simply trusted Buffett’s business acumen.
The remaining third who disagreed with the Berkshire board’s decision largely cited a lack of transparency. By not announcing the successor’s identity, the company creates tension and suspense, which could detract from internal morale. These respondents generally believed that investors were entitled to such transparency—unless Berkshire would be materially damaged by disclosing.