Premium ContentMouse over Home then click on Premium Content for information.Warren Buffett has been talking about his successor for about 30 years, even though there's no way of knowing when he might need one.
The idea is to reassure shareholders of Omaha-based Berkshire Hathaway Inc., and it's not just a whim. Federal securities law requires companies to disclose “material” facts so that investors can be well-informed.
That led to this statement in last week's official filing with the Securities and Exchange Commission, the legal companion to the letter Buffett writes to his shareholders each year:
“We are dependent on a few key people for our major investment and capital allocation decisions. Major investment decisions and all major capital allocation decisions are made by Warren E. Buffett, Chairman of the Board of Directors and CEO, age 80, in consultation with Charles T. Munger, Vice Chairman of the Board of Directors, age 87.
“If for any reason the services of our key personnel, particularly Mr. Buffett, were to become unavailable, there could be a material adverse effect on our operations.
“However, Berkshire's Board of Directors has identified four current Berkshire subsidiary managers who are capable of being CEO. Berkshire's Board has agreed on a replacement for Mr. Buffett should a replacement be needed currently.
“The Board continually monitors this risk and could alter its current view regarding a replacement for Mr. Buffett in the future. We believe that the Board's succession plan, together with the outstanding managers running our numerous and highly diversified operating units, helps to mitigate this risk.”
The wording was identical to last year's filing, except for one detail: Last year it mentioned three capable replacements. No names were listed either year.
But the most prominent addition to Berkshire's corps of managers in the past year is Matt Rose, CEO of Burlington Northern Santa Fe, the railroad company Buffett acquired in early 2010. Rose won praise from Buffett before and after the purchase and, at age 51, has another important quality: youth, at least on the CEO scale.
Rose likely is the fourth name, and there's speculation about who the three others might be.
Mentioned most often are David Sokol of Omaha, chairman of MidAmerican Energy Holdings and other Berkshire divisions; Greg Abel of Des Moines, president of MidAmerican; Ajit Jain, head of Berkshire's reinsurance operations; and Tony Nicely, CEO of the Geico auto insurance company.
Buffett lets Berkshire's board know his recommendation. The decision, when it happens, will be up to the other directors. “Berkshire shareholders should feel reassured,” Buffett said in 2002 about the succession plan.
There is no assurance that any of the four people on today's list will end up as Berkshire's next CEO. That person also could come from outside Berkshire, and the list could change at any moment. For example, top Berkshire executives Louis Simpson of Geico and Rich Santulli of NetJets, who may have been considered at one time, have left the company.
Munger, who was heir apparent until he passed a certain age, has said that Berkshire shareholders should relax. If Buffett has done well creating and building up Berkshire for the past 50 years, Munger has said, why would you think he couldn't figure out a plan that would continue the company's success?
In 2000, Munger said, “Berkshire does not stand to lose with Warren's ultimate demise.”
A gem of an idea
Buffett will forgo his annual table tennis exhibition on the Sunday after the April 30 shareholders meeting in favor of a more lucrative pastime:
He'll man a sales counter at Borsheim's, the jewelry store at Regency Court that is jammed with shareholders that weekend seeking bargains.
Susan Jacques, president of Borsheim's, said she's “thrilled and flattered” by Buffett's plan, and she expects him to set a sales record.
Buffett, calling himself a “hotshot salesman,” said in his letter to shareholders that he'll use techniques he learned while selling shirts at J.C. Penney's 63 years ago.
No word on what pricing philosophy he will follow, or whether he will take extra training in gemology so he can discuss the wares intelligently.
A taste of Brazil?
Among the foggier investments attributed to Berkshire recently is the supposed purchase of shares in Brasil Foods, a huge meat and food production and export company.
Buffett has praised Brazil's economic advances in the past, noting that he invested in Brazil's currency because of its strength relative to the dollar.
The price of shares in Brasil Foods increased after a story ran in the Brazilian newspaper Valor Economico, attributed to an unidentified source. The U.S. website Seeking Alpha reprinted the report in Portuguese, followed by the Google translation.
The translated version said that Buffett came to Brazil and that executives of Brasil Foods told investors at a meeting that managers of Berkshire had visited the company's business units and began buying shares.
Something may have been missing in translation.
Buffett seldom, if ever, sends managers out to scout stocks, preferring to read about them instead. It's uncertain that Buffett actually visited Brazil, and there's no official word from Berkshire about a share purchase.
Brasil Foods reportedly has 120,000 workers with 60 industrial plants in Brazil and offices in 110 countries. It's a competitor of Arkansas-based Tyson Foods, among others.
India, philanthropy
In an article in India's Economic Times, Buffett and Bill and Melinda Gates write that they plan to sit down with some of that country's business leaders and philanthropists this month “to learn more about philanthropy in India and to talk about our own enthusiasm for philanthropy and the impact it can have.”
“Not that India needs us to tell them,” the article said, noting that before Andrew Carnegie's endowment created Carnegie University, Jamsetji Tata established an endowment that led to creation of the Indian Institute of Science.
Six years later, Tata pledged half his wealth to philanthropy — exactly the promise that Buffett and the Gateses seek from wealthy Americans through their Giving Pledge.
“So we come not as preachers, but more like cheerleaders,” they said.
Azim Premji, chairman of the outsourcing firm Wipro Technologies of Bangalore, recently pledged $2 billion for education in India, the biggest charitable donation by an Indian, writes Ravi Velloor in the Strait Times of Singapore. Much of the money will got to set up a university to train teachers in new practices.
Premji is famous for his no-bribes corporate philosophy and thrift, including his policy that company executives, including himself, fly economy class.
BYD's electric car
BYD will exhibit its U.S.-market electric car in Omaha at the Berkshire annual shareholders meeting April 30, a return visit for the slowly appearing brand.
The New York Times said BYD, the Chinese car and battery company that is 10 percent owned by Berkshire, set up its temporary North American headquarters in the Los Angeles suburb of Glendale.
The F3DM is a plug-in hybrid that could go on sale this spring if it passes inspections. DM stands for “dual mode” because the car also has a three-cylinder gasoline motor to recharge the battery and propel the auto when the battery level is low.
Car reviewer Bradley Berman said the F3DM is “as proletarian as it gets: no frills, no flash, no real driving engagement.” On the plus side, the F3DM is more affordable than many new electric cars (less than $29,000, not counting tax incentives) and has a large-capacity battery.
Despite the drawbacks, Berman said, “I see that Chinese cars — electric and affordable — are not only possible but imminent.”
Contact the writer:
402-444-1080, steve.jordon@owh.com
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