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Berkshire Hathaway shareholders will confront a world without Warren Buffett
Leadership » CEO succession sure to be hot topic at Berkshire annual meet.


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Buffett biographer Andy Kilpatrick, who is also a shareholder, says Berkshire’s next CEO will face pressure to change if the business begins to languish, though. He predicts that shareholders would one day press the company to pay a dividend for the first time since Buffett took over the company in 1965 and possibly to break apart the conglomerate.

And changes like that will become more likely in several years because more than half of Berkshire’s board is at least 70, so there will be turnover, Matthews says.

At a glance

Annual meeting drama

Berkshire Hathaway after Warren Buffett:

An audience for the oracle » Berkshire Hathaway’s annual shareholders meeting will feature five hours of Q&A with chairman and CEO Warren Buffett, the billionaire investor.

Succession plans » Berkshire will split Buffett’s job into three when he’s gone, and the board has chosen his successor — although Buffett has said that person doesn’t know it yet.

Diffuse company » Berkshire’s 80 subsidiaries are highly decentralized. Of the 270,000 employees of Berkshire companies, just 24 work at Omaha headquarters.

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The management model that Berkshire plans to use after Buffett could also result in more conflict between the company’s top executives, Matthews and Shields say.

As chairman and CEO, Buffett oversees Berkshire and invests the cash its subsidiaries generate. The company plans to split his job into three roles — CEO, chairman and a head of investment management — after he leaves.

Buffett told shareholders in February that Berkshire’s board has chosen someone to succeed him as CEO — someday — and he said there are two backup candidates.

None of the three has been publicly identified. The Berkshire managers believed to be possible chief executive 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, CEO of Burlington Northern Santa Fe.

Buffett has said Berkshire hasn’t even told the successor and backups who they are. But he has said that his son Howard, a member of Berkshire’s board, would make an ideal chairman.

And Berkshire has hired two hedge fund managers, Todd Combs and Ted Weschler, over the past two years who Buffett says are capable of eventually running the company’s entire portfolio. Combs and Weschler manage portfolios worth about $2 billion, while Buffett continues to make most of Berkshire’s investment decisions.

Howard Buffett says he knows that if he does succeed his father as chairman, his role won’t be running the company. Instead, Howard Buffett says he’d be using his knowledge of his father’s ideas to help preserve the company’s culture.

"I will put the interests of Berkshire ahead of my own personal interests," Howard Buffett says.


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Still, the AFL-CIO, which owns Berkshire stock, has submitted a shareholder proposal that’s up for a vote at the annual meeting asking whether the company should be compelled to disclose more specifics about its succession plan.

So the subject of Buffett’s health is likely to be prominent at the shareholders meeting Saturday. But questions will be coming from a mix of shareholders, reporters and stock analysts.

In other words, Buffett will be asked about plenty of other subjects, too — his view of the economy, the company’s earnings in the first quarter, prospects for future Berkshire acquisitions.

No one is giving the Oracle up yet.

Says George Morgan, a finance professor at the University of Nebraska at Omaha and a former investment adviser: "Berkshire is going to be Berkshire for quite some time."



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