Berkshire Hathaway Inc has been synonymous with Warren Buffett. It falls to his oldest son, Howard Buffett, to keep the conglomerate’s “culture” alive.
Friday’s announcement that Warren Buffett, 96, stepped down as chairman means the longtime investor would no longer have a management role at the company he took over in 1965, or be a regular sounding board for Greg Abel, who succeeded him as chief executive officer in January.
Howard Buffett, 71, is assuming a different role as non-executive chairman, focused on preserving Berkshire’s culture and values. It is the latest move in a years-long leadership transition.
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“This one is really about continuity,” University of Notre Dame business school management professor Michael Withers said. “The test moving forward will be whether Abel and Howard can honor [Warren Buffett’s] legacy while still giving Berkshire room to adapt to a market that looks very different from the one Buffett mastered.”
Their longtime presence could assure investors and analysts who do not expect, or want, big changes at the approximately US$1.1 trillion conglomerate, which owns the BNSF railroad, car insurer Geico Corp, and a slew of energy, industrial and retail companies, along with a stock portfolio that includes American Express Co, Apple Inc and Coca-Cola Co.
Abel joined Berkshire in 2000 when it bought the former MidAmerican Energy, and became part of Berkshire’s leadership team in 2018. Howard Buffett has been with Berkshire even longer, as a director since 1993.
“Howie’s there as a watchdog,” said James Armstrong, president of Henry H. Armstrong Associates in Pittsburgh, and a longtime Berkshire investor. “Minimize bureaucracy, stay focused on long-term goals, put the shareholders first, no self-dealing, no corruption and widen the moat that protects Berkshire’s businesses.”
Warren Buffett wrote on Friday in a shareholder letter that Abel has exceeded his “sky high” expectations.
“Think of Howard as a policy the shareholders own and hope never to claim against,” Buffett wrote.
Buffett still controls more than 13 percent of Berkshire’s stock and about 30 percent of its voting power. These percentages would decline as his shares get distributed to foundations overseen by his children.
CFRA Research analyst Cathy Seifert called Howard Buffett’s lack of management experience a shortcoming in Berkshire’s succession plan.
“Compared to other family dynasties, typically when you have the heir apparent’s son he’s usually involved in day-to-day operations,” she said. “Howard Buffett doesn’t have that.”
Berkshire’s board has several directors with management experience who could act as guides.
“New managers do not have the same intuition that only time and experience can bring,” Zacks Investment Management chief market strategist Brian Mulberry said. “Buffett’s son and Abel have been in the Berkshire ecosystem for long enough that this lag should be minimal but not nothing.”
Gardner, Russo & Quinn LLC partner Tom Russo, a longtime Berkshire investor, recalled Warren Buffett telling him and other Stanford Business School students in 1983 that “you couldn’t make a good deal with a bad person.”
He said Abel and Howard Buffett should respect that thinking. Time will tell how.
“This is new territory,” Russo said.
