The wizard of Omaha, philanthropist and a classic representation of the word ‘investor’ does not need much introduction. Warren Buffet who is the Chief Executive Officer of Berkshire Hathaway has numerous accomplishments under his portfolio. He is worth more than 87 Billion according to estimates by Bloomberg and Forbes. Warren Buffet currently owns around 37% of the company shares. He pledged that 99% of his wealth will go charity once he expires. He has been a visionary in seizing businesses which are undervalued and turning them into gold mines. Though criticized for his lack of initiatives towards investing in tech firms, his vast knowledge in other fields such as railways, insurance to name a few, and continuous perseverance made him the man he is today. Partnerships were his initial way of raising funds. He used the money to buy undervalued stocks and later sold them at a premium. Similarly, he bought the stock of Berkshire Hathaway a textile industry at that time. He gradually regained control of the company and made it a conglomerate which has investments in diverse businesses.
The primary objective of Berkshire Hathaway is to invest in companies which paid good dividends, such as Coca-Cola, IBM, and American Express. The company is registered on the NYSE; it trades in both class A and Class B shares. The class A stocks increased almost 4410% (Current value is 320,238 USD) since its listing. On a contradictory note to their investment strategies, Berkshire Hathaway does not pay dividends to their shareholders. The class ‘A’ share value is too high for any investor to buy. Berkshire Hathaway says that a high share value displays the confidence the company has in it.
The Board of Directors at Hathaway is ageing and in dire need of new leaders who can replace the existing ones. The wizard of Omaha is 87 years old. The vice chairman of Berkshire Hathaway, Charlie Munger is also 92 years old. Mr. Buffet cannot run the company endlessly and the board of directors of Berkshire has retirement plans in order as well. Berkshire Hathaway has always considered of planning a successor after Warren Buffet but as long as Mr. Buffet stays healthy and is willing to work, he is the boss.
The thought of Buffet not being the CEO of Berkshire Hathaway is disheartening. The charming man has his own way of doing business and that too successful business. Investors put their money in some stocks just because Buffet said that the industry has a better growth in the future. Mr. Buffet is a Public figure and his powerful influence is spread all over the world.
Buffet made his intentions clear regarding selecting his successor. Mr. Buffet is a huge admirer of the values such as integrity, smart and passionate. He wants someone who has the core values of the Berkshire Hathaway imbibed in him and whose personal goals lie according to the vision of the company. This clearly shows that the next CEO of Berkshire will be someone who spent his majority of time creating and adding value to the organization. In the 2015 annual letter of Berkshire Hathaway, Mr. Buffet mentioned that they now have the exact person to succeed him as CEO. Some of the choices that they have are Ajit Jain, executive VP of Berkshire Hathaway’s National Indemnity Company insurance subsidiary and Greg Abel, CEO of Berkshire Hathaway Energy Company, and vice chairman of non-insurance operations of Berkshire Hathaway. These two have been promoted recently to the company board as executives and are in prime position to land as the next CEO of Berkshire Hathaway.A deep dive into the profiles tells us how they function and what they can bring to the table once they succeed the oracle of Omaha.
Ajit Jain who is aged 65 and is from an Indian descent heads Berkshire Hathaway’s Insurance business. People define him as a risk taker and a box of innovative ideas. He is the prime protagonist in devising some of the insurance policies which generated tons of income with premiums on the insurance. Buffet wrote in one of the annual letters that “Ajit Jain has created Billions of value for his Berkshire Shareholders and if there were ever to be another Ajit and you could swap me for him, don’t hesitate. Make the trade!”
On the contrary, Gregory Abel aged 55 who hail from Canada, looks after the energy business. As with the most of the employees of Berkshire Hathaway, he also avoids the limelight of media and social presence. He shares the quality of integrity as is with Buffet. Buffet told to an alum magazine that “Abel brings in innovative ideas and is always creative in his business approach”.
Charlie Munger the Vice-chairman also speaks highly of these two people. He says that in taking some business decisions each is a better business executive than Buffet.
This shows that both are competent enough to be the successor of the Oracle of Omaha. But industry stalwarts suggest that Berkshire Hathaway can go for someone who is younger, in this case, evidently Gregory Abel.
Analyzing the after-effects of Buffet stepping down is a difficult one. Company shareholders might lose confidence in Berkshire Hathaway and sell the shares of the company in the short run, once buffet steps down. The chosen one must show his appetite for creating lucrative businesses and attractive propositions so that he gains the confidence of the shareholders.
However, Buffet assures his shareholders that he is healthy and enjoys going to the office every morning and there is no other place in the world he would rather be, than in his office.