Charlie Munger, the esteemed vice chairman and longtime board member of Berkshire Hathaway, passed away on Tuesday. While Munger’s death certainly marks the end of an era, it is unlikely to have a significant impact on the company. Berkshire Hathaway has long been under the firm and capable leadership of CEO Warren Buffett, who has guided the company since he assumed control in 1965.
Now at the age of 93, Buffett remains an actively engaged CEO. In a recent interview with Charlie Rose, he emphasized his continuous commitment to Berkshire Hathaway, stating that he is “always on the clock” for the company. Munger primarily served as a vital sounding board and advisor to Buffett, rather than directly involving himself in the day-to-day affairs of the company.
While news of Munger’s passing did not elicit a substantial market reaction, with Berkshire’s Class B stock experiencing a minor decline of 0.4% to $360.05, significant changes in leadership are anticipated for Berkshire Hathaway in the future.
In the post-Buffett era, the company’s leadership is expected to comprise Greg Abel as CEO and Ajit Jain overseeing the insurance businesses. Abel, who currently heads Berkshire’s expansive non-insurance businesses, and Jain, responsible for the insurance operations, have assumed their roles in 2018. Notably, Abel has recently taken on additional responsibilities within the company.
Furthermore, Ted Weschler and Todd Combs, currently managing approximately 10% of Berkshire’s impressive $350 billion equity portfolio, are projected to oversee the entire investment operations. Meanwhile, Buffett’s eldest son, Howard, is widely anticipated to assume the position of chairman.
Buffett exerts significant control over Berkshire Hathaway through his 15% ownership stake in the company, which holds approximately 30% of voting power due to its primarily supervoting Class A stock composition. Valued at around $118 billion, this stake will eventually enter a trust established to be managed by Buffett’s three children following his passing. Over the course of approximately ten years, the trust’s holdings will be gradually liquidated.
This trust arrangement effectively shields Berkshire Hathaway from potential external pressures or activism in the early stages after Buffett’s demise. As with any transition of leadership, the true impact and direction of the company will likely become more apparent after Buffett steps down as CEO and following his eventual passing. Nevertheless, Berkshire Hathaway is well-positioned to navigate this change with its established leadership team and careful succession planning.
Warren Buffett’s Vision for Berkshire Hathaway
Warren Buffett, renowned investor and CEO of Berkshire Hathaway, has long been a subject of speculation regarding the fate of the company after his passing. Many believe that the stock will plummet without his guidance. However, Buffett holds a different view.
According to Buffett, he anticipates that the stock will actually rise after his demise. He believes that investors will recognize the potential for a breakup of the company, with the sum of its various parts being worth more than the whole. This optimistic perspective stems from Buffett’s strategic management of Berkshire Hathaway.
To protect Berkshire Hathaway from external pressures following his death, Buffett has put safeguards in place. The company will likely be shielded from immediate upheaval as it transitions into the post-Buffett era.
Chris Davis, a member of Berkshire’s board and the head of investment firm Davis Advisors, shares Buffett’s sentiment. He emphasizes that protecting the company from activists and maintaining its unique structure will be crucial. Davis praises Buffett’s ability to amass a collection of long-lasting assets that will generate substantial cash flow for years to come.
Davis compares serving on Berkshire’s board to indulging in dessert first. The privilege of working closely with Warren Buffett and Charlie Munger is a cherry on top, while the responsibility of safeguarding the company’s precious culture is akin to eating vegetables.
Buffett acknowledges that ensuring the company’s continued success goes beyond his personal influence. In a recent letter to shareholders, he expressed confidence in Berkshire’s current CEO and Board of Directors, describing them as essential components for a seamless transition. He believes that Berkshire’s unique characteristics and behavior will initially be supported by his substantial holdings. However, he recognizes that over time, the company will earn its reputation based on its own merits.
In conclusion, Buffett envisions a bright future for Berkshire Hathaway beyond his leadership. By focusing on long-term growth and upholding its distinctive culture, he believes that the company has been built to last.
