This morning, Berkshire made some big news about its future. The amount of board of directors seats goes from 12 to 14. And Buffett appointed Gregory Abel, 55, to be Berkshire Hathaway’s Vice Chairman – Non-Insurance Business Operations and Ajit Jain, 66, to be its Vice Chairman – Insurance Operations.
Jain and Abel are now officially the successors – perfectly apropos given the biblical ages of the chairmen, Warren Buffett is 87 and Charlie Munger is 94(!).
Berkshire shareholders should take comfort in the continuity here. Abel has been with the company since 1992 and has made us a ton of money on the energy / utilities side. Jain has been with the insurance operations of Berkshire since 1986 and Buffett never misses an opportunity to praise his work publicly.
There has been a longstanding argument on Wall Street about how Berkshire Hathaway offers the ultimate example of “key man risk” and that the company’s stock price will be decimated when Buffett finally heads off to that gleaming Dairy Queen in the sky. I don’t know about that. There could certainly be some volatility, but shareholders should remember that it’s not exactly as though this eventuality isn’t being planned for. Besides, it’s possible that a new CEO could unlock some of the value hidden within the vast conglomerate with asset sales, or put the $100 billion-plus cash hoard to better, more aggressive use to create even more value.
There is also, you should remember, an authorized buyback in place stipulating that the company will buy in its own shares at a cheap multiple to book value should the stock ever get down to it.
Today’s announcement is a good one, even if we’re all wishing for another ten years of the big guy at the top. The company is prepared either way.