Succession, Buffett Style
In many ways, Berkshire-Hathaway is a family business. Chairman Warren Buffet has voting control of the company, and while his family fortune is in tens of billions of dollars, like many business owning families, the vast majority of his family's net worth is in the business.
Buffet provides an excellent example of succession planning in his chairman's letter in the latest Berkshire-Hathaway Annual Report.
On my death,Berkshire's ownership picture will change but not in a disruptive way: First, only about 1% of my stock will have to be sold to take care of bequests and taxes; second, the balance of my stock will go to my wife, Susan, if she survives me, or to a family foundation if she does not. In either event, Berkshire will possess a controlling shareholder guided by the same philosophy and objectives that now set our course. At that juncture, the Buffet family will not be involved in managing the business, only in picking and overseeing the managers who do....
Were we to need (new management), my family and a few key individuals know who I would pick....
I will continue to keep my family posted on the succession issue. Since Berkshire stock will make up virtually my entire estate and will account for a similar portion of the assets of either my wife or the foundation for a considerable period after my death, you can be sure that I have thought through the succession issue carefully. You can be equally sure that the principles we have employed to date in running Berkshire will continue to guide the managers who succeed me.
The principles Buffet refers to are the thirteen economic philosophies that have guided Berkshire since 1983. He articulates them in what he calls â€œAn Owner's Manual.
We encourage all owner-managers to consider doing the same producing and sharing clearly written principles and philosophies for the next generation of owners and managers.
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