- Wealth, experience, and humility are among the traits that Berkshire Hathaway CEO Warren Buffett has said he would like his successor to have.
- Shareholders will be reading Warren Buffett’s annual letter, due on Saturday, for anything he says about who might replace him.
- In January, Buffett promoted two senior executives – Ajit Jain and Greg Abel – to Berkshire Hathaway’s board, fuelling speculation that it would be one of them.
Whoever replaces Warren Buffett as Berkshire Hathaway’s CEO will have gigantic shoes to fill.
That’s why this Saturday, when Buffett releases his annual letter, shareholders will be reading for anything Buffett says on succession.
Buffett fuelled more speculation about his pick in January, when he announced the promotion of two senior executives – Ajit Jain and Greg Abel – to Berkshire’s board of directors.
At the annual meeting last year, Buffett detailed to shareholders the traits he’d like to see in a successor, following a question on how the person should be compensated:
“I actually would hope that we have somebody that’s already very rich – which they should be if they have been working a long time – and really is not motivated by whether they have ten times as much money than they and their families can need or a hundred times as much.
“And, they might even wish to perhaps set an example by engaging for something far lower than actually what you could say their true market value is. That could or could not happen, but I think it would be terrific if it did. I can’t blame anybody for wanting their market value.
“If they didn’t elect to go in that direction, I would say that you would probably pay them a very modest amount and then have an option which increased in striking price annually.”
This segued into a scathing critique of compensation consultants, who are hired by corporate boards of directors to provide independent advice on shareholders’ behalf.
“I have avoided all my life compensation consultants. I hardly can find the words to express my contempt,” said Charlie Munger, Berkshire’s vice chairman.
Munger did find such words during the 2012 meeting when he said “prostitution would be a step up” for compensation consultants.
“If the board hires a compensation consultant after I go, I will come back mad,” Buffett said.
For Buffett, the problem is that compensation consultants use other companies as a guide.
“What consultant is ever going to get another assignment if he says you should pay your CEO down in the fourth quartile,” Buffett said. “It isn’t that the people are evil or anything, it’s just that the nature of the situation produces a result that is not consistent with how representatives of the owners should behave.”