December 6, 2021

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Billionaire Warren Buffett taps his replacement at Berkshire Hathaway

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What Warren Buffett has been investing in amid the pandemic

Warren Buffet spent a record $5.1 billion buying back shares of his Berkshire Hathaway Inc. in the second quarter.

Bloomberg, Bloomberg

Warren Buffett plans to give Greg Abel one of the most coveted corporate jobs in America — leading the $630 billion Berkshire Hathaway conglomerate when the billionaire CEO decides to step down, according to reports.

Friends who know Abel well say he’s grounded, whip-smart and tough.

They say the Canadian transplant to Iowa has earned the right to follow the Oracle of Omaha’s enormous footsteps. “He’s damn near a genius,” says Bill Knapp, a Des Moines philanthropist and businessman, who has been friends with Abel for several years.

“He’s as common as can be. He just wants to do the job and do it well,” says Knapp, who founded Iowa Realty, the state’s largest real estate company that’s now part of Berkshire Hathaway’s HomeServices of America.

Buffett has said he has no plans to retire.

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Abel, who is now vice president of non-insurance operations at Berkshire Hathaway, travels often, yet still manages to coach his kids’ hockey, baseball and soccer teams, says Jim Cownie, a former cable executive and Iowa real estate investor.

“How does a guy with that much responsibility do that? He just figures out a way,” Cownie said. “He’s an amazing human being.”

Abel will succeed the 90-year-old Buffett as CEO.

Buffett confirmed the succession plan Monday to CNBC after Berkshire Vice Chairman Charlie Munger let details of it slip during the Omaha, Nebraska-based company’s annual meeting on Saturday. 

In an exchange with Munger, Buffett said Berkshire’s extremely decentralized operating model wouldn’t work unless the company has the right culture.

Munger responded: “But we do, and Greg will keep the culture.”

Buffett told CNBC that if anything happened to him, Abel would be the one to take the top post. Buffett said that if for some reason Abel couldn’t do the job, Vice Chairman Ajit Jain, who oversees Geico and all of Berkshire’s other insurance units, would become CEO.

Berkshire has long planned to split Buffett’s job into three parts when he is gone: a CEO to oversee capital allocation and Berkshire’s operations, investment managers to handle Berkshire’s stock portfolio, and a separate board chairman.

In the past, Buffett has declined to name the next CEO except to say that one of Berkshire’s managers would take the job. But Abel was seen as a likely candidate — Buffett has said he wants the next CEO to have a long tenure leading the conglomerate and Abel is currently 58.

Buffett has named two investment managers who already help manage the portfolio and has said that his oldest son, Howard Buffett, who already serves on Berkshire’s board, is likely to become the company’s next chairman. 

Berkshire Hathaway has a ‘great deal of comfort’ with Greg Abel

It’s clear that Berkshire values the contributions of Abel and Jain because both men received $19 million in compensation last year. That’s well above the $100,000 salary Buffett has received for more than 25 years.

Edward Jones analyst Jim Shanahan said it’s not a surprise that Abel will be Berkshire’s next CEO, given the role he has had overseeing many of Berkshire’s more than 90 subsidiaries since 2018, including the BNSF railroad and all of Berkshire’s utilities, retail and manufacturing companies.

“We have a great deal of comfort with Abel as CEO and with the overall future leadership of the company. I think he has proven to be a really effective leader,” said Shanahan, who pointed out that Abel skillfully handled questions at the annual meeting about Berkshire’s efforts to respond to climate change.

Abel came to the meeting prepared with presentation slides and lots of background information about what Berkshire’s utilities and BNSF have done to reduce carbon dioxide emissions. It’s a subject he knows well because he led MidAmerican Energy, then helmed Berkshire’s overall utility division for more than a decade before he became a vice chairman, and he remains based in Des Moines, Iowa, where the utility unit’s headquarters is.

Berkshire Hathaway’s announcement should give investors peace of mind

CFRA Research analyst Cathy Seifert said the announcement of Abel as Berkshire’s leader in waiting should give investors some peace of mind that the transition will be relatively seamless. Still, she noted, it’s hard to know what kind of a leader Abel is because his only public appearances have been at the last two Berkshire annual meetings.

“It’s difficult to sort of assess his management style because we really don’t have access to him,” she said.

Lawrence Cunningham, a George Washington University law professor who wrote “Berkshire Beyond Buffett: The Enduring Value of Values,” said it would be nearly impossible to match Buffett’s investment track record.

But Abel has made plenty of great purchases, Cunningham said. “An important part of that job is deciding when to make an investment in another company. And he’s proven to be good at it,” he said.

Abel will have to “establish an investment track record, beyond energy, that are good picks — that are successful,” Cunningham said. “He’ll get a little leeway. No one’s expecting him to hit the kind of home runs that Warren did.”

Seifert said that as successor to Buffett, Abel likely will face more pressure from activists who want the company to make changes because he won’t control roughly one-third of the voting stock the way that Buffett does now. Over the weekend, Berkshire shareholders rejected proposals calling for the company to produce annual reports on climate change and diversity efforts largely because Buffett opposed them.

‘He’s seeing a large part of the economy just like Warren always has’

Jim Weber, CEO of Berkshire’s Brooks Running company, said Abel has routinely visited the Seattle company to review its strategy and operations several times a year since becoming vice chairman. Plus, Abel is available whenever needed, which Weber took advantage of last year when the coronavirus pandemic shut down all the retail stores that sell Brooks’ shoes.

“I wanted to get his insight into what he was seeing in the economy and at the other businesses. He’s seeing a large part of the economy just like Warren always has,” Weber said. Abel encouraged Weber to focus on Brooks’ customers during the pandemic, which helped lead the company to shift to online sales and set sales records because people kept running even with the coronavirus restrictions.

Abel has been an active member of the Des Moines metro community, serving on the boards of the Mid-Iowa Council Boy Scouts of America, Drake University and the American Football Coaches Foundation.

The Associated Press contributed to this article.

Donnelle Eller covers agriculture, the environment and energy for the Register. Reach her at [email protected] or 515-284-8457. 

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