Berkshire Hathaway shareholders make their annual pilgrimage to Omaha this weekend, and this year they have to confront an uncomfortable truth: Warren Buffett, Berkshire's CEO and the greatest celebrity in investing, can't go on forever.
Investors would rather not imagine life without the Oracle of Omaha, who is 81 and said last month that he had been diagnosed with prostate cancer. And he has no plans to leave the post soon.
When the day comes, people who have studied the company say, Berkshire without Buffett will probably look a lot like Berkshire with Buffett.
Berkshire, which owns 80 subsidiaries that range from a railroad to an upscale kitchen products company, is already decentralized: Of its 270,000 employees, just 24 work at Omaha headquarters.
The conglomerate has a succession plan in place. Berkshire will split Buffett's job into three when he's gone, and the board has chosen his successor — although Buffett has said that person doesn't know it yet.
And at least in the short term after Buffett, not unlike Apple in these first months after the death of Steve Jobs, there should be strong institutional pressure to keep doing things the way Buffett did them, Berkshire watchers say.
"Nobody is going to want to mess with what Warren Buffett built," says Jeff Matthews, a Berkshire shareholder and author of "Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett."
To be sure, a Berkshire without Buffett would lose the sheen of celebrity. More than 30,000 shareholders are expected to be in Omaha for the annual meeting and related events that begin Friday.
Buffett and Berkshire's vice chairman, Charlie Munger, who is 88, will spend more than five hours answering questions Saturday — many of them doubtless about what happens to Berkshire when Buffett is gone.
Berkshire's Class A stock remains the most expensive U.S. stock. One share traded for about $122,000 Thursday, near its 52-week high of a little more than $123,500.
Buffett says the growth in the stock's book value — the company's assets minus liabilities — has outpaced the Standard & Poor's 500 index in all but eight years since 1965 for a compounded annual gain of almost 20 percent.
The cancer doesn't appear a threat to the billionaire's life because doctors caught it early, and Buffett plans to undergo radiation treatments this summer.
But even before last month's diagnosis, Buffett acknowledged that his age limits how many more years he has to lead Berkshire. And not everyone is confident about the company after those years.
Meyer Shields, a stock analyst for the brokerage Stifel Nicolas, says that Buffett is deeply intertwined with the company, making it difficult to assess the importance of his role.
"It's hard to know where Warren Buffett ends and Berkshire begins," Shields says.
In addition to a smaller annual meeting crowd in the post-Buffett era, Shields says Berkshire Hathaway and its next chief executive will have a lower cultural profile.
The next CEO won't have Buffett's reputation and connections, either. So he or she may not get calls like the ones Buffett got from Goldman Sachs and General Electric in 2008.
At the depths of the financial crisis that fall, Buffett bought $8 billion of preferred stock in those companies. They paid him steep 10 percent interest — perhaps because they needed his stamp of approval as much as his cash.
Buffett doesn't plan to retire because he enjoys the work he has been doing for almost five decades far too much. So he has tried to reassure shareholders — without giving away too many details — that Berkshire has a solid succession plan in place.
The highly decentralized structure is part of what gives investors confidence the company can continue with little change.
Berkshire's eclectic mix of companies includes Geico insurance, MidAmerican Energy, the Burlington Northern Santa Fe railroad, Shaw carpet, Helzberg Diamonds, the Nebraska Furniture Mart and Pampered Chef.
And all of Berkshire's subsidiaries run with little input from Buffett. His role is to decide where to invest the excess cash the businesses generate. That's why Buffett jokes that he delegates almost to the point of abdication at Berkshire.
Buffett biographer Andy Kilpatrick, who is also a shareholder, says he thinks Berkshire will continue operating in much the same fashion.
"It's not going to be a disaster. Buffett has thought too much about this, and so has the board," says Kilpatrick, who wrote "Of Permanent Value: The Story of Warren Buffett."
Matthews says Berkshire's next CEO will face pressure to change if the business begins to languish, though. He predicts that shareholders would one day press the company to pay a dividend for the first time since Buffett took over the company in 1965 and possibly to break apart the conglomerate.
And changes like that will become more likely in several years because more than half of Berkshire's board is at least 70, so there will be turnover, Matthews says.
The management model that Berkshire plans to use after Buffett could also result in more conflict between the company's top executives, Matthews and Shields say.
As chairman and CEO, Buffett oversees Berkshire and invests the cash its subsidiaries generate. The company plans to split his job into three roles — CEO, chairman and a head of investment management — after he leaves.
Buffett told shareholders in February that Berkshire's board has chosen someone to succeed him as CEO — someday — and he said there are two backup candidates.
None of the three has been publicly identified. The Berkshire managers believed to be possible chief executive successors are Ajit Jain, who runs Berkshire's reinsurance division; Greg Abel, president and CEO of MidAmerican; Tony Nicely, chief executive of Geico; and Matt Rose, CEO of Burlington Northern Santa Fe.
Buffett has said Berkshire hasn't even told the successor and backups who they are. But he has said that his son Howard, a member of Berkshire's board, would make an ideal chairman.
And Berkshire has hired two hedge fund managers, Todd Combs and Ted Weschler, over the past two years who Buffett says are capable of eventually running the company's entire portfolio. Combs and Weschler manage portfolios worth about $2 billion while Buffett continues to make most of Berkshire's investment decisions.
Howard Buffett says he knows that if he does succeed his father as chairman, his role won't be running the company. Instead, Howard Buffett says he'd be using his knowledge of his father's ideas to help preserve the company's culture.
"I will put the interests of Berkshire ahead of my own personal interests," Howard Buffett says.
Still, the AFL-CIO, which owns Berkshire stock, has submitted a shareholder proposal that's up for a vote at the annual meeting asking whether the company should be compelled to disclose more specifics about its succession plan.
So the subject of Buffett's health is likely to be prominent at the shareholders meeting Saturday. But questions will be coming from a mix of shareholders, reporters and stock analysts.
In other words, Buffett will be asked about plenty of other subjects, too — his view of the economy, the company's earnings in the first quarter, prospects for future Berkshire acquisitions.
No one is giving the Oracle up yet.
Says George Morgan, a finance professor at the University of Nebraska at Omaha and a former investment adviser: "Berkshire is going to be Berkshire for quite some time."
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