Succession at Berkshire

Preparatory to the annual report's issuance on Saturday, Friday's Financial Times features the following editorial I wrote about the urgency of the succession issues at Berkshire. How the $166B investment portfolio (and derivatives book) will be managed, the ever-shifting list of names on the hypothetical list of internal CEO candidates, and the question of who will serve as non executive chairman after Buffett should all be at the top of investor's minds.

These questions exist because of Buffett's titanic achievements, not despite them. His success is the very reason why it is so difficult to envision Berkshire without him, much less plan for it. But that is all the more reason why the transition roles should be crafted far in advance and with great care.

It is not enough to know that one or more investment managers may have some responsibility for something, and that one person, Todd Combs, has been hired and may or may not have an expanded role someday. Likewise, if Buffett wants the option to change his mind about the CEO candidates, of course that's fine, but other companies go through this all the time and it is not surrounded by so much secrecy.  And when it is .... the company is heavily criticized. See Steve Jobs and Apple.   I know that to some people, any criticism of Buffett is heresy. The market, however, has reached a verdict with Berkshire's valuation having declined steadily from what used to be consistently well over 2x tangtible book. It is not doing Buffett, his legacy or his shareholders a favor to be in denial.

I am very much hoping that Saturday's annual report demonstrates a change of heart and contains some new information that clarifies things. Otherwise, it is very worrying that the stock's valuation may simply keep declining.