Warren Buffett has just delivered a master's degree in succession planning with his own theatrical fulfillment, balancing his desire for a gentle department and his taste for a high drama.
The famous investor shocked the world on Saturday when he declared at a stadium filled with Berkshire Hathaway, which he planned to resign as CEO at the end of this year, giving way to his handpicked successor, Greg Abel.
Manufacturing years
The Oracle of Omaha “prepares its shareholders to retire as CEOs for a long time.
He often underlined his advanced age in the letters and interviews of shareholders. He also talked about Abel management prowess and a central role in the management of Berkshire, and even compared him to his late trading partner, Charlie Munger.
“At 94, it will not take long before Greg Abel replaces me as CEO and wrote the annual letters,” wrote Buffett in this year's missive. He said that in the rare moments when good deals abound, Abel obviously showed his ability to act at times such as Charlie “.
Buffett was a team to replace him who includes Abel, the assurance manager Ajit Jain, investment managers Todd Combs and Ted Weschler, and his son Howard. His work will be to preserve the culture of Berkshire as president once Buffett is no longer there.
The billionaire philanthrope has also detailed that in his death, his Berkshire stock will be placed in a trust for his children to allocate to good causes. This decision should help prevent an activist investor from picking up his actions once he has gone and trying to dismantle the company he built.
The successful leaders prepare their companies when they recover, Bret Bero, assistant professor of management practice at Babson College, told Business Insider.
Buffett did a lot to prepare for this transition, but ultimately his “success will be measured” by the way Berkshire occurs under Abel, said Bero.
Greg Abel is expected to succeed Warren Buffett as CEO during the new year. Berkshire Hathaway Energy
Soften the blow
Buffett knew that his news of resignation could scare investors – Berkshire's action dropped 5% on Monday – so he took badly to reassure his shareholders.
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He plans to stay CEO until the new year and continue as president of Berkshire beyond that, indicating that he will still supervise Berkshire and guide Abel for a while.
Buffett is committed not to sell a single share of his participation by almost 14% in Berkshire, a position worth more than $ 160 billion. He defended Abel in the process, describing the decision as an “economic decision” because he expected the company to get better under his successor.
The reversal of beans to retire to shareholders without first saying to the board of directors of Abel or Berkshire (with the exception of two of his children who are administrators) also sent the message he really enhances their self -confidence and acts in their interests.
“It is essentially a thank you to all these long -standing shareholders who have stayed with the company,” said Associate Professor at the McDonough School of Business at the University of Georgetown.
The rear zoom, Buffett may have thought that Abel's personally selection to succeed him would help win the Berkshire shareholders. This approach avoided the business standard to hire a consulting company to seek external candidates in the world, said Larry Cunningham. He is director of the Weinberg Center on Corporate at the University of Delaware and the author of several books on Buffett and Berkshire.
“Here, we have an excellent succession plan created by a deep and long reflection,” he told Bi, adding that “best practice for a business is not the best practice for all”.
Show
Buffett may have prepared Berkshire shareholders for his retirement, but he could not resist announcing the news in a dramatic style.
He kept the secret decision, making no warnings in advance to the members of the Board of Directors Non -Family or to Abel, who sat next to him on stage. This has limited the risk that its great surprise would be disclosed or spoiled and would guarantee that it has had a maximum impact.
He asked questions for almost five hours before dropping the bomb in his closing comments and going to a standing ovation, throwing the planned agenda. This has made the climax of his question and answer session and all weekend.
The shareholders attend the annual meeting of Berkshire Hathaway on May 3 in Omaha, Nebraska. Rebecca S. Gratz / AP
Keep beforehand “speculation or fanfare” lips, releasing Buffett to focus on the questions and “take advantage of the commitment with shareholders without the overhang of succession”, told Bi Macrae Sykes, head of the portfolio at Gabelli Funds.
“He has always created a great positive Berkshire theater and that deserved another Oscar as well as a consideration for a lifetime prize,” added Sykes.
Buffett is a “big showman”, Steve Hanke, professor of applied economy at Johns Hopkins University who was Teach Buffet style assessment For decades, Bi said.
“He knows that you are directing the show or that the show manages you,” said Hanke, nodding his head that if Buffett had left the news early, the reaction of the crowd and the media frenzy would have overwhelmed everything he said later.
Schloetzer also praised the status of icon of Buffett and the marketing flair, saying that a “unique leader can design his surprise final”.
“No 8-k or email blast form could have removed such a memorable moment,” he added.
