OMAHA, Neb. (AP) 鈥� When becomes Berkshire Hathaway's new CEO next year he will of course take on additional responsibilities, but with remaining as chairman, the announced at the annual meeting over the weekend is in some ways just another milestone in the company's succession plans.
Shareholders have been about how to replace the world's greatest investor for decades 鈥� even before the 94-year-old hit a typical retirement age. So years ago, Berkshire's board started devoting part of every meeting to the succession question.
Then in 2018, Buffett began publicly handing over the reins when he put Abel in charge of all of Berkshire's dozens of manufacturing, retail, railroad and utility businesses. Fellow Vice Chairman Ajit Jain was given responsibility for the insurance companies including Geico, while Buffett kept responsibility for investing Berkshire's billions. Berkshire would be Buffett's successor in 2021 after former Vice let it slip at a shareholder meeting.
Starting next year, Abel will have the final say on all of Berkshire's companies and investments, but he will also still have Buffett, Jain and two investment managers 鈥� Ted Weschler and Todd Combs 鈥� coming to the office every day to help. And the CEOs of Berkshire's many different subsidiaries handle all the day-to-day operations.
鈥淕reg鈥檚 already been doing it for a couple of years, so his job really doesn鈥檛 change. His title does, but his job鈥檚 not really changing that much,鈥� said Bob Miles, who has taught a course about Buffett and Berkshire at the University of Nebraska-Omaha for 15 years.
Berkshire's board approved the 62-year-old Abel's promotion to CEO and kept Buffett as chairman on Sunday. Berkshire Class B shares fell more than 5% Monday in response to the news after hitting an all-time high Friday, but many investors praised the plan.
鈥淚 think it gives Warren a little more bandwidth instead of running this conglomerate," Macrae Sykes, portfolio manager at Gabelli Funds, said in an interview with The Associated Press. "It gives Greg more transparency on the opps with also Warren still being his mentor as chairman,鈥�
Unmatched track record of success
In six decades at the helm, Buffett turned a Massachusetts textile company into a sprawling but nimble conglomerate that owns everything from Daily Queen and See鈥檚 Candies to BNSF Railway and massive insurance and utility companies. As the company grew, Buffett's reputation grew with it as shares of Berkshire Hathaway climbed steadily, exceeding major indexes by wide margins and returning an average 19.9% each year to investors versus 10.4% for the Standard & Poor鈥檚 500.
The decision to continue with the Oracle of Omaha, as Buffett is known, as head of the board differs from the succession plans laid out in the event of Buffett's death. The billionaire has long said that Howard Buffett, the second-born of his three children, should become chairman when he is gone to protect Berkshire's culture.
Abel will take over in a precarious time as the U.S. launches trade wars against friend and foe alike, which Buffett has called a mistake. But that could also create investment opportunities for Berkshire if there is a crisis.
So much money, so few places to put it
Then there is Berkshire鈥檚 $348 billion in cash.
Buffett says he doesn鈥檛 see many bargains to invest that money in now, not even Berkshire鈥檚 own stock, but he assured some of the estimated 40,000 attendees of the company鈥檚 annual meeting in Omaha, Nebraska, over the weekend that one day the company would be 鈥渂ombarded with opportunities.鈥�
Abel, a low-key Canadian with a love a hockey who makes it a priority to coach his kids' teams, said Saturday that he wouldn鈥檛 change Berkshire鈥檚 approach to investing, which he learned from Buffett. Maintaining Berkshire鈥檚 fortress-like balance sheet will always be a priority, he said.
Eventually, Berkshire might have to consider paying a dividend, which Buffett always resisted because he believed he could deliver better returns by reinvesting the cash. For now, Buffett and Abel want to keep building cash, so they are prepared when opportunities arise.
High praise for Abel
Buffett endorsed Abel, vowing to keep all of his shares that give him control of 30% of Berkshire Hathaway. Abel is a more hands-on manager than Buffett, asking managers tough questions and encouraging them to collaborate with other subsidiaries when it makes sense.
鈥淚t鈥檚 way better with Greg than with me because I didn鈥檛 want to work as hard as he works and I can get away with it because we鈥檝e got a basically good business -- a very good business 鈥� and I wasn鈥檛 in danger of you firing me by virtue of the ownership and the fact that we could do pretty well,鈥� Buffett said. "The fact that you can do pretty well doesn鈥檛 mean you couldn鈥檛 do better, and Greg can do better at many things,鈥� he said.
The CEOs of Berkshire subsidiaries who report to Abel have praised his management style of personal accountability, but also autonomy. See's Candy CEO Pat Egan worked with Abel at Berkshire's utility unit for years before he took over the candymaker six years ago and said Abel makes sure he's considered every contingency.
鈥淗e鈥檚 allowed me to make a lot of decisions that he may or may not have agreed with, but he鈥檒l support us at the end of the day, no matter what as long as we鈥檙e operating with integrity and principles and the long game," Egan said.
But Morningstar analyst Greggory Warren wrote that Buffett's succession announcement left him with plenty of questions and Abel will have to prove himself.
鈥淎bel, in our view, will be held to a different standard than Buffett, with a greater focus on how well Berkshire is performing鈥攅specially with it being likely that there will be some churn in the company鈥檚 shareholders as we move past the end of an era for the firm,鈥� Warren said.
Buffett's philanthropy continues
Buffett has always delegated the decisions about how to distribute his fortune, worth nearly $160 billion, to others through annual share donations to the Gates Foundation and four family foundations run by his children.
The Gates Foundation has received the biggest donations worth since he started giving away his fortune in 2006.
He said last summer that his three children will how to distribute his remaining fortune after his death, but donations to the Gates Foundation will end. Buffett has said he expects it to take a decade to give away all his shares after his death, ensuring extended support for Abel from the family.
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AP Business writer Bernard Condon is in New York City. AP Business Writer Michelle Chapman contributed to this report from New York City.
Josh Funk And Bernard Condon, The Associated Press
