In a very unusual statement, Berkshire Hathaway Chairman and CEO Warren Buffett has revealed that Berkshire’s board of directors would almost certainly support Ajit Jain as the company’s next CEO if he wanted the position.  However, Mr. Jain is apparently not interested in the job:

“He loves what he does, he’s not looking to take my job,” Buffett said yesterday at a news conference in Bangalore. “If he was, the board of directors would probably put him in there in a minute.”

Mr. Buffett has consistently refused to publicly identify the list of four candidates to succeed him as CEO partly due to the uncertain date of the transition.  Mr. Buffett has no plans to retire and appears to be in very good health based on his travel schedule and public appearances. As far as we know, today’s statement was the first time that Mr. Buffett has ever publicly commented on the succession issue this explicitly or named a candidate who would have the job if he wanted it.

We have previously discussed the succession issue at Berkshire and succession planning is one of the main areas of focus in Berkshire Hathaway:  In Search of the “Buffett Premium”, our recently published comprehensive report on Berkshire.

Like many Berkshire analysts, we have considered David Sokol to be the front runner based on numerous factors.  Mr. Sokol is most likely still the front runner (among candidates who appear to want the job), but his status is somewhat diminished by the fact that Mr. Jain now appears to be the heir apparent should he change his mind regarding taking on the CEO position at some point in the future.  Of course, the entire list of candidates could very well change if Mr. Buffett continues to run Berkshire over the next decade since he has previously indicated that the next CEO of Berkshire should ideally have a long tenure.

For more information regarding Mr. Jain, including his own views regarding Berkshire’s succession plans, please see our article published earlier today regarding his recent interview with the Times of India.

Disclosure:  Long Berkshire Hathaway.

Buffett: Berkshire’s Board Would Support Jain as Successor (But Jain’s Not Interested)
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12 thoughts on “Buffett: Berkshire’s Board Would Support Jain as Successor (But Jain’s Not Interested)

  • March 23, 2011 at 12:25 pm
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    “ Mr. Sokol is most likely still the front runner (among candidates who appear to want the job), but his status is somewhat diminished by the fact that Mr. Jain now appears to be the heir apparent should he change his mind regarding taking on the CEO position at some point in the future. “

    I think this grossly overstates the picture. Being in Bangalore, Buffett was likely to receive a question about the prospects of a local guy made good. His answer was diplomatic and complimentory of Ajit: He’s qualified but doesn’t want the job. Beyond that he has revealed nothing. He did not say that job was Ajit’s if he wanted it.

  • March 23, 2011 at 12:32 pm
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    I’ll have to respectfully disagree. After spending decades not saying a word about any individual’s chances of becoming CEO, Mr. Buffett made a statement and I think he meant exactly what he plainly said. There are plenty of ways to compliment Ajit other than making the statement Mr. Buffett made yesterday. I don’t think his words were an accident. Regardless, this is an academic exercise since Ajit does not want the job.

  • March 23, 2011 at 12:44 pm
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    BTW, everyone should read Alice Schroeder’s take on this. She thinks Buffett was serious and is trying to put pressure on Ajit to agree to take the job:

    http://aliceschroeder.com/blog/ajit-ceo

    She further states that Buffett and his family have always wanted Ajit to become CEO. I take it that she is basing these comments on direct interviews with the individuals involved from researching Snowball.

    Buffett is careful with his words and I don’t think he simply misspoke here.

    • March 23, 2011 at 2:32 pm
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      I agree with Alice’s points, but I still don’t think Warren was trying to make a big statement. He was (likely) saying to the Bangalorese that he is not ignoring one of theirs. Beyond that the world is too fluid.

      Having said that my working model is something like this: Bill Gates becomes the senior partner (chairman of the board, who knows), since on Warren’s death he and the Gates Foundation will become the largest shareholders. Under him, in some sense, you might well have a team that would be modelled after the Larry and Bob Tisch or Jay and Bob Pritzker. Ajit could well have some role as a Larry or Jay. Sokol would be one of the Bobs. These are models Warren knew well. Where a CIO might fit in, I don’t know, and I don’t think one need lose sleep worrying about it.

      After Warren Berkshire will be a different company. It will go into a kind of runoff. It will no longer be constrained by Warren’s not wanting taxable dividends (although with his charitable carry-forwards this might not be an issue) nor his not wanting a growing conflict of interest of large assets outside of BRK. Also, whoever is running the place will not have to be anywhere near as public as Warren.

      I do enjoy reading your postings, Ravi.

  • March 23, 2011 at 4:05 pm
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    I agree that Gates will probably serve as Chairman at some point in the future, although Howard Buffett is favored to take that position initially. It is hard to know exactly how things will unfold because much depends on timing. We can’t know the future in general, nor can we know how long Warren Buffett will live although objective evidence leads me to the conclusion that it is far more likely than not that he will be running Berkshire in five years. Beyond that is anyone’s guess. I think the organizational structure is fairly clear and I don’t think Buffett or anyone else intends the company to go into any kind of runoff – that would be viewed as a major failure of the model.

    We’ll have to see. I may be going out on a limb here but it would not surprise me at all to see Berkshire as the largest market cap company in the US within 10 to 20 years – particularly if runoff scenarios are avoided and earnings are retained. In fact, it may be inevitable (with earnings retention and compounding) within 20 years barring major errors by Buffett’s successors.

  • March 23, 2011 at 4:28 pm
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    We pretty much agree. Perhaps “runoff” is too strong, implying ultimately liquidating, which I didn’t mean. The runoff I have in mind includes paying a dividend, which I don’t favor, but the market covets; buying back stock; or even distributing publicly traded positions to shareholders. My general point is that post Buffett BRK won’t just continue merrily along. Sure, its culture will remain intact. for some time (Warren managing from the grave through seances); but the company will in some ways be right-sized for post-Buffett. There is no plan on how to play that out.

  • March 24, 2011 at 8:47 am
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    One final comment: if Warren really wanted to make a statement about succession why would he pick Bangalore?

  • March 24, 2011 at 9:31 am
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    I’m not sure but I still believe he meant what he said on the topic. I think that’s the simplest interpretation. There are many ways to communicate how important Ajit is to Berkshire without making the specific statement that was made.

    Given that something this direct was stated, I think it is now fair game for specific questions to be asked at the annual meeting next month.

  • March 24, 2011 at 10:46 am
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    Ravi, did you see this interview with Ajit:
    http://timesofindia.indiatimes.com/business/india-business/At-80-Buffett-has-more-energy-than-I-have-Ajit-Jain/articleshow/7758432.cms
    He is quite forthcoming, suggesting that the problem Alice alludes to might have as much to do with Alice, which, given some of her post-book comments, seem reasonable.

    After reading Ajit and thinking about the context in India–and knowing Warren for 35 years, I do think you are making too much of Warren’s comment. (Back in the early ’80s I said to him, when we were meeting in a WPO office, that I could easily serve as his PR agent, because I would not have to check with him on everything. I have gone off in my own direction, so I don’t feel quite as tuned in. You might be right, but I rather doubt it.)

  • March 24, 2011 at 11:00 am
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    I did read that interview and I think Ajit handled the question very well. Alice alludes to personal knowledge of what Buffett’s family wants (Ajit becoming CEO) which I assume is based on her interviews with family members although she doesn’t directly say so. In any case, obviously she has not had access for a few years now since the biography was published so her information may be outdated.

    I do not personally know Warren Buffett so you are probably in a much better position to comment on what he may have meant in this context given that you’ve known him for many decades.

    It could be that all of us are spending too much time parsing words for meaning, although it’s almost irresistible to do so given the topic!

  • March 24, 2011 at 2:56 pm
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    Ravi, I didn’t mean to \pull rank\ on you. I totally agree with your last sentence, and maybe, at age 69, I’ve become a little like my mother who, when asked about the weather, would reply, why don’t you wait until tomorrow, and you’ll know.

    I think Alice’s book is first rate, but after her falling out with Warren, I’m left with the feeling that there is a text here we don’t know. Her judgment on several occasions since then have seemed more like coming from a jilted lover. I’m sure she is very disappointed. For example, what does Buffett’s family have to do with succession? If that is how the business will be run we should sell. I don’t think for a moment that his family, and not the board of directors, is calling the shots. Sure they have preferences, but that is all they are. And Ajit made a valid point, if Warren hangs on for another 10 years, as he thinks, he, Ajit, will be 70, and like with Lou Simpson we’ll be looking at a whole new cast a characters.

  • March 24, 2011 at 3:24 pm
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    I’m basically agnostic when it comes to the question of whether Alice’s likely disappointment with being cut out of the loop has influenced her judgment. I don’t think there is any way to know so I’ve attributed my periodic disagreements with her opinions to simple difference of opinion (most notably on NetJets). But I do think she has the kind of exposure to Buffett and his inner circle that hardly anyone has so I pay close attention to what she has to say.

    If Warren Buffett is running Berkshire in ten years then the successors will be completely different since even David Sokol would be nearly 65 years old at that time. Not everyone agrees with the idea of working til they drop so … younger executives may need to be found at that point.

    There are also some intermediate possibilities such as Mr. Buffett staying involved but delegating more responsibility as he gets older. I realize that this goes against most of what we know about how he operates, but it is a possibility.

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