Berkshire Hathaway Expands Board With An Eye On Buffett’s Succession

Berkshire Hathaway CEO Warren Buffett.

Berkshire Hathaway Inc. named Gregory E. Abel vice chairman of noninsurance businesses and Ajit Jain vice chairman of insurance operations this week, a move that expands the company’s board from 12 to 14 directors and could shed some light on who will become CEO Warren Buffett’s eventual heir.

“Jain and Abel are being anointed jointly as they are expected to run Berkshire jointly one day, with Jain as senior partner, following in the tradition of Buffett and his junior partner, Charlie Munger,” Jeff Cunningham, professor of global leadership at Arizona State University’s Thunderbird School of Global Management told Corporate Board Member. “In anointing [Jain and Abel] as vice chairs to the Berkshire board, Warren is doing what he always does: making smart but consequential moves slowly after a period of testing and thinking.”

Abel, 55, currently serves as chairman and CEO of Berkshire Hathaway Energy Company, which he joined in 1992. Jain, 66, leads Berkshire’s reinsurance operations in his current role as executive vice president of National Indemnity Company. He has been with Berkshire Hathaway Insurance Group since 1986.

“Buffett isn’t reacting to the corporate governance fraternity in making these moves.” – Jeff Cunningham

Cunningham believes the move fits perfectly with Berkshire Hathaway’s corporate culture, as Buffett and Munger have worked in concert to run the company successfully for many years.

“Jain and Abel will be a corporate tag team, two heads better than one, similar to Buffett and Munger,” Cunningham says. “Warren knows his own investment philosophy may be better than most, but not always perfectly accurate, and he relies on Munger to tell him when he’s dreaming.”

The decision to bring Jain and Abel into the boardroom wasn’t made under any outside pressure, according to Cunningham.

“Buffett isn’t reacting to the corporate governance fraternity in making these moves,” he says. “You could define this as ‘do the right thing, but always pay attention to how the public will perceive it.'”

While plans for succession at Berkshire Hathaway may be progressing behind closed doors, the CEO has been upfront about planning for his succession and his own ability to lead the company at his advanced age.

“Buffett has had a false step or two in planning his succession but has been fairly transparent about his intentions and his own health,” senior associate dean for leadership studies at the Yale School of Management Jeffrey Sonnenfeld told Corporate Board Member. “He has been eager to discuss his concern for this process whereas [NewsCorp CEO Rupert] Murdoch has not been.”

Buffett has refuted the idea that this week’s board moves are related to his health, telling MSNBC “I feel terrific. I love what I do. I can’t wait to go to the office in the morning.” However, the CEO did concede that the appointment of the two new vice chairs is “part of a movement to succession over time.”