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Successor at Berkshire lined up, says Warren Buffett

It has long been one of Wall Street's favourite guessing games: Who will succeed Warren E Buffett as chief executive of Berkshire Hathaway?

business Updated: Feb 26, 2012 20:21 IST
The New York Times
The New York Times

It has long been one of Wall Street's favourite guessing games: Who will succeed Warren E Buffett as chief executive of Berkshire Hathaway?

Buffett, in his annual letter to Berkshire shareholders on Saturday, said for the first time that he had chosen a successor. But Buffett, 81, did not name the candidate, and emphasised that he and his longtime business partner, the 88-year-old Charlie Munger, were sticking around.

"Do not, however, infer from this discussion that Charlie and I are going anywhere; we continue to be in excellent health, and we love what we do," wrote Buffett, who over five decades has built Berkshire, based in Omaha, into one of America's largest companies.

By signaling a clear succession plan, Buffett hopes to reassure investors who have expressed concern over Berkshire's future leadership. Berkshire's share performance has lagged the broader stock market over the last two years, and Wall Street analysts partly blame the uncertainty surrounding a new chief executive.

It was only a year ago that Berkshire disclosed in a securities filing that it had identified four current managers "who are capable of being CEO." But just weeks after that filing, David Sokol, a top lieutenant of Buffett whom many considered the front-runner, resigned when he was accused of violating the company's insider trading policies.

Sokol's departure, a major embarrassment for Buffett, went unmentioned in the letter. But he praised the work of several executives who are thought to be leading candidates to succeed him as chief, including Ajit Jain, the head of the company's reinsurance operations; Tad Montross, chief of the insurance business General Re; and Matthew Rose at the railroad unit Burlington Northern Santa Fe.

Beyond succession issues, the 22-page letter delved into the performance of Berkshire's vast holdings, providing insights into the country's business prospects.

"In short, when you look at Berkshire, you are looking across corporate America," wrote Buffett, whose net worth is about $50 billion, according to Forbes magazine.

With a market capitalization of about $200 billion, Berkshire ranks among the top 10 most valuable companies in the United States, roughly the same size as General Electric and Google. The conglomerate has holdings large and small, like the giant utility MidAmerican Energy and the modest confectioner See's Candies.

Berkshire on Saturday reported net income last year of about $10.3 billion, which was off 21% from 2010. The company's book value, or net worth — Buffett's preferred yardstick for performance — increased 4.6%, outpacing the broader stock market's 2.1% return.

Among the assets that dragged on Berkshire's performance were its holdings in the housing sector, which include the homebuilder Clayton Homes, the carpet maker Shaw, and Acme Brick.
The New York Times

First Published: Feb 26, 2012 20:19 IST