By Nicole Friedman
OMAHA, Neb. -- Warren Buffett is quietly installing a new set of
leaders throughout Berkshire Hathaway Inc.
Seven Berkshire subsidiaries that collectively employ more than
46,000 people announced changes in chief executive officers in the
last year, an unusually high amount of turnover at a company that
rarely has top executives leave.
They range from reinsurer General Re Corp. and
specialty-chemicals company Lubrizol Corp. to MiTek Industries
Inc., which supplies equipment and software to the construction
industry. Some of the leadership changes weren't widely
reported.
The moves will test the strength of Berkshire's decentralized
structure. Berkshire's roughly 60 subsidiaries operate
independently, with the CEOs of most Berkshire businesses reporting
directly to Mr. Buffett.
"The performance of these units in transition will each be a
test of succession planning," said Lawrence Cunningham, a law
professor at George Washington University who has written about
Berkshire.
At Berkshire's annual meeting Saturday, Mr. Buffett offered no
new clues about who would eventually succeed him as CEO, though he
did suggest that person could take over while Mr. Buffett is still
alive. The 86-year-old, who has headed Berkshire for 52 years, has
said that Berkshire's board has agreed on a succession plan but
hasn't released the name of his successor.
Mr. Buffett went out of his way Saturday to praise Berkshire's
managers, as he usually does. "We have never had more good managers
than we have now," Mr. Buffett said. But, he quipped, "that's
because we've got more good companies."
Berkshire typically leaves the management team in place when it
buys a business, and Berkshire CEOs rarely leave their jobs to take
other positions. Some have served for decades.
Most Berkshire CEOs report directly to Mr. Buffett, but some
report to one of his investing lieutenants, Ted Weschler or Todd
Combs, or to Tracy Britt Cool, Mr. Buffett's former financial
assistant and current chief executive of the Pampered Chef, a
Berkshire subsidiary.
When Tad Montross announced his retirement from Gen Re last year
Gen Re said his successor would report to Ajit Jain, who runs
Berkshire Hathaway Reinsurance Group, and not to Mr. Buffett as Mr.
Montross had. One month later it announced the new CEO would be
Kara Raiguel.
Berkshire's board routinely discusses succession at the top but
also at the subsidiary level, with a focus on how to maintain
Berkshire's culture, said board member Ron Olson, a partner at
Munger, Tolles & Olson LLP, at a conference Thursday in
Omaha.
Most new managers are hired from within the subsidiaries, he
said, a model that has been successful.
One such example is Eric Schnur, who started reporting to Mr.
Buffett as chief executive of Lubrizol in January, replacing the
retiring James Hambrick. He has worked at the company since he was
a student.
"I know the product lines, the customers. I know a lot of the
challenges, " he said in an interview. "It's clear to me what we
need to do" to expand the business.
Many Berkshire managers spent part of last week networking with
each other in Omaha, sharing experiences and ideas on shared
challenges.
Other recent Berkshire subsidiary CEO turnovers include Cathy
Baron Tamraz, who retired as CEO of press-release distributor
Business Wire Inc., and was succeeded by Geff Scott. At MiTek, Mark
Thom took over as CEO while former CEO Tom Manenti became executive
chairman and continues to report to Mr. Buffett.
In December, Melissa Burgess-Taylor took the helm at Fruit of
the Loom Inc. after Rick Medlin died at age 68. In April,
Texas-based Star Furniture said Chief Executive Bill Kimbrell had
resigned and a successor wasn't announced. A spokesman didn't
provide an immediate comment.
Starting in June, RC Willey Home Furnishings Chief Executive
Scott Hymas is planning to take a three-year religious leave,
during which the company's president will be in charge of the Utah
furniture chain while Mr. Hymas will take more of a board role, he
said.
Berkshire declined to say whether that was a complete list of
CEO transitions since 2016's annual meeting.
Mr. Buffett sends CEOs a letter every two years reminding them
of the company's values and asking them to recommend in writing who
their successors should be, he said in his 2010 shareholder
letter.
Mr. Buffett also occasionally replaces top executives. In 2012,
he wrote a letter to ousted Benjamin Moore & Co. CEO Denis
Abrams explaining his decision to fire him based on "a differing
view about distribution channels and brand strategy."
At the 2016 annual meeting, Mr. Buffett said there is no "grand
design" behind succession planning at the subsidiary level, and
there are no rules about how many executives can report to Mr.
Buffett.
"At Berkshire, every decision that comes up, we just try to
figure out the most logical thing to do at that time," he said.
Write to Nicole Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
May 08, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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