Berkshire Hathaway

Can Buffett Be Replaced?

Lubica Belhadjova 吳筣雪MA1N0212

Course: Financial Management, Program: Global MBA, Southern Taiwan university of Sience and Technology

Berkshire Hathaway• Headquartered in Omaha, Nebraska, USA (source:

www.berkshirehathaway.com)

• A diversified company with major interest in GEICO, life insurance, annuity sales and sales of jewelry (source: www.berkshirehathaway.com)

Berkshire Hathaway – Can Buffett Be Replaced? (1/7)

• In early 1980, investors could buy one share of Berkshire Hathaway for $285 – may have seemed expensive at the time

• By 2007, the price of one share had climbed to $111,000

• Who is behind the success??

Berkshire Hathaway – Can Buffett Be Replaced? (2/7)

• Warren Buffett with his partner Charlie Munger runs a large conglomerate of – 73 businesses – with 217,000 employees and – nearly $100 billion in annual revenues

Berkshire Hathaway – Can Buffett Be Replaced? (3/7)

• Buffett receives an annual salary of $100,000 – not much in this age of super CEO compensation packages

• However, his 31% ownership of Berkshire Hathaway is valued at nearly $44 billion

• He announced recently his plans to donate $40 billion to philanthropic causes

Berkshire Hathaway – Can Buffett Be Replaced? (4/7)

Warren Buffett:• “I’ve taken the easy route,

just sitting back and working through great managers who run their own shows. My only tasks are to cheer them on, sculpt and harden our corporate culture, and make major capital-allocation decisions. Our managers have returned this trust by working hard an effectively.”

Berkshire Hathaway – Can Buffett Be Replaced? (5/7)

• Many think that Buffett is one of the best analytical minds in the business

• Berkshire’s annual report is a must-read for many investors due to a popularity of Buffett’s annual letter to shareholders – discussing such topics as investing, corporate governance, and corporate leadership

• Shareholder meetings in Omaha, Nebraska, have turned into cult-like gatherings, with thousands traveling to listen Buffett answer questions from shareholders

Berkshire Hathaway – Can Buffett Be Replaced? (6/7)

• One question that needs to be answered is whether Berkshire Hathaway can successfully replace Buffett (age 77), Munger (age 83), and the board of directors (average age of 70)…?

Berkshire Hathaway – Can Buffett Be Replaced? (7/7)

• Given its track record, the company is likely to be successful in finding a new generation of leadership that takes action based on the best interest of employees, customers, and shareholders, as long as Warren Buffett is able to impart his special wisdom to the process

Case Question• The share price of Berkshire Hathaway has

never been split. Why might the company refuse to split its shares to make them more affordable to average investors?

Reference List

• GITMAN, L.J. ‘Principles of Managerial Finance’ 2009

• www.berkshirehathaway.com

Thank You For Your Attention

Lubica Belhadjova 吳筣雪MA1N0212