Buffett’s Legacy and Berkshire’s Future

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Rady School Discussion Examines Warren Buffett’s Legacy and What’s Next for Berkshire Hathaway

Article by: Christine Clark | Feature image by: Joel Ackerman/Rady School of Management

Speaking at the Rady School of Management, Buffett scholar Larry Cunningham examined how trust, leadership, and disciplined investing will shape Berkshire Hathaway’s next chapter

What happens when Warren Buffett steps away from Berkshire Hathaway? Can the company’s famously decentralized culture endure without its legendary founder? And what lessons from Buffett’s approach to business and trust will guide the next generation of leaders?

Those were among the questions explored at UC San Diego Rady School of Management Stanley Foster Symposium, where Larry Cunningham, one of the nation’s leading experts on corporate governance and the history of Berkshire Hathaway, discussed the future of the multinational conglomerate holding company before a packed audience of students, faculty, alumni and community members.

The event, co-sponsored by the Rady School’s Brandes Center, was moderated by Bosco Luján, a FlexEvening MBA ’12 graduate and executive director at Morgan Stanley. He also serves as a member of the Rady Dean’s Advisory Council, is a UC San Diego Foundation trustee and chair of the Foundation’s Investment/Finance Committee. Luján guided Cunningham through a wide-ranging conversation on Buffett’s career, Berkshire’s culture and the company’s future leadership.

Cunningham on the right. The event was moderated by Bosco Luján (left). Luján is a FlexEvening MBA ’12 graduate and executive director at Morgan Stanley. He also serves as a member of the Rady Dean’s Advisory Council, is a UC San Diego Foundation trustee and chair of the Foundation’s Investment/Finance Committee.

Meeting Warren Buffett: A Defining Moment

Cunningham recounted his first encounter with Buffett—an experience that set the course of his career. Shortly after becoming director of the Heyman Center on Corporate Governance in New York, Cunningham decided to host a symposium on Buffett’s famous shareholder letters. Weeks of silence had him doubting whether the idea would take off—until one evening he returned home to find a message on his answering machine:

“Oh, hi, Larry. This is Warren Buffett. Bob Denham told me about your idea. I think it’s terrific. Why don’t you give me a call?”

That call led to a three-day conference with Buffett, Charlie Munger, and their closest associates. The lively debates became the foundation for Cunningham’s book, “The Essays of Warren Buffett: Lessons for Corporate America,” now translated into 14 languages.

“What you see is what you get with Warren,” Cunningham told the UC San Diego audience. “He’s a down-to-earth, Midwestern guy.”

How Trust is in the Berkshire Hathaway DNA

When asked why Berkshire Hathaway’s model has proven so difficult to replicate, Cunningham distilled the answer into one word: trust.

Munger once described the company as “a seamless web of deserved trust,” and Cunningham explained how that philosophy permeates every level of the organization—from the boardroom to the loading dock. Buffett’s model has been to hire capable managers, grant them wide autonomy, and hold them accountable for performance.

“There’s far less red tape at Berkshire than at many other companies,” Cunningham said. “That culture of autonomy and accountability is the glue that holds it all together.”

From left to right: Bosco Luján; Lisa Ordóñez, Dean of the Rady School of Management; Larry Cunningham and Robert Schmidt, executive director of The Brandes Center at UC San Diego Rady School of Management.

Preparing for Life After Buffett

Looking ahead, Cunningham emphasized that Berkshire’s succession plan will divide Buffett’s many roles among trusted leaders. Greg Abel, who has led the company’s energy business for 25 years, will become CEO. Buffett’s son, Howard, is expected to serve as board chair, while investment duties will remain with Todd Combs and Ted Weschler, who have managed large portions of the portfolio for more than a decade.

The most difficult transition, Cunningham said, will be Buffett’s role as controlling shareholder. His estate plan calls for gradually selling his Class A shares—converted into Class B shares—over 12 years, with proceeds going to charity. While no single shareholder will hold Buffett’s influence, Cunningham noted that a core group of long-term investors will help preserve Berkshire’s culture.

“Greg will get some space,” Cunningham observed. “But he and the team must continue to deliver value. And my bottom line? My money is on Greg.”

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Half of Russell 3000 Companies report no changes in Board Composition

External Articles, Media Coverage

The Conference Board has issued a study, Corporate Board Practices in the Russell 3000 and S&P 500. The study was developed with the support from the Weinberg Center, as successor to the Investor Responsibility Research Institute (IRRCi), Debevoise & Plimpton and Russell Reynolds Associates.

For a copy of the report, please click HERE

For a copy of the press release, please click HERE

For a copy of “What’s Keeping More Women From Board Seats: Little Turnover,” Wall Street Journal (April 24, 2019), click HERE (subscription required)

For a copy of “Corporate Board Practices in the S&P 500 and Russell 3000: 2019 Edition,” Harvard Law School Forum on Corporate Governance and Financial Regulation Blog (May 7, 2019), click HERE

The Role of the General Counsel as a Corporate Culture Influencer

External Articles, Media Coverage

https://youtu.be/vkM7XrYw17k

On September 11, 2017, the Weinberg Center hosted a discussion on the role of the general counsel and how she should be positively influencing corporate culture. The Center has been working with the Association of Corporate Counsel (ACC) to examine this issue in light of ACC’s recent research and white paper on this topic. ACC is a global bar association with more than 43,000 in-house counsel members worldwide. Participating in the discussion were the following;

Veta T. Richardson, president and CEO of the Association of Corporate Counsel. For four consecutive years she has been named to the NACD’s Directorship 100 as one of the most influential leaders in the boardroom and corporate governance community. Her own expertise was shaped through more than a decade as in-house counsel at Sunoco, Inc., where her practice focus was corporate governance, transactions, securities disclosure and finance.
Gloria Santona, who recently stepped down as executive vice president, general counsel and corporate secretary of McDonald’s after three decades at the company. During that time, she worked closely with McDonald’s board of directors as their liaison to senior management. Gloria also has served as an independent director of Aon Corporation since 2004.
Ann Mulé, Associate Director of the Center, moderated the discussion. Prior to joining the Center, Ann Mulé served as the chief governance and compliance officer, assistant general counsel, and corporate secretary at Sunoco, Inc. where she worked with Sunoco’s Board and Board committees for many years.

As a companion to the video, Veta Richardson from ACC and Ann Mulé from the Weinberg Center interviewed Kenneth C. Frazier, President and CEO of Merck & Co., Inc., on leadership, corporate culture and the evolving role of the general counsel. To read teh interview, click on the following link:

“On Leadership: An Interview with Kenneth C. Frazier, President & CEO of Merck & Co. Inc. (ACC 2017)

To read the ACC white paper, click on the followong link:

“Leveraging Legal Leadership: The General Counsel as a Corporate Culture Influencer.”

For more information about the role of the general counsel, including the complete bios of the discussion participants, click HERE.