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.”
A new report, Corporate Board Practices in the Russell 3000, S&P 500, and S&P MidCap 400: 2021 Edition, published by The Conference Board and ESGAUGE
The Conference Board and ESGAUGE have published a new eport, Corporate Board Practices in the Russell 3000, S&P 500, and S&P MidCap 400: 2021 Edition, which focuses primarily on board diversity. The Report finds that women’s representation on boards continues to increase across all three indices. Boards with multiple women directors saw increases in the S&P 500. The Report also finds that typically, the smaller the company, the less gender diversity on their board. With regard to racial disclosure, the Report finds that such disclosures increased in all three indices. The Report finds that despite the increase in racial disclosure, the racial and ethnic composition of the newly elected class of directors remains similar to the makeup reported in 2020, according to directors’ self-disclosure. The study was published by The Conference Board and ESG data analytics firm ESGAUGE, in collaboration with Debevoise & Plimpton, the KPMG Board Leadership Center, Russell Reynolds Associates, and the John L. Weinberg Center for Corporate Governance at the University of Delaware.
Justin Klein, Director of the Weinberg Center, noted “The latest data reveal that the all-male board is fast becoming obsolete, as most boards recognize the many benefits that diversity can bring to the table. Diversity is not a check-the-box compliance exercise, and companies should not relent in the pursuit of some form of gender balance on their board. Those smaller entities that do not yet have any female board members should give thoughtful consideration to adding other diverse members to their board.”
Additional key findings of the report include:
While large companies continue to combine the Chair and CEO roles, mid-sized companies are increasingly separating them.
Despite more ESG responsibilities for boards, new duties continue being fulfilled primarily by existing committees.
The report is complemented by an online dashboard, that users can use to visualize the data by market index, business sector, and company size.
Corporate Board Practices in the Russell 3000 and S&P 500: 2020 Edition, published by The Conference Board and ESGAUGE
The Conference Board and ESGAUGE have published a new report, Corporate Board Practices in the Russell 3000 and S&P 500: 2020 Edition, which focuses on how companies can improve diversity and strategic capabilities in the boardroom. The Report finds that women on Russell 3000 boards have increased by just 4.2 percent over 3 years, and over 13 percent of the companies in the index still had no female directors. Moreover, only about 10 percent of S&P 500 companies explicitly report the race and ethnicity of their individual directors and 8 out of 10 of the directors at those companies are white. The study was published by The Conference Board and ESG data analytics firm ESGAUGE, in collaboration with Debevoise & Plimpton, the KPMG Board Leadership Center, Russell Reynolds Associates, and the John L. Weinberg Center for Corporate Governance at the University of Delaware.
Ann Mulé, Associate Director of the Weinberg Center, noted “The scrutiny of board diversity practices will continue to intensify, driven by multiple factors. As just one example, more and more institutional investors are following the lead of prominent asset managers that are moving diversity to the front and center of their corporate stewardship initiatives. Corporate boards are now at an inflection point and have a window of opportunity to embrace changes in their composition and practices that align with companies’ strategies and meet new investor demands. “
Additional key findings of the report include:
Less than 5 percent of board chairs are women.
Companies are looking beyond the C-suite for new directors.
The most popular specialized skill sets are finance and information technology.
U.S. board members serve longer than some of their foreign counterparts.
Boards are not getting any younger (or older, for that matter).
More than half of the companies in the Russell 3000 index do not restrict the number of additional directorships their board members can accept.
A plurality of companies made no changes to the composition of their board of directors.
Almost half of Russell 3000 companies have not yet transitioned to majority voting in director elections.
The report is complemented by an online dashboard, where users can manipulate and visualize the data across indices, sectors and company size groups.
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 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
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:
