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Is the world’s richest man, Warren Buffet, risking the shareholder’s funds by not announcing his succession plans?
It’s May 3, 2008. A whopping crowd of 31,000 is present at the Qwest Center at Omaha in Nebraska. Visitors enjoy themselves by watching movies, singing, dancing, laughing away at jokes et al. And why not, when the event is the AGM of Berkshire Hathaway, who is commonly known as the ‘Woodstock of Capitalists.’ It’s an AGM that is not just a routine event but a jamboree of celebrations for shareholders across the globe, especially when the meeting is addressed by Warren Buffet – Chairman & CEO of the company and the richest person in the world, who merrily treats himself and even his guests with Coke (Buffet owns 8% stake in Coca-Cola & Co.) and now chocolates, since he has participated in the Mars’ takeover of Wrigley. That’s Warren Buffet for you – uncomplicated and straightforward, much unlike the market knowledge he has so diligently mastered and leveraged over the years.
From selling newspapers to building an empire worth a sterling $139.30 billion, Buffet has not only made money for his shareholders, but has brought as many as 38 companies under the Hathaway umbrella. The recent acquisition of Wrigley Jr. Co. by Buffet in partnership with Mars for a not-so-sweet $23 billion is a clear indication of how his risk taking appetite is yet to wane. And of course, not without reward. Hathaway has, for the past 25 years, maintained a record of announcing an average of 25% annual dividend. And never has the company ever gone for a stock split or faced any crisis situation.
A Wharton graduate, Buffet has always been reckoned as a man with a third eye. When he went ahead and bought Chinese Government-owned PetroChina for $500 million in 2002, he has recently quoted to Fortune, “I read only the annual report of PetroChina and instantly decided to buy it.” While analysts condemned it as a futile attempt, Buffet proved everybody wrong when he sold PetroChina for $4 billion in 2006. More recently, stock prices of crisis-ridden Bear Stearns shot up by 8% just by the mere rumour that Buffet was acquiring it. That’s the power of Buffet – the man Forbes ranked as the world’s richest person in March 2008.
Alarmingly, though, net profits of the company have dangerously fallen by 65% to $940 million in Q1’08 from $2.684 billion in Q1 ‘07. Since the results were declared on May 2, shares fell to $1,22,800 on May 12, a fall of 8.08%. So far Buffet is at the helm of affairs, shareholders needn’t worry. But for how long? Two key officials of Hathaway – Buffet and Charles Munger, 84, who is not only the company’s Vice Chairman, but also a life long friend of Buffet, are at the end of their working tenures (?). Unlike any other top line executive, Buffet, 77, reportedly claims that he does not intend to retire any time soon and wishes to continue to work even until six years after he dies! Buffet might consider himself invincible, but the fact is that the company’s succession planning is still a big mystery. So there could remain a niggling bearishness with respect to the company, even if bottomlines improve.
The worst mistake an iconic leader can make is not to appoint a suitable successor. That one mistake could make Berkshire Hathaway fall apart, taking all those chocolates & Cokes down the drain, unless Buffet & Munger do indeed have a fool proof strategy for an afterlife!
Savreen Gadhoke
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
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Is the world’s richest man, Warren Buffet, risking the shareholder’s funds by not announcing his succession plans?
It’s May 3, 2008. A whopping crowd of 31,000 is present at the Qwest Center at Omaha in Nebraska. Visitors enjoy themselves by watching movies, singing, dancing, laughing away at jokes et al. And why not, when the event is the AGM of Berkshire Hathaway, who is commonly known as the ‘Woodstock of Capitalists.’ It’s an AGM that is not just a routine event but a jamboree of celebrations for shareholders across the globe, especially when the meeting is addressed by Warren Buffet – Chairman & CEO of the company and the richest person in the world, who merrily treats himself and even his guests with Coke (Buffet owns 8% stake in Coca-Cola & Co.) and now chocolates, since he has participated in the Mars’ takeover of Wrigley. That’s Warren Buffet for you – uncomplicated and straightforward, much unlike the market knowledge he has so diligently mastered and leveraged over the years.From selling newspapers to building an empire worth a sterling $139.30 billion, Buffet has not only made money for his shareholders, but has brought as many as 38 companies under the Hathaway umbrella. The recent acquisition of Wrigley Jr. Co. by Buffet in partnership with Mars for a not-so-sweet $23 billion is a clear indication of how his risk taking appetite is yet to wane. And of course, not without reward. Hathaway has, for the past 25 years, maintained a record of announcing an average of 25% annual dividend. And never has the company ever gone for a stock split or faced any crisis situation.
A Wharton graduate, Buffet has always been reckoned as a man with a third eye. When he went ahead and bought Chinese Government-owned PetroChina for $500 million in 2002, he has recently quoted to Fortune, “I read only the annual report of PetroChina and instantly decided to buy it.” While analysts condemned it as a futile attempt, Buffet proved everybody wrong when he sold PetroChina for $4 billion in 2006. More recently, stock prices of crisis-ridden Bear Stearns shot up by 8% just by the mere rumour that Buffet was acquiring it. That’s the power of Buffet – the man Forbes ranked as the world’s richest person in March 2008.
Alarmingly, though, net profits of the company have dangerously fallen by 65% to $940 million in Q1’08 from $2.684 billion in Q1 ‘07. Since the results were declared on May 2, shares fell to $1,22,800 on May 12, a fall of 8.08%. So far Buffet is at the helm of affairs, shareholders needn’t worry. But for how long? Two key officials of Hathaway – Buffet and Charles Munger, 84, who is not only the company’s Vice Chairman, but also a life long friend of Buffet, are at the end of their working tenures (?). Unlike any other top line executive, Buffet, 77, reportedly claims that he does not intend to retire any time soon and wishes to continue to work even until six years after he dies! Buffet might consider himself invincible, but the fact is that the company’s succession planning is still a big mystery. So there could remain a niggling bearishness with respect to the company, even if bottomlines improve.
The worst mistake an iconic leader can make is not to appoint a suitable successor. That one mistake could make Berkshire Hathaway fall apart, taking all those chocolates & Cokes down the drain, unless Buffet & Munger do indeed have a fool proof strategy for an afterlife!
Savreen Gadhoke
For more articles, Click on IIPM Article.
Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam Chaudhuri (Renowned Management Guru and Economist).
Read these article :-
B-schooled in India, Placed Abroad (Print Version)
IIPM in Financial times (Print Version)
IIPM makes business education truly global (Print Version)
The Indian Institute of Planning and Management (IIPM)
IIPM Campus
ZEE BUSINESS BEST B SCHOOL SURVEY
For More IIPM Info, Visit below mentioned IIPM articles.
1500-plus IIPM students placed across the country with 44 bagging international offers
IIPM set to beat economic slowdown
IIPM, GURGAON
IIPM - Admission Procedure
IIPM awards four Bengali novelists
The Hindu : Education Plus : Honour for IIPM
IIPM ranked No.1 B-School in India, Management News - By ...
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Moneycontrol >> News >> Press- News >> IIPM ranked No1 B-School in ...
» IIPM ranked No1 B-School in India :: Education, Careers ...
The Hindu Business Line : IIPM placements hit a high of over 2000 jobs
Deccan Herald - IIPM ranked as top B-School in India
India eNews - IIPM Ranked No1 B-School in India
IIPM Delhi - Indian Institute of Planning and Management New Delhi ...
domain-b.com : IIPM ranked ahead of IIMs
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