Last year, Warren Buffett’s Berkshire Hathaway (BRKa.N) boosted the compensation of Greg Abel, his appointed successor, to $20 million, coinciding with the conglomerate’s achievement of a record operating profit. The company, headquartered in Omaha, Nebraska, advocated against six shareholder proposals. These proposals included calls for increased disclosure regarding efforts to curb greenhouse gases and enhance diversity, tighter monitoring of safety measures within its BNSF railroad division, and dialogue on the extent to which its operations are influenced by Chinese governmental activities.
The company’s annual proxy filing on Friday came ahead of a May 4 annual shareholders meeting. Buffett is expected to name Abel CEO after retiring in 2021, though he has clarified that he is not rushing.
Abel, 59, is viewed as Buffett’s most likely successor. He satisfies Buffett’s criterion that the next CEO should be relatively young, and he has operational and capital allocation experience from his time at Berkshire Energy. He will oversee Berkshire’s non-insurance business, including BNSF, and the firm’s dozens of commercial, industrial, and retail ventures. Vice Chairman Ajit Jain, who oversees insurance operations, including Geico, also received $20 million.
Investors will closely watch how Abel manages Berkshire’s massive holdings of public companies. The firm holds significant positions in various industries, including utilities and insurers, and has a massive stock portfolio. Analysts expect Abel to retain Todd Combs and Ted Weschler, who oversee smaller pieces of the stock portfolio and help Buffett pick big bets.
A critical risk for Berkshire is whether U.S. regulators determine it is systemically important, a designation that would require it to submit to enhanced oversight and liquidity requirements. However, Buffett has resisted that possibility, saying it could damage the firm’s growth and profitability.
The company also needs help expanding its business, and investors are concerned that it may run out of investment opportunities. The firm has a strict stance on issuing new shares, and Buffett has said that means it can only double its current size in the next five years.
Berkshire’s decentralized business model has given it leeway to avoid centralized controls. Still, the board wants to encourage the company’s managers to be “more sensitive to the needs of their business units and their employees.” It is seeking a senior management commitment to avoid political speech that could hurt the firm or its portfolio companies’ reputations.
Berkshire has already started disclosing diversity data more. The company’s consolidated EEO-1 report shows workforce breakdowns by gender, race and ethnicity. It has also started publishing a sustainability report that measures the company’s performance in areas such as carbon dioxide emissions, water intensity and diversity. Shareholders are urging the company to go further and commit to a broader set of targets by 2050. They also ask that the company publish a timeline of how it intends to reach those targets.
