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In the wake of the potential departure of the current CEO, Warren Buffett, Berkshire Hathaway Inc. (NYSE:BRK) might be at risk from activist investors, alerts a member of the company’s board.
What Happened: Chris Davis, one of the directors of Berkshire Hathaway, cautioned about the possibility of activist investor pressure on the company once Buffett exits.
Buffet, 93, is nearing the conclusion of his tenure as CEO of Berkshire following the demise of his right-hand man, Charlie Munger.
Davis recognized Buffett and Munger’s dedication to their shareholders as “the greatest stewards almost in the history of capitalism," on the latest Excess Returns podcast, as reported by Business Insider. He envisions an influx of shareholder proposals targeted at short-term value after their departure, potentially undermining the long-term value.
Buffett and Munger had designed Berkshire as a cluster of self-governing subsidiaries, allowing them to concentrate on capital allocation and hand over daily management to different CEOs. Critics, however, argue that this structure could be more efficient, thus leading to potential calls for changes.
Davis highlighted the board’s role in maintaining the company’s culture, asserting that directors should “stay focused on the long term.”
Why It Matters: The demise of Charlie Munger, Buffett’s long-time confidant and vice-chairman of Berkshire Hathaway, and the anticipated departure of Buffett himself marks a significant transition for the company.
They built Berkshire into a massive holding company with a market capitalization exceeding $791 billion.
In response to Munger’s death, the Daily Journal Corp. (NASDAQ:DJCO) expressed concerns about future returns, stating it’s “impossible to ever replace” Buffett’s investment partner.
The anticipated activist investor pressure could potentially lead to a shift in Berkshire’s structure and operations. The company’s ability to navigate these challenges will significantly influence its future.
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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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