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04-05-2014, 10:59 AM
Meet the sheriff Howard Buffett, Warren Buffett’s heir to Berkshire Hathaway
ANUPREETA DAS THE WALL STREET JOURNAL MAY 04, 2014 11:03AM
Berkshire's Heir Apparent: Warren's Eldest Son 3:58
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Howard Buffett is a farmer, philanthropist and volunteer sheriff. He is now also tapped to take over Berkshire Hathaway when his father, Warren Buffett, passes away. WSJ's Anupreeta Das discusses her interview with the next head of Berkshire. Photo: Bob Stefko for The Wall Street Journal
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Howard Buffett, Berkshire Hathaway's heir apparent, pictured in his role as Macon County,Howard Buffett, Berkshire Hathaway's heir apparent, pictured in his role as Macon County, Illinois, auxiliary local sheriff. Picture: Bob Stefko for The Wall Street Journal Source: The Wall Street Journal <>
Berkshire's Heir Apparent: Warren's Elde...Howard Buffett, Berkshire Hathaway's hei...
HOWARD Buffett’s mobile phone rang one recent afternoon to the tune of a Rolling Stones hit. “Start me up,” he answered. The sheriff of Macon County, Illinois, was on the line.
Hours later, the eldest son of investor Warren Buffett was patrolling the streets here in his hometown in a bulletproof vest with a Glock 22 .40-calibre pistol strapped to his hip, fulfilling his duties as an auxiliary deputy sheriff. Already this year, he has logged more than 225 hours as an unpaid volunteer deputy in two counties in central Illinois and one in Arizona.
“People say, ‘Oh, Howard Buffett, the billionaire’s son.’ But he’s just one of us,” says Macon County sheriff Tom Schneider, a friend. “He’s got a youthful enthusiasm … He’s the first one digging the ditch.”
For most of his life, the younger Mr Buffett has indulged many interests far outside his father’s sphere of influence. A college dropout, Mr Buffett, 59, is a corn and soybean farmer, a conservationist, a philanthropist, a globetrotting photographer and an author.
But the day may not be far off when Mr Buffett will be presiding over the $300 billion conglomerate that his father built into one of the world’s most admired corporate entities. “Howie,” as Warren Buffett calls him, is his father’s choice to be the next chairman of Berkshire Hathaway.
The title is a nonexecutive one, meaning Howard Buffett won’t be in charge of making investments or overseeing day-to-day operations of the huge company and its 70-odd subsidiaries. His role, as laid out by his father, will be to keep watch over Berkshire’s culture and values. It won’t begin until his 83-year-old father is no longer alive or running the company, and the board approves his ascension.
Given Warren Buffett’s age and brush with prostate cancer in 2012, succession issues already are on the minds of shareholders, who gather in Omaha, Nebraska, this weekend for Berkshire’s annual meeting. Interviews with shareholders suggest that many know little about Howard Buffett beyond that he is a farmer who has been heavily involved in giving away his father’s money.
At last year’s annual meeting, hedge-fund manager Doug Kass asked, “Away from the accident of birth, how is Howard the most qualified person to take on this job?” Mr Kass, whose fund has bet against Berkshire Hathaway’s stock, had been invited by Warren Buffett to join a panel posing questions to him.
The elder Buffett responded that his son, having grown up at his side, was ideally suited to the role of watching over Berkshire’s culture and values. Those include a relentless focus on shareholders and giving managers of its far-flung operations great latitude to make decisions.
Howard Buffett says he is unfazed by the increased attention. “Most people don’t know my business background,” he says, referring to one-time executive positions at two companies and service on several corporate boards. “They think I’m a farmer and now I have the foundation” — his philanthropic organisation, funded by his father.
People who have worked with Howard Buffett over the years say he shares many traits with his father: plain-spoken, confident in his judgments and sceptical of those who value expertise over common sense. Both men also enjoy their sodas — Cherry Coke for father, Mr Pibb Zero for son — and their wisecracks.
But unlike the elder Buffett, who hunts for useful minutiae in books and balance sheets, Howard Buffett says he prefers to learn by doing.
“I’m mellowing, but still kind of wild,” he says. “Why else are we going out with the sheriff for the afternoon, putting on a bulletproof vest and a gun? People ask, ‘Why are you doing that?’ But for me, it’s a whole new learning experience.”
Being chairman of Berkshire won’t be “rocket science,” he says. “I understand exactly what my dad wants me to do conceptually, and I can certainly do it.” That includes making sure top executives don’t misuse their power, he says, while simultaneously staying “out of the CEO’s way.”
Howard Graham Buffett got his middle name from Benjamin Graham, an investor who influenced his father. He grew up in Omaha, where his father built a conglomerate of businesses around a struggling New Bedford, Massachusetts, textile mill called Berkshire Hathaway. He attended several colleges without graduating and held a number of jobs through his 20s, including a two-year stint at Berkshire-owned See’s Candies.
In 1986, his father bought a 400-acre farm north of Omaha and rented it to his son. That kindled his self-confessed “love affair” with planting and harvesting and indulged his passion for big machines. Today Mr Buffett jokes that he is “overcapitalised” with tractors and that his local John Deere distributor calls him his “best customer per acre.” He owns seven John Deere tractors.
Mr. Buffett moved to Decatur, in central Illinois, in 1992 to take a job with Archer Daniels Midland, the grain-processing giant based whose board he had joined the previous year. For four years, he held several senior positions, including head of investor relations, and helped develop business in Mexico and Central America.
During that time, in 1993, he joined the boards of his father’s company and of bottling company Coca-Cola Enterprises, before Coca-Cola Co., in which Berkshire Hathaway has long held a major stake, bought its North American bottling operations. Later, he served for several years on the board of consumer-foods giant ConAgra Foods Inc.
Mr Buffett says he left Archer Daniels in 1995 because he didn’t trust how the company was going to handle a federal investigation into price fixing. The following year, the company pleaded guilty to fixing prices and paid a $100 million fine. “That was 20 years ago,” says an ADM spokeswoman. “We are a different company today.”
He continued to live in Decatur with his wife, Devon. They have a 30-year-old son, Howard Warren, and four daughters from Ms Buffett’s previous marriage. He became a partner and investor at GSI Group Inc., a large maker of steel grain bins, staying for six years. He sold his 5 per cent stake in 2001.
In 1999, his father gave each of his three children a chunk of Berkshire stock to use for charitable purposes, incorporating three foundations. The Howard G. Buffett Foundation began disbursing money globally in 2000 to causes such as conservation and food security.
As Howard Buffett was trying different things, his father was building Berkshire into a diversified behemoth. It owns stocks and bonds as well as insurance, energy, industrial and other businesses. Between 1965 and 2013, Berkshire delivered a compounded annual gain of nearly 20 per cent for shareholders, compared with a 9.8 per cent for the S & P 500 stock index.
Lately, some shareholders have clamoured for a dividend, which the company has never paid. Others worry that the sprawling entity is held together only by the presence of the elder Mr Buffett and his partner Charlie Munger, vice chairman, who is 90. The concern is that without their stewardship, top Berkshire managers could leave or a successor could split the company into smaller units.
The senior Mr Buffett, who was successfully treated for cancer, has spent the past few years planning for succession. He has said his job will be divided into three once he is gone — a CEO, a nonexecutive chairman and investment managers. In 2012, he said the board had picked a CEO candidate and two backup candidates, but didn’t disclose names. Mr Buffett has hired two investment managers, Ted Weschler and Todd Combs, to eventually oversee Berkshire’s $107 billion stock portfolio.
In naming his son as the future nonexecutive chairman, Mr. Buffett has said he is mainly concerned with trying to prevent a future CEO from turning Berkshire into a “personal sandbox” at the expense of shareholders. He says he also wants to uphold a culture of candour and autonomy among managers.
“I don’t see him as being like Paul Revere, yelling ‘the British are coming,’” he says of his son. “But I do see [his role] as when directors get uneasy with the CEO, they can have a meeting” with the chairman and facilitate changes where necessary.
Warren Buffett says he believes the odds of such problems are remote. Tensions have arisen at other companies. A decade ago, Roy Disney, a nephew of Walt Disney Co.’s eponymous founder, mounted a campaign against then-CEO and Chairman Michael Eisner. Mr Disney felt Mr Eisner wasn’t true to the company’s creative spirit and values. Mr Eisner was ousted as chairman in a coup led by Mr Disney and eventually stepped down as CEO. Mr Eisner has said his departure had nothing to do with Disney’s crises. Mr Disney died in 2009.
As a Berkshire director, Howard Buffett is one of the few people who knows who will succeed his father as CEO. When he becomes nonexecutive chairman, he says, he doesn’t expect to be involved with acquisitions or operations beyond regular board meetings.
Mr Buffett says he won’t try to force Berkshire to remain the way it is for sentimental reasons, but will keep an open mind about the best way to deliver shareholder value. “Whether that means paying a dividend or something else, the board will always look” to do the right thing, he says.
One thing he is sentimental about is Omaha. Mr Buffett says he never would allow Berkshire’s headquarters to leave the Nebraska city.
In recent years, Howard and his two siblings, Susan and Peter, have devoted considerable time to giving away a chunk of his father’s fortune. In 2006, Warren Buffett said he would direct the bulk of it to a foundation run by Microsoft chairman Bill Gates and his wife Melinda, but he also pledged large sums to his children’s foundations. In 2012, he doubled his original pledges to his children.
The hedge-fund manager who questioned Howard Buffett’s qualifications says he isn’t yet satisfied that the son is up to the chairman’s job. “Berkshire is an increasingly complex entity,” Mr Kass says. “Doesn’t that mean that the chairman [should have] had experience in the management of companies, trading large sums of securities, and is more than just a supporter of Berkshire culture?”
Howard Buffett says he is accustomed to sceptics taking him lightly. When he was a Nebraska county commissioner between 1989 and 1992, Mr Buffett says, they jokingly called him an S.O.B. — son of a billionaire.
People who have worked with him say he is direct but easygoing, with an open mind and little patience for by-the-book thinking.
Fellow philanthropist Shannon Sedgwick Davis recalls travelling with Mr Buffett in a car, teary-eyed after a harrowing visit to eastern Congo, when she felt something land on her lap. It was a pack of cherry Twizzlers, which she says cheered her up. “I remember thinking, ‘Who brings Twizzlers to the middle of a jungle?’ You can’t be fooled by Howard’s sense of joy and fun.”
The Howard G. Buffett Foundation already has disbursed around $530 million. It has estimated that by 2045, when the last of his father’s wealth will be distributed, it will have received more than $7 billion.
“Howie’s an Indiana Jones all the way,” his father says of his philanthropy. “He’s always been on the go. He’s got boundless energy and curiosity, and a good heart.”
His board activity isn’t as well known. Currently, besides serving on Berkshire’s board, he is a director at Coca-Cola and at irrigation-infrastructure company Lindsay Corp.
Mr. Buffett says he has come a long way from his first stint as a director, which felt like an “Accounting 101” lesson. He says he is wary of activist investors and believes that informal conversations with fellow directors outside the boardroom often can resolve disagreements. He says he believes executive pay should have a reasonable base, with higher amounts tied to performance.
Coca-Cola executives say they have found Mr Buffett’s connections helpful in dealing with government officials and other leaders in emerging markets. Coke Chief Executive Muhtar Kent said in an email Mr Buffett’s knowledge of such markets had helped “guide my thinking.”
Berkshire’s longtime reinsurance business chief, Ajit Jain, whom analysts consider a potential CEO successor, says he values Mr Buffett’s understanding of business enough that he has tried to coax him, over lunches in New York, to get more involved in Berkshire. But Mr Buffett has been more interested in other pursuits, he says. Mr Jain says he believes Mr Buffett is the right choice for the chairman’s role.
Howard Buffett says his father never made a concerted effort to teach his children about business or investing, but instilled in him the value of money early on by tying pocket money to household chores. He and his siblings would hear snippets of conversation on the phone or at the dinner table, absorbing them by “osmosis.” His business education, he says, is “not something you can buy or read about. It’s something that came with life.”
Some shareholders say that if Warren Buffett thinks his son is the best choice, that is good enough for them. “[Warren] Buffett is totally unemotional, which is one of the reasons he’s a phenomenal investor,” says Paul Lountzis, whose firm Lountzis Asset Management owns Berkshire shares. “Why would anyone think he would do anything to jeopardise a lifetime of work?”
This story originally appeared in The Wall Street Journal
ANUPREETA DAS THE WALL STREET JOURNAL MAY 04, 2014 11:03AM
Berkshire's Heir Apparent: Warren's Eldest Son 3:58
Play video
http://cdn.newsapi.com.au/image/v1/exter...z9c5xuj3mc
Howard Buffett is a farmer, philanthropist and volunteer sheriff. He is now also tapped to take over Berkshire Hathaway when his father, Warren Buffett, passes away. WSJ's Anupreeta Das discusses her interview with the next head of Berkshire. Photo: Bob Stefko for The Wall Street Journal
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Howard Buffett, Berkshire Hathaway's heir apparent, pictured in his role as Macon County,Howard Buffett, Berkshire Hathaway's heir apparent, pictured in his role as Macon County, Illinois, auxiliary local sheriff. Picture: Bob Stefko for The Wall Street Journal Source: The Wall Street Journal <>
Berkshire's Heir Apparent: Warren's Elde...Howard Buffett, Berkshire Hathaway's hei...
HOWARD Buffett’s mobile phone rang one recent afternoon to the tune of a Rolling Stones hit. “Start me up,” he answered. The sheriff of Macon County, Illinois, was on the line.
Hours later, the eldest son of investor Warren Buffett was patrolling the streets here in his hometown in a bulletproof vest with a Glock 22 .40-calibre pistol strapped to his hip, fulfilling his duties as an auxiliary deputy sheriff. Already this year, he has logged more than 225 hours as an unpaid volunteer deputy in two counties in central Illinois and one in Arizona.
“People say, ‘Oh, Howard Buffett, the billionaire’s son.’ But he’s just one of us,” says Macon County sheriff Tom Schneider, a friend. “He’s got a youthful enthusiasm … He’s the first one digging the ditch.”
For most of his life, the younger Mr Buffett has indulged many interests far outside his father’s sphere of influence. A college dropout, Mr Buffett, 59, is a corn and soybean farmer, a conservationist, a philanthropist, a globetrotting photographer and an author.
But the day may not be far off when Mr Buffett will be presiding over the $300 billion conglomerate that his father built into one of the world’s most admired corporate entities. “Howie,” as Warren Buffett calls him, is his father’s choice to be the next chairman of Berkshire Hathaway.
The title is a nonexecutive one, meaning Howard Buffett won’t be in charge of making investments or overseeing day-to-day operations of the huge company and its 70-odd subsidiaries. His role, as laid out by his father, will be to keep watch over Berkshire’s culture and values. It won’t begin until his 83-year-old father is no longer alive or running the company, and the board approves his ascension.
Given Warren Buffett’s age and brush with prostate cancer in 2012, succession issues already are on the minds of shareholders, who gather in Omaha, Nebraska, this weekend for Berkshire’s annual meeting. Interviews with shareholders suggest that many know little about Howard Buffett beyond that he is a farmer who has been heavily involved in giving away his father’s money.
At last year’s annual meeting, hedge-fund manager Doug Kass asked, “Away from the accident of birth, how is Howard the most qualified person to take on this job?” Mr Kass, whose fund has bet against Berkshire Hathaway’s stock, had been invited by Warren Buffett to join a panel posing questions to him.
The elder Buffett responded that his son, having grown up at his side, was ideally suited to the role of watching over Berkshire’s culture and values. Those include a relentless focus on shareholders and giving managers of its far-flung operations great latitude to make decisions.
Howard Buffett says he is unfazed by the increased attention. “Most people don’t know my business background,” he says, referring to one-time executive positions at two companies and service on several corporate boards. “They think I’m a farmer and now I have the foundation” — his philanthropic organisation, funded by his father.
People who have worked with Howard Buffett over the years say he shares many traits with his father: plain-spoken, confident in his judgments and sceptical of those who value expertise over common sense. Both men also enjoy their sodas — Cherry Coke for father, Mr Pibb Zero for son — and their wisecracks.
But unlike the elder Buffett, who hunts for useful minutiae in books and balance sheets, Howard Buffett says he prefers to learn by doing.
“I’m mellowing, but still kind of wild,” he says. “Why else are we going out with the sheriff for the afternoon, putting on a bulletproof vest and a gun? People ask, ‘Why are you doing that?’ But for me, it’s a whole new learning experience.”
Being chairman of Berkshire won’t be “rocket science,” he says. “I understand exactly what my dad wants me to do conceptually, and I can certainly do it.” That includes making sure top executives don’t misuse their power, he says, while simultaneously staying “out of the CEO’s way.”
Howard Graham Buffett got his middle name from Benjamin Graham, an investor who influenced his father. He grew up in Omaha, where his father built a conglomerate of businesses around a struggling New Bedford, Massachusetts, textile mill called Berkshire Hathaway. He attended several colleges without graduating and held a number of jobs through his 20s, including a two-year stint at Berkshire-owned See’s Candies.
In 1986, his father bought a 400-acre farm north of Omaha and rented it to his son. That kindled his self-confessed “love affair” with planting and harvesting and indulged his passion for big machines. Today Mr Buffett jokes that he is “overcapitalised” with tractors and that his local John Deere distributor calls him his “best customer per acre.” He owns seven John Deere tractors.
Mr. Buffett moved to Decatur, in central Illinois, in 1992 to take a job with Archer Daniels Midland, the grain-processing giant based whose board he had joined the previous year. For four years, he held several senior positions, including head of investor relations, and helped develop business in Mexico and Central America.
During that time, in 1993, he joined the boards of his father’s company and of bottling company Coca-Cola Enterprises, before Coca-Cola Co., in which Berkshire Hathaway has long held a major stake, bought its North American bottling operations. Later, he served for several years on the board of consumer-foods giant ConAgra Foods Inc.
Mr Buffett says he left Archer Daniels in 1995 because he didn’t trust how the company was going to handle a federal investigation into price fixing. The following year, the company pleaded guilty to fixing prices and paid a $100 million fine. “That was 20 years ago,” says an ADM spokeswoman. “We are a different company today.”
He continued to live in Decatur with his wife, Devon. They have a 30-year-old son, Howard Warren, and four daughters from Ms Buffett’s previous marriage. He became a partner and investor at GSI Group Inc., a large maker of steel grain bins, staying for six years. He sold his 5 per cent stake in 2001.
In 1999, his father gave each of his three children a chunk of Berkshire stock to use for charitable purposes, incorporating three foundations. The Howard G. Buffett Foundation began disbursing money globally in 2000 to causes such as conservation and food security.
As Howard Buffett was trying different things, his father was building Berkshire into a diversified behemoth. It owns stocks and bonds as well as insurance, energy, industrial and other businesses. Between 1965 and 2013, Berkshire delivered a compounded annual gain of nearly 20 per cent for shareholders, compared with a 9.8 per cent for the S & P 500 stock index.
Lately, some shareholders have clamoured for a dividend, which the company has never paid. Others worry that the sprawling entity is held together only by the presence of the elder Mr Buffett and his partner Charlie Munger, vice chairman, who is 90. The concern is that without their stewardship, top Berkshire managers could leave or a successor could split the company into smaller units.
The senior Mr Buffett, who was successfully treated for cancer, has spent the past few years planning for succession. He has said his job will be divided into three once he is gone — a CEO, a nonexecutive chairman and investment managers. In 2012, he said the board had picked a CEO candidate and two backup candidates, but didn’t disclose names. Mr Buffett has hired two investment managers, Ted Weschler and Todd Combs, to eventually oversee Berkshire’s $107 billion stock portfolio.
In naming his son as the future nonexecutive chairman, Mr. Buffett has said he is mainly concerned with trying to prevent a future CEO from turning Berkshire into a “personal sandbox” at the expense of shareholders. He says he also wants to uphold a culture of candour and autonomy among managers.
“I don’t see him as being like Paul Revere, yelling ‘the British are coming,’” he says of his son. “But I do see [his role] as when directors get uneasy with the CEO, they can have a meeting” with the chairman and facilitate changes where necessary.
Warren Buffett says he believes the odds of such problems are remote. Tensions have arisen at other companies. A decade ago, Roy Disney, a nephew of Walt Disney Co.’s eponymous founder, mounted a campaign against then-CEO and Chairman Michael Eisner. Mr Disney felt Mr Eisner wasn’t true to the company’s creative spirit and values. Mr Eisner was ousted as chairman in a coup led by Mr Disney and eventually stepped down as CEO. Mr Eisner has said his departure had nothing to do with Disney’s crises. Mr Disney died in 2009.
As a Berkshire director, Howard Buffett is one of the few people who knows who will succeed his father as CEO. When he becomes nonexecutive chairman, he says, he doesn’t expect to be involved with acquisitions or operations beyond regular board meetings.
Mr Buffett says he won’t try to force Berkshire to remain the way it is for sentimental reasons, but will keep an open mind about the best way to deliver shareholder value. “Whether that means paying a dividend or something else, the board will always look” to do the right thing, he says.
One thing he is sentimental about is Omaha. Mr Buffett says he never would allow Berkshire’s headquarters to leave the Nebraska city.
In recent years, Howard and his two siblings, Susan and Peter, have devoted considerable time to giving away a chunk of his father’s fortune. In 2006, Warren Buffett said he would direct the bulk of it to a foundation run by Microsoft chairman Bill Gates and his wife Melinda, but he also pledged large sums to his children’s foundations. In 2012, he doubled his original pledges to his children.
The hedge-fund manager who questioned Howard Buffett’s qualifications says he isn’t yet satisfied that the son is up to the chairman’s job. “Berkshire is an increasingly complex entity,” Mr Kass says. “Doesn’t that mean that the chairman [should have] had experience in the management of companies, trading large sums of securities, and is more than just a supporter of Berkshire culture?”
Howard Buffett says he is accustomed to sceptics taking him lightly. When he was a Nebraska county commissioner between 1989 and 1992, Mr Buffett says, they jokingly called him an S.O.B. — son of a billionaire.
People who have worked with him say he is direct but easygoing, with an open mind and little patience for by-the-book thinking.
Fellow philanthropist Shannon Sedgwick Davis recalls travelling with Mr Buffett in a car, teary-eyed after a harrowing visit to eastern Congo, when she felt something land on her lap. It was a pack of cherry Twizzlers, which she says cheered her up. “I remember thinking, ‘Who brings Twizzlers to the middle of a jungle?’ You can’t be fooled by Howard’s sense of joy and fun.”
The Howard G. Buffett Foundation already has disbursed around $530 million. It has estimated that by 2045, when the last of his father’s wealth will be distributed, it will have received more than $7 billion.
“Howie’s an Indiana Jones all the way,” his father says of his philanthropy. “He’s always been on the go. He’s got boundless energy and curiosity, and a good heart.”
His board activity isn’t as well known. Currently, besides serving on Berkshire’s board, he is a director at Coca-Cola and at irrigation-infrastructure company Lindsay Corp.
Mr. Buffett says he has come a long way from his first stint as a director, which felt like an “Accounting 101” lesson. He says he is wary of activist investors and believes that informal conversations with fellow directors outside the boardroom often can resolve disagreements. He says he believes executive pay should have a reasonable base, with higher amounts tied to performance.
Coca-Cola executives say they have found Mr Buffett’s connections helpful in dealing with government officials and other leaders in emerging markets. Coke Chief Executive Muhtar Kent said in an email Mr Buffett’s knowledge of such markets had helped “guide my thinking.”
Berkshire’s longtime reinsurance business chief, Ajit Jain, whom analysts consider a potential CEO successor, says he values Mr Buffett’s understanding of business enough that he has tried to coax him, over lunches in New York, to get more involved in Berkshire. But Mr Buffett has been more interested in other pursuits, he says. Mr Jain says he believes Mr Buffett is the right choice for the chairman’s role.
Howard Buffett says his father never made a concerted effort to teach his children about business or investing, but instilled in him the value of money early on by tying pocket money to household chores. He and his siblings would hear snippets of conversation on the phone or at the dinner table, absorbing them by “osmosis.” His business education, he says, is “not something you can buy or read about. It’s something that came with life.”
Some shareholders say that if Warren Buffett thinks his son is the best choice, that is good enough for them. “[Warren] Buffett is totally unemotional, which is one of the reasons he’s a phenomenal investor,” says Paul Lountzis, whose firm Lountzis Asset Management owns Berkshire shares. “Why would anyone think he would do anything to jeopardise a lifetime of work?”
This story originally appeared in The Wall Street Journal
