The first question most people probably asked when they heard Warren Buffett has prostate cancer was how he was doing. But for shareholders in the famous investor’s company, Berkshire Hathaway, that question was likely followed by another one: Does this mean we’ll finally learn who his successor will be?
Even if they’re right to want to know, they’d be wise not to hold their breath. Buffett’s announcement Tuesday that he has stage I prostate cancer — he was diagnosed last Wednesday and says his “condition is not remotely life-threatening or even debilitating in any meaningful way” — appears to be more of a way to ward off future speculation about his health than to stop speculation about his successor.
Telling the world he has an illness that some 80 percent of men his age have is not just responsible governance; it’s also a way for Buffett to appear more forthcoming and candid, even if it’s not about the subject investors want to hear. In doing so, he prevents investors who might, as he undergoes radiation treatment in a couple months’ time, see a more frail Buffett and fear a much grimmer and more near-term fate. As Bloomberg BusinessWeek’s Diane Brady points out, Buffett’s announcement “is less an acknowledgement of his mortality than of his celebrity.”
Berkshire Hathaway investors have long wanted to know who will succeed the 81-year-old investing sage, whose iconic status as the Oracle of Omaha makes his succession plans more than mere investor gossip. That interest intensified after David Sokol, long presumed to be Buffett’s successor, left the company last year amid questions about stock trading that led to an inquiry by regulators. Sokol’s name was not mentioned in Buffett’s letter to investors this year, which revealed that he had chosen a successor and told the board who it was, even though the name was not going to be shared publicly.
But does Buffett really owe investors a name? Organizations with 81-year-old leaders had better have a firm succession plan in place. But explicitly saying who the successor will be can be a tricky proposition. Mr. Next in Line could foul up publicly, as Sokol did. Reveal the news too early (it could be years before Buffett actually steps down) and the economic landscape could change enough that strategy demands a leader with different kinds of skills. Worst of all, publicly anointing your successor — or even setting up a public horse race between several top candidates — could cause an exodus among other talented executives disappointed they didn’t get the top job.
In this case, however, with Buffett so inextricably linked to the identity of Berkshire Hathaway, a wink and a nod in one direction is probably worth the risk. Even if someone isn’t explicitly named, pushing someone into the forefront, as Apple did with Tim Cook, or as many companies do when they name presidents or vice chairmen, would make a lot of sense for a company so tied to the leadership of one man. Then, when the time comes for the change itself, investors are more comfortable with someone whom they already know and (hopefully) like.
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