Warren Buffett to keep it "All in the Family"?

[REWahoo]

CHICAGO (MarketWatch) -- Warren Buffett has told the CBS News program "60 Minutes" that after he dies, he wants his son to become non-executive chairman of Berkshire Hathaway . Howard Buffett, a farmer with no college degree, would be a good successor, the elder Buffett said, because he understands the values of the company. For his part, Howard Buffett is amenable to the plan, he told the newsmagazine, as long as he doesn't have to stop growing corn and soybeans.

Warren Buffett wants farmer son to succeed him - MarketWatch

 

[Midpack]

Surprising...

 

[foxfirev5]

Nothing lasts forever, even Berkshire Hathaway

 

[samclem]

A list of those who sold (or shorted) BRK-A and BRK-B between the time of the interview and the release of this article would make interesting reading. I'm sure we wouldn't find anyone connected with CBS . . .

 

[ERD50]

Is this the same Buffett fellow that thinks the govt should take more of his money each year, and when he dies - yet he structured his business to keep much of it in the family, and never writes a check to the govt above the taxes he owes? I think it is one and the same.


-ERD50

 

[clifp]

Surprising...

Not at all. It is something that was talked about in his bio Snowball.
Howard Buffett role would be to maintain Warren's ethical standards and Berkshire's cultural values. It is isn't to figure out what companies to buy or how to restructure the company.

For instance, when one of the potential heir to Buffett, David Skolol was found to have engaged in insider trader last spring, Buffett was initially supportive of the guy. However, once it became clear the Skolol actions were certainly unethical and possibly illegal, Buffett pointedly cut all ties with the guy helped the SEC etc. and refused to pay for Skolol legal fees.

This is entirely consistent with Buffett's rules.

“Lose money for my firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.”

A more typical action for F500 companies, would be have been to avoid litigation and issue an non committal press release about how the guy was placed on leave and they were cooperating with authorities.

I believe that Howard Buffett job would be to make sure the Berkshire board does not go the way of the Hewlett-Packard board and make horrendous ethical lapse. In general I trust a farmer (especially one who was raised by Warren Buffett) to have a better sense of right from wrong than most businessman.

 

[arebelspy]

Is this the same Buffett fellow that thinks the govt should take more of his money each year, and when he dies - yet he structured his business to keep much of it in the family, and never writes a check to the govt above the taxes he owes? I think it is one and the same.

-ERD50

Yes.

You write that like it's a bad thing or hypocritical or inconsistent or something.

And why is it that it's wrong to want everyone rich to pay more, but not want to be the only one to do so?

That is, he'd rather voluntarily give his money to charity than the government, but he'd rather those in his position be forced to give some more to the government, including himself.

I don't see a problem with that viewpoint.

 

[MooreBonds]

I'm just curious on what his son's exact powers would be, and how the different roles would interact and be subordinate to the other positions on the board.

Also, while I certainly would hope that Buffet raised this son with great values, I wonder if his son would be able to follow the various financial methods, terms, scenarios and structuring that will come down the road with different deals? Not trying to badmouth his intelligence in any way, as there are some deals on Wall Street that sometimes only an expert with a PhD in computational finance can fully understand the implications of.

He can only effectively oversee what he understands and knows, and what the other board members/executives explain to him. Granted, I'm sure he would react after-the-fact if he found out that he was hoodwinked, but I hope he's able to be more proactive.

 

[MichaelB]

Is this the same Buffett fellow that thinks the govt should take more of his money each year, and when he dies - yet he structured his business to keep much of it in the family, and never writes a check to the govt above the taxes he owes? I think it is one and the same.
-ERD50

IIRC his thoughts about taxes are not about the gov't taking more of his money but instead all individuals with incomes over a certain amount paying a greater share of their income in taxes.

I thought he put a bunch of shares into Gates' charitable trust and committed to an additional annual amount.

It's hard to tell from one paragraph in the news what Buffet has in mind but the news item linked did not say CEO. Non-executive chairman usually oversees the board and has no involvement in operations. Actually, a very appropriate role for his son and a good example for other corporate businesses with large family ownership and involvement.

 

[MooreBonds]

Is this the same Buffett fellow that thinks the govt should take more of his money each year, and when he dies - yet he structured his business to keep much of it in the family, and never writes a check to the govt above the taxes he owes? I think it is one and the same.

While Buffet's son may not have the role of CEO, I would somewhat agree with your sentiments...is inheritance of power somehow "less" than inheritance of wealth? You can personally decide who will take a (perhaps) very powerful role on the BOD at a multi-billion dollar company, but you can't decide who will get to utilize your $10 million estate that you sacrificed to accumulate to be fiscally prudent and not depend on society to pay your way?

The gov't should start taxing power transfers as well as wealth. Are you a 1st Cousin or closer, and want to take over a family's political office seat or executive/BOD position at a company? It'll cost you 10% of your total compensation or 1% of the company's revenues/year for the first 5 years, whichever is greater.

It would really be no different than wealth transfers. If this were enacted, you would see lawyers creating complex shell trusts and companies that acquire shares of the family company, etc.....just like how they currently do the exact same with some family trusts and other vehicles for estate transfers.

 

[arebelspy]

The gov't should start taxing power transfers as well as wealth... If this were enacted, you would see lawyers creating complex shell trusts and companies that acquire shares of the family company, etc.....just like how they currently do the exact same with some family trusts and other vehicles for estate transfers.

Soooooo... You'd prefer the lawyers get richer?

 

[ERD50]

Is this the same Buffett fellow that thinks the govt should take more of his money each year, and when he dies - yet he structured his business to keep much of it in the family, and never writes a check to the govt above the taxes he owes? I think it is one and the same.


-ERD50

Yes.

You write that like it's a bad thing or hypocritical or inconsistent or something.

And why is it that it's wrong to want everyone rich to pay more, but not want to be the only one to do so?

That is, he'd rather voluntarily give his money to charity than the government, but he'd rather those in his position be forced to give some more to the government, including himself.

I don't see a problem with that viewpoint.

A) He could lead by example. After all, he can afford it.

B) I do think he is hypocritical, as he supports the Estate Tax, but has taken much effort to avoid it. He has set up these charitable organizations and named his sons & daughters to head them. What makes them the best to lead the org - apparently blood only? Those positions have 'worth' (I assume they come with a salary, maybe modest, but they certainly come with a lot of power and respect, which factors into 'total compensation' views).

C) If the govt is such a great place to put money, why doesn't he give it to them instead of his charities? What's good for the goose is good for the gander.

IIRC his thoughts about taxes are not about the gov't taking more of his money but instead all individuals with incomes over a certain amount paying a greater share of their income in taxes.

I thought he put a bunch of shares into Gates' charitable trust and committed to an additional annual amount.

And why should his views count any more than any one else? We have an (admittedly broken) process of electing representatives to make these decisions for ALL people. So if he wants to do something different (within the law), he should do it. It would mean a lot more to me if he disbanded all his charities, told his kids to find their own jobs, and started writing checks to the US Treasury.

It's hard to tell from one paragraph in the news what Buffet has in mind but the news item linked did not say CEO. Non-executive chairman usually oversees the board and has no involvement in operations. Actually, a very appropriate role for his son and a good example for other corporate businesses with large family ownership and involvement.

I was thinking in more general terms, where he has named his children to head his charities. They are in those positions due to the 'birth lottery'.

-ERD50

 

[TromboneAl]

Warren Buffett wants farmer son to succeed him - MarketWatch

He knows his son will be even better at shoveling bullshit that he is.

 

[MichaelB]

I do think he is hypocritical, as he supports the Estate Tax, but has taken much effort to avoid it. He has set up these charitable organizations and named his sons & daughters to head them. What makes them the best to lead the org - apparently blood only? Those positions have 'worth' (I assume they come with a salary, maybe modest, but they certainly come with a lot of power and respect, which factors into 'total compensation' views).

He gave his money to charity, not his children. What's wrong with that? I see no hypocrisy and lots of generosity.

If the govt is such a great place to put money, why doesn't he give it to them instead of his charities? What's good for the goose is good for the gander.

He doesn't say gov't spending is good. His point is a more fair share of the tax burden.

And why should his views count any more than any one else?

They only matter more to those that care.

I was thinking in more general terms, where he has named his children to head his charities. They are in those positions due to the 'birth lottery'.

If he left his money to his children I would agree with the birth lottery comment, but he has given his money to charitable causes. The money will never be theirs to spend.

 

[Midpack]

He doesn't say gov't spending is good. His point is a more fair share of the tax.

I wish he (or maybe our media) acknowledged the reason, capital gains rates. A few have, the majority have not.

As a result, much of the general public came away believing that Buffett's income tax rates are lower than his employees? Or that he gets all sorts of deductions, aka loopholes. Neither is true at all, but it's sadly helped foster the class warfare arguments.

 

[MichaelB]

I wish he (or maybe our media) acknowledged the reason, capital gains rates. A few have, the majority have not.

As a result, much of the general public came away believing that Buffett's income tax rates are lower than his employees? Or that he gets all sorts of deductions, aka loopholes. Neither is true at all, but it's sadly helped foster the class warfare arguments.

Capital gains rates, as well as stock based compensation (options, grants, etc) that is given as income but taxed as investment, or sheltered. He also includes payroll taxes in his calculation (I think). I agree with you statement on class warfare and media, but am not expecting this to change any time soon.

 

[ERD50]

If he left his money to his children I would agree with the birth lottery comment, but he has given his money to charitable causes. The money will never be theirs to spend.

But he left his children in positions of power in those organizations. To be the head of a large charitable org brings quite a bit of 'cachet' and respect with it. Meeting with important people, maybe State dinners and such? It is a different type of 'inheritance' than a $$$ inheritance, but it is something he 'gave' his children.

But he wants to say that if you want to give your children $$$, you should not be allowed to (above certain limits). I just can't respect what I see as a cherry-picking of the rules.

BTW, the small bit that I've seen of them, I get the impression that his children are good people who will carry out their duties reasonably well. I don't mean any of this personally against them in any way, I just find Warren's pronouncements to be a bit condescending and they ring hollow for me.


While I'm at it, here's what I hate about the Estate Tax. Let's say you have $10M to will. And lets say you are a good-hearted person who has put in considerable effort, and have identified 100 needy and worthy individuals, and you want to give them each $100,000. That eats up the $10M. But an estate tax is going to eat up a lot of that. Why shouldn't that individual be able to distribute it ALL as they see fit?

A special-needs child could easily require a $1M trust to help support them for life. That would take identifying just 10 needy individuals, probably not hard at all if one was so motivated.

Or, the whole $10M could go to one spoiled brat who will wipe out a family driving his/her Ferrari while snorting coke. But to the law, it's all the same $10M and taxed the same. And the kinds of 'trusts' and things that could be set up for special needs children get twisted by smart lawyers who can probably define that Ferrari as a 'need' (she will be emotionally distraught if she has to drive a Chevy while her friends drive Lamborghinis). We don't need no stinkin' loop-holes, we need to let people use (most of) the money they earned in the way they see fit.

-ERD50

 

[MichaelB]

But he left his children in positions of power in those organizations. To be the head of a large charitable org brings quite a bit of 'cachet' and respect with it. Meeting with important people, maybe State dinners and such? It is a different type of 'inheritance' than a $$$ inheritance, but it is something he 'gave' his children.

But he wants to say that if you want to give your children $$$, you should not be allowed to (above certain limits). I just can't respect what I see as a cherry-picking of the rules.

That role may also be a figurehead, with the authority given to the board. I would not argue or assume either, but I would give the benefit of the doubt to Warren because he has been a straight shooter 'til now - which means I suspect his children have limited power.

While I'm at it, here's what I hate about the Estate Tax. Let's say you have $10M to will. And lets say you are a good-hearted person who has put in considerable effort, and have identified 100 needy and worthy individuals, and you want to give them each $100,000. That eats up the $10M. But an estate tax is going to eat up a lot of that. Why shouldn't that individual be able to distribute it ALL as they see fit?

A special-needs child could easily require a $1M trust to help support them for life. That would take identifying just 10 needy individuals, probably not hard at all if one was so motivated.

Or, the whole $10M could go to one spoiled brat who will wipe out a family driving his/her Ferrari while snorting coke. But to the law, it's all the same $10M and taxed the same. And the kinds of 'trusts' and things that could be set up for special needs children get twisted by smart lawyers who can probably define that Ferrari as a 'need' (she will be emotionally distraught if she has to drive a Chevy while her friends drive Lamborghinis). We don't need no stinkin' loop-holes, we need to let people use (most of) the money they earned in the way they see fit.

-ERD50

I'm not going to respond to this part because it's not the purpose of the thread and tax discussions often get political.

 

[clifp]

I'm just curious on what his son's exact powers would be, and how the different roles would interact and be subordinate to the other positions on the board.

Also, while I certainly would hope that Buffet raised this son with great values, I wonder if his son would be able to follow the various financial methods, terms, scenarios and structuring that will come down the road with different deals? Not trying to badmouth his intelligence in any way, as there are some deals on Wall Street that sometimes only an expert with a PhD in computational finance can fully understand the implications of.

He can only effectively oversee what he understands and knows, and what the other board members/executives explain to him. Granted, I'm sure he would react after-the-fact if he found out that he was hoodwinked, but I hope he's able to be more proactive.

I don't know for sure, but IIRC from Snowball or maybe additional blogs by his biographer Alice Schroeder. I think he envision a role similar to what various Disney heirs had on the Disney board after Walt's death. I am guessing at some point, somebody at Disney thought that opening a Disney theme casino would be very profitable. The purpose of the heirs would be say, I really don't care how much money it makes a casino isn't compatible with what Disney brand means. When the person saying this is the son/sister/nephew of the founder their words carry greater weight.

Think of Howard as the guardian of the Berkshire's culture and Warren's ethics.

 

[arebelspy]

I don't know for sure, but IIRC from Snowball or maybe additional blogs by his biographer Alice Schroeder. I think he envision a role similar to what various Disney heirs had on the Disney board after Walt's death. I am guessing at some point, somebody at Disney thought that opening a Disney theme casino would be very profitable. The purpose of the heirs would be say, I really don't care how much money it makes a casino isn't compatible with what Disney brand means. When the person saying this is the son/sister/nephew of the founder their words carry greater weight.

Think of Howard as the guardian of the Berkshire's culture and Warren's ethics.

I like that.

But is there room for it in modern capitalism with corporations beholden to shareholders?

 

[mickeyd]

as long as he doesn't have to stop growing corn and soybeans.

I'm anxious to see that 60 minutes show to see if WB has his tongue solidly pressed into his cheek.

 

[Nords]

This information has been around for years, even decades, but I think the media is aware of their potentially dwindling opportunity for Buffett interviews. Perhaps it was a really slow news week. Or maybe they're auditioning an Andy Rooney replacement.

I'm just curious on what his son's exact powers would be, and how the different roles would interact and be subordinate to the other positions on the board.
Also, while I certainly would hope that Buffet raised this son with great values, I wonder if his son would be able to follow the various financial methods, terms, scenarios and structuring that will come down the road with different deals? Not trying to badmouth his intelligence in any way, as there are some deals on Wall Street that sometimes only an expert with a PhD in computational finance can fully understand the implications of.
He can only effectively oversee what he understands and knows, and what the other board members/executives explain to him. Granted, I'm sure he would react after-the-fact if he found out that he was hoodwinked, but I hope he's able to be more proactive.

Think of Howard as the guardian of the Berkshire's culture and Warren's ethics.

What ClifP said.

Here's some links from the Berkshire website:
http://www.berkshirehathaway.com/ownman.pdf

At my death, the Buffett family will not be involved in managing the business but, as very substantial shareholders, will help in picking and overseeing the managers who do. Just who those managers will be, of course, depends on the date of my death. But I can anticipate what the management structure will be: Essentially my job will be split into two parts. One executive will become CEO and responsible for operations. The responsibility for investments will be given to one or more executives. If the acquisition of new
businesses is in prospect, these executives will cooperate in making the decisions needed, subject, of course, to board approval. We will continue to have an extraordinarily shareholder-minded board, one whose interests are solidly aligned with yours.

Howie won't be making deals. He'll be listening to the ideas that the smart CEOs, Ajit Jain, and Combs/Weschler bring to him. Then he'll try to decide if it's something that his dad would have wanted to do.

Here's another reference he can consult if his common sense deserts him:
Corporate Governance

And here's the details of the letters distributing his charitable contributions to the Gates Foundation and the foundations of his three children:
Letters from Warren E. Buffett Regarding Pledges to Make Gifts of Berkshire Stock

Note that Buffett has struggled over the years with his thoughts on how he'll "help" his family (not just his kids). He awarded his kids some shares of stock when they were young adults and he encouraged them to follow their interests. However he didn't really help raise them, let alone teach them what he does. (I don't think Buffett is very good at teaching what he does, although he's very glib about it.) He refused to bail out his sister when she traded her stocks into a liquidity crunch in the 1980s. He was very stingy with giving siblings or kids money for fear of inflicting affluenza, but in later years he loosened up with a "million bucks every five years" policy. Suzy kept the Buffett household running when they were together, but when she moved out then the entire place fell apart. Even the dog left.

Schroeder's biography highlights out how badly Buffett's been scarred by his mother's emotional abuse. It brings up lots of interesting speculation about his relationships with women (of all ages) and parenting. Essentially he can't help doing what he does, and he's paid a very heavy price for it-- one that's been partially inflicted on his siblings, spouses, and children.

But we still keep a quarter of our investment portfolio in Berkshire Hathaway, and we still take advantage of the speculation & hype by selling call options & put options on the shares.

 

[MichaelB]

The 60 minutes segment on the Buffets was good. It affirms what Nords posted - Howard will be the protector of the culture and not get involved in operations.

 

[clifp]

One thing that I had not realized was that none of Warren's kids had graduated from college.However, they have all been pretty successful in life although Susie's "job" has been running her foundation for the last few year