Warren Buffett unveils successor and charitable legacy in surprise letter
In a surprise announcement late Tuesday, Warren Buffett's company, Berkshire Hathaway, revealed it has received a letter detailing what appears to be his successor and the trustees of his huge fortune, valued at more than $118 billion (more than $180 billion AUD).
It was a letter that doesn't appear to have been sent by the multibillionaire to his master company in recent years, especially one dealing with inheritance and estate planning.
Buffett said the company has the right CEO to succeed him and the right Board of Directors as he made a donation of $866 million USD ($1.332 billion AUD) of Berkshire stock to four family philanthropies on Tuesday.
Buffett's letter was made public by Berkshire in the week that America's most revered festival - Thanksgiving - occurs.
Buffett wrote in the letter that he feels "good but fully realises I am playing in extra innings."
Berkshire vice chairman Greg Abel, who heads the company's non-insurance businesses, has been widely identified as Buffett's likely successor.
Buffett also said that his three children, Howard, Susan, and Peter Buffett, are executors of his will and will be trustees of the charitable trust that will receive nearly all his wealth. This appears to be a new disclosure by Buffett.
"My three children are the executors of my current will as well as the named trustees of the charitable trust that will receive 99%-plus of my wealth pursuant to the provisions of the will."
"They were not fully prepared for this awesome responsibility in 2006, but they are now. In administering the testamentary trust, the three must act unanimously. Because of the random nature of mortality, successors must always be designated."
The three children are aged 65 to 70, with Howard and Susan Buffett on the Berkshire board. Buffett began giving away his Berkshire stock in 2006 and has donated more than half of his stake in the company since then. The bulk of the donations have gone to the Bill and Melinda Gates Foundation.
Buffett now owns a 15% stake in Berkshire—some 216,687 Class A shares and 344 shares of Class B stock—and is worth $118 billion. Berkshire's Class A stock (BRK.A) was virtually unchanged Tuesday at $547,625, while the Class B stock was off 0.1% to $361. In the donation Tuesday, Buffett converted 1,600 Class A shares and converted them to 2.4 million Class B shares.
Reflecting his business and giving philosophy, Buffett wrote the trust will be self-liquidating over a decade or so and be thinly staffed.
Buffett has made it clear that he is uninterested in creating a long-lasting philanthropy like the Ford Foundation. His view is that his wealth should be distributed relatively soon after his death to maximise its impact. Buffett hates bureaucracies and runs Berkshire with a small headquarters staff in Omaha.
"My children, along with their father, have a common belief that dynastic wealth, though both legal and common in much of the world, including the United States, is not desirable. Moreover, we have had many opportunities to observe that being rich does not make you either wise or evil.
"We also agree that capitalism—whatever its weaknesses, including the vast disparities in wealth and political influence that it delivers somewhat capriciously to its citizens—has worked wonders and continues to work wonders."
"The testamentary trust will be self-liquidating after a decade or so and operate with a lean staff. To the extent possible, it will be funded by Berkshire shares. Berkshire—one of the largest and most diversified companies in the world—will inevitably encounter human errors in judgment and behavior.
"These occur at all large organisations, public or private. But these mistakes are unlikely to be serious at Berkshire and will be acknowledged and corrected. We have the right CEO to succeed me and the right Board of Directors as well. Both are needed."
American media played down the letter and its clear importance - for the first time one of the world's richest people and the most admired and followed business person globally has spelled out what will happen after his death.
In his June letter detailing his annual charitable donations, Buffett pointed out that his fortune was valued at around $112 billion USD - as of Tuesday, it was $118 billion USD.
Rupert Murdoch - aged 92 - and a much smaller multibillionaire, has not detailed what will happen after he dies - the TV drama Succession did a good job of fleshing out those details, but we have yet to hear from Murdoch.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.