Buffett Successor Is a Billionaire Without Many Berkshire Shares

Article content

(Bloomberg) — Warren Buffett’s appointed successor has built a billion-dollar fortune in his time at Berkshire Hathaway Inc. But unlike the legendary investor — or even his friends and early backers who became spectacularly wealthy over his six-decade run — relatively little of that is tied up in company shares.

Article content

Article content

Greg Abel, 62, who’ll replace Buffett as Berkshire’s chief executive officer at the end of the year, holds about $175 million worth of stock. That makes up about 18% of his $1 billion net worth, according to the Bloomberg Billionaires Index, which is valuing his fortune for the first time. 

Article content

Article content

The majority of his wealth stems from the proceeds of a 2022 stock buyback in which Berkshire purchased his $870 million stake in Berkshire Hathaway Energy, a wholly owned subsidiary that Abel ran from 2008 to 2018.

Article content

Article content

His Berkshire holdings are about one-thousandth the value of Buffett’s $160 billion stake. They’re also significantly less than that of other non-founding CEOs of trillion-dollar companies, including Tim Cook, whose $651 million Apple Inc. stake makes up about 38% of his net worth, or Sundar Pichai, whose $338 million Alphabet Inc. holding makes up 33% of his fortune.

Article content

Abel didn’t respond to a request for comment.

Article content

Longtime observers of Berkshire under Buffett’s stewardship are asking whether Abel will make changes when he takes over, ranging from expanding the company’s famously lean C-suite to revamping what businesses Berkshire focuses on. Abel’s relatively small stake could also raise the question of whether he’ll change the pay structure of Berkshire’s upper management or the company’s dual-class share structure.

Article content

Since Abel was promoted to a vice chairman role at Berkshire in 2018, he has earned about $20 million a year in the form of salary and bonus. Like the rest of Berkshire’s upper management, he’s never been awarded any equity as part of his compensation package during that time. He purchased his Berkshire shares with his own money in 2022 and 2023, after cashing out his energy stake.

Article content

Article content

‘Ask Questions’

Article content

For years, Buffett, 94, has personally decided the annual compensation of other senior executives and taken a nominal $100,000 salary for himself. He also owns more than a third of the company’s Class A shares, which have 10,000 times the voting power of the more common B shares.

Article content

“When Buffett was running it, few ever questioned the dual-class structure and few questioned his salary — he was so invested in the thing,” Charles Elson, founding director of the University of Delaware’s Weinberg Center for Corporate Governance, said in an interview. “Once you bring a new person in that’s not the founder, people begin to ask questions.” 

Article content

To be sure, Abel’s Berkshire stake isn’t unusual when looking at the full range of publicly traded companies. A 2018 study by the Harvard Law School Forum on Corporate Governance found that more than half of Russell 3000 Index CEOs held less than 1% of their company’s outstanding stock, with only 3.6% holding more than 25%. (Abel holds 0.0002% of Berkshire’s outstanding Class A and Class B shares.)

Article content

Abel might also get a pass from shareholders and from Berkshire’s board, who could be hesitant to shake up a pay structure that’s consistently delivered outstanding returns for decades.

Article content

“Why would they now, simply because Warren is leaving, try and find a way to shoehorn themselves into a pay structure that arguably doesn’t work that well for other companies?” said Dan Walter, a compensation consultant at consulting firm Alliant Human Capital. “If your shareholders are making great returns, they almost never care about how much the people generating those returns are getting paid.”

Article content