OMAHA, Neb. -- Warren Buffett is quietly installing a new set of leaders throughout Berkshire Hathaway Inc.
Seven Berkshire subsidiaries that collectively employ more than 46,000 people announced changes in chief executive officers in the last year, an unusually high amount of turnover at a company that rarely has top executives leave.
Continue Reading Below
They range from reinsurer General Re Corp. and specialty-chemicals company Lubrizol Corp. to MiTek Industries Inc., which supplies equipment and software to the construction industry. Some of the leadership changes weren't widely reported.
The moves will test the strength of Berkshire's decentralized structure. Berkshire's roughly 60 subsidiaries operate independently, with the CEOs of most Berkshire businesses reporting directly to Mr. Buffett.
"The performance of these units in transition will each be a test of succession planning," said Lawrence Cunningham, a law professor at George Washington University who has written about Berkshire.
At Berkshire's annual meeting Saturday, Mr. Buffett offered no new clues about who would eventually succeed him as CEO, though he did suggest that person could take over while Mr. Buffett is still alive. The 86-year-old, who has headed Berkshire for 52 years, has said that Berkshire's board has agreed on a succession plan but hasn't released the name of his successor.
Mr. Buffett went out of his way Saturday to praise Berkshire's managers, as he usually does. "We have never had more good managers than we have now," Mr. Buffett said. But, he quipped, "that's because we've got more good companies."
Berkshire typically leaves the management team in place when it buys a business, and Berkshire CEOs rarely leave their jobs to take other positions. Some have served for decades.
Most Berkshire CEOs report directly to Mr. Buffett, but some report to one of his investing lieutenants, Ted Weschler or Todd Combs, or to Tracy Britt Cool, Mr. Buffett's former financial assistant and current chief executive of the Pampered Chef, a Berkshire subsidiary.
When Tad Montross announced his retirement from Gen Re last year Gen Re said his successor would report to Ajit Jain, who runs Berkshire Hathaway Reinsurance Group, and not to Mr. Buffett as Mr. Montross had. One month later it announced the new CEO would be Kara Raiguel.
Berkshire's board routinely discusses succession at the top but also at the subsidiary level, with a focus on how to maintain Berkshire's culture, said board member Ron Olson, a partner at Munger, Tolles & Olson LLP, at a conference Thursday in Omaha.
Most new managers are hired from within the subsidiaries, he said, a model that has been successful.
One such example is Eric Schnur, who started reporting to Mr. Buffett as chief executive of Lubrizol in January, replacing the retiring James Hambrick. He has worked at the company since he was a student.
"I know the product lines, the customers. I know a lot of the challenges, " he said in an interview. "It's clear to me what we need to do" to expand the business.
Many Berkshire managers spent part of last week networking with each other in Omaha, sharing experiences and ideas on shared challenges.
Other recent Berkshire subsidiary CEO turnovers include Cathy Baron Tamraz, who retired as CEO of press-release distributor Business Wire Inc., and was succeeded by Geff Scott. At MiTek, Mark Thom took over as CEO while former CEO Tom Manenti became executive chairman and continues to report to Mr. Buffett.
In December, Melissa Burgess-Taylor took the helm at Fruit of the Loom Inc. after Rick Medlin died at age 68. In April, Texas-based Star Furniture said Chief Executive Bill Kimbrell had resigned and a successor wasn't announced. A spokesman didn't provide an immediate comment.
Starting in June, RC Willey Home Furnishings Chief Executive Scott Hymas is planning to take a three-year religious leave, during which the company's president will be in charge of the Utah furniture chain while Mr. Hymas will take more of a board role, he said.
Berkshire declined to say whether that was a complete list of CEO transitions since 2016's annual meeting.
Mr. Buffett sends CEOs a letter every two years reminding them of the company's values and asking them to recommend in writing who their successors should be, he said in his 2010 shareholder letter.
Mr. Buffett also occasionally replaces top executives. In 2012, he wrote a letter to ousted Benjamin Moore & Co. CEO Denis Abrams explaining his decision to fire him based on "a differing view about distribution channels and brand strategy."
At the 2016 annual meeting, Mr. Buffett said there is no "grand design" behind succession planning at the subsidiary level, and there are no rules about how many executives can report to Mr. Buffett.
"At Berkshire, every decision that comes up, we just try to figure out the most logical thing to do at that time," he said.
Write to Nicole Friedman at email@example.com
(END) Dow Jones Newswires
May 08, 2017 02:47 ET (06:47 GMT)