Warren Buffett is clearly one of the most successful investors since time immemorial. Berkshire Hathaway (NYSE:BRK.A) has made many investors rich and happy.
Because Berkshire is a publicly traded company they need a Board of Directors. In this case the investors most likely do not rely on the board. you rely on Warren Buffett. But the guy is getting old and feels good but had this prostate cancer thing and who knows what little time he has left.
A successor has been arranged. But unlike the Vatican no smoke up the chimney because it’s still a secret. So lets take a look at the board of Berkshire Hathaway.
Total of 13 individuals. Warren Buffett and Charles Munger are iconic members but very old. Howard Buffett 58 is the son of Warren and not considered an independent.
Four independent directors are over the age of 80. They are
David Keough 86. Ten years on the board. He is former Chairman of Allen & Company.
Thomas Murphy 87 Ten years on the board. Officially retired but was former chairman and CEO of capital cities/ABC.
Walter Scott 81 Twenty-Five years experience on the board. Was Chairman of LeveL 3 Communications.
David Gottesman 86 9 years experience on the board. Currently principal of First Manhattan & Co.
Charles Rotblut CFA and Editor of AAII Journal and vice President of American Association of Individual Investors recently interviewed David Laibson who is a professor of economics at Harvard University Cambridge for an article entitled “Aging and Investing”. Not surprisingly as you age there exists the growing risk of cognitive impairment. In addition to Warren Buffett and Charlie Munger this board has unmitigated risk in this calculation.
So there you have seven out of thirteen members who are very old and entrenched as they say. Governance experts will tell you that this is a very big negative.
For $253 Billion in market cap the risks are not very well covered. It all depends on the torch being passed effectively to someone new. Therefore you are investing or following stars and hoping for the best.
Risky way to make a buck if you ask me.
George Gutowski writes from a caveat emptor perspective. Follow him on twitter at twitter.com/financialskepti