In a surprise announcement during Berkshire Hathaway’s BRK.A BRK.B annual meeting, chairman and CEO Warren Buffett said he plans to step down as CEO at the end of the year. Buffett is recommending to Berkshire’s board that Greg Abel assume the role of CEO. Buffett expects unanimous board approval. Questions remain whether Buffett will remain as chairman.
“I would still hang around and conceivably be useful in a few cases,” Buffett added—specifically when it comes to possibly making any large acquisitions.
Buffett made the announcement with two cans of Coca-Cola in front of him and a surprised Abel beside him. Buffett said only two of the directors, his children Susie and Howard, knew about today’s announcement before he made it.
What Berkshire Without Buffett May Look Like
Buffett spoke for the 60th time before Berkshire Hathaway’s shareholders at the 2025 meeting; it’s hard to imagine what the firm will be like without him at the helm.
Morningstar strategist and Berkshire analyst Gregg Warren notes that the firm has been planning for Buffett’s eventual departure for 25 years:
“Close to a decade ago, we started noting in our research that the company would survive the eventual departures of Buffett and Munger, writing that the groundwork for a successful transition has existed since the start of the millennium, with Berkshire dedicating more and more capital to companies that could absorb the cash flow thrown off by its disparate operations, either through capital expenditures or bolt-on acquisitions.”
Buffett and colleague Charlie Munger (who died in late 2023) were adept at finding ways to invest that excess capital and were mindful of culture and fit when acquiring businesses.
“We expect this to continue, believing that Berkshire’s culture of management autonomy and entrepreneurship has become institutionalized. However, the new managers will probably work with a slightly different opportunity set, and we believe they will evolve Berkshire from what has historically been a reinvestment machine into one that is more focused on returning capital to shareholders, which is what we would expect of a company of this size with limited investment opportunities.”
Will Berkshire Hathaway Pay a Dividend After Buffett’s Departure?
Despite its size and ample cash position, Berkshire doesn’t currently pay a dividend. Morningstar’s Warren thinks that will likely change after Abel takes over as CEO.
“A dividend remained out of the question as long as Buffett was running the show because he believed it could be a tool better used by his successors,” he says. “We never fully agreed with this rationale, but his reluctance to pay a dividend was understandable.” But issuing a dividend could help Berkshire retain shareholders who may consider selling once Buffett’s no longer at the helm.
Heading into the meeting, Berkshire Hathaway stock was up 19% for the year to date, as investors have sought out perceived “safer haven” names in this year’s volatile stock market. In fact, the stock looked slightly overvalued according to Morningstar as of Friday’s close, with both the A and B shares trading 11% above their fair value estimates.
Should Berkshire Hathaway’s Shareholders Be Worried?
Buffett stepping down as CEO is indeed a significant change. But as long as nothing changes with Berkshire’s efficient and effective operating structure, Morningstar’s Warren expects Berkshire to survive in the long run.
“We’ve long believed Berkshire to be the best possible example of what a decentralized conglomerate should be: a judicious allocator of capital, incurring minimal costs for shareholders. We expect those aspects of the business to continue regardless of who is at the helm,” he says. “With all the company’s operating businesses managed on a decentralized basis, pushing responsibility for each business down to the subsidiary level and eliminating the need for layers of management control, the next set of managers should be able to focus on stewardship of the firm’s portfolio and capital-allocation decisions.”
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
