Iconic Warren Buffett Gets Hit Directly with Governance Issue — Is His Legacy In-Play?

“California Public Employees’ Retirement System, the largest public pension fund in the U.S., said it plans to vote for a shareholder proposal that Berkshire Hathaway Inc. replace billionaire Warren Buffett as chairman … The non-profit National Legal and Policy Center, which is also a shareholder, [in addition] has called for an independent chair …” — Patrick Winters, Bloomberg, April 19,2022.

GOVERNANCE UPRISINGS HARDENING INTO STANDARD TREND

Now, just like Twitter, Coca-Cola, and Starbucks, the almost sacred institution Berkshire Hathaway is under scrutiny for governance issues.

Once a sleeper in the ESG (Environmental Social Governance) movement in the US, governance matters have taken center stage. Likely this development can harden into a standard trend.

MULTIPLE CONSTITUENCIES PILE ON

Yes, the turmoil will continue for corporate leadership. That’s the take of Wall Street law firm Paul Weiss.

In a January 2022 article in Corporate Counsel Paul Weiss Chairperson Brad Karp and the law firm’s Co-Chair of

its Sustainability and ESG practice David Curran projected that governance activity will dominate in public companies.

The push for that, they document, is coming from not only high-profile individual shareholders such as Elon Musk. In addition, Karp and Curran explain:

“… [There is] support from large institutional investors and advisory firms such as Institutional Shareholder Services (ISS) and Glass Lewis.”

Other sources of disruption, they hammer, are:

“… previously marginalized groups such as disgruntled employees … winning proxy battles and gaining access to previously undisclosed documents.”

Paul Weiss sums this activity up as a “game-changer.” Some recall that it had launched back in Spring 2020 the first-ever in the legal sector specialized ESG practice. It anticipated the upheaval.

SO, WHERE ARE THE CHECKS AND BALANCES?

Essentially the Berkshire Hathaway shareholder beef is that Buffett should not be in the role of both Chairman and Chief Executive Officer. Instead what is needed, they argue, are the checks and balances of a Chairman being independent from management.

Not only does Berkshire Hathaway push back on this proposal. It responds in this puzzling way: When Buffett steps down from leadership, it states, then the corporation will have the Chairman position be filled by a non-management person.

WHAT WILL HAPPEN TO THE BUFFETT BRAND?

Since that response certainly doesn’t address shareholders’ concerns, it raises questions about Buffett’s leadership.

That could put his legacy in-play. The reality emerges: Has this leader outlived his useful corporate life? Could what is happening make it impossible for him to “Do a Johnny Carson.” That is step away from the action at the top of his game? Is he already screwing up his game?

Recently, in an interview with Charlie Rose, Buffett, 91, made it quite clear that he has no intention to retire. His health is good. He made that public declaration even though that he had designated his successor: Greg Abel. In the Annual Report he allowed Abel space to discuss sustainability matters.

The gallows humor about such a Buffett stance is that he has made Abel a kind of Prince Charles. There Abel is, dutifully waiting for ever for the top job.

GOVERNANCE AS THE PLATFORM FOR HUMBLING CORPORATE LEADERSHIP

During this second decade of this century it could be the governance aspects of ESG which will make once revered corporate leaders look mighty foolish.

Law and More covers corporate leaders and now and then Jane Genova does freelance assignments for Paul Weiss and other law firms, defense and plaintiff

Originally published at https://lawandmore.typepad.com.