Berkshire Hathaway’s 2025 Proxy Statement
Berkshire has introduced a retirement age of eighty for most directors, a surprising development given Warren Buffett's prior statements.
“We do not remove superstars from our lineup merely because they have attained a specified age—whether the traditional 65, or the 95 reached by Mrs. B on the eve of Hanukkah in 1988. Superb managers are too scarce a resource to be discarded simply because a cake gets crowded with candles.”
— Warren Buffett, Letter to Shareholders, February 28, 1989
“Ken Chace has decided not to stand for reelection as a director at our upcoming annual meeting. We have no mandatory retirement age for directors at Berkshire (and won’t!), but Ken, at 75 and living in Maine, simply decided to cut back his activities.“
— Warren Buffett, Letter to Shareholders, March 1, 1991
Berkshire Hathaway has released its annual proxy statement which includes important information for shareholders prior to the annual meeting scheduled for May 3, 2025. It is unfortunate that proxy statements are released a few weeks after annual reports and often receive relatively little attention in the media. For this reason, I wrote articles covering Berkshire’s proxy in 2022, 2023, and 2024.
My focus in those articles was primarily on the “skin in the game” of Berkshire’s board of directors. While still very significant due to Warren Buffett’s holdings, the deaths of Sandy Gottesman in 2022 and Charlie Munger in 2023 removed two longtime directors with multi-billion dollar holdings of Berkshire stock. Such directors simply cannot be replaced, both in terms of business acumen and massive stockholdings.
I have updated the table presented in each of the prior articles covering Berkshire’s proxy statements. Although Berkshire’s proxy lists the number of shares controlled by each director, I find it useful to disaggregate the holdings by type. In many cases, directors control substantial holdings for the benefit of charitable foundations. While I am sure directors with such voting interests take their roles as fiduciaries seriously, charitable holdings do not represent personal wealth. For this reason, I list shares held directly, shares held in trust, and “other holdings” that represent charitable foundations. My categorization is based on an interpretation of the table footnotes on page 11 of the proxy.1
The columns in orange tie to the share totals listed in the proxy statement and represent the sum of Direct Holdings, Trust Holdings, and Other Holdings. The columns in blue represent the sum of Direct Holdings and Trust Holdings, with the value of the shares calculated based on closing prices as of Friday, March 14.
Warren Buffett’s holdings represent the vast majority of director “skin in the game” and it is appropriate that Greg Abel and Ajit Jain maintain large holdings. All other directors have substantial holdings of Berkshire stock in absolute terms, assuming one considers seven and eight figure holdings to be substantial. However, it seems apparent that certain directors with lengthy business careers, such as Susan Decker and Kenneth Chenault, likely have only a small percentage of their net worth in Berkshire stock.
Since I wrote at length about the importance of “skin in the game” in prior articles covering Berkshire’s proxy, I will not repeat myself here other than to say that any criticism we might have as shareholders regarding individual directors must be seen in the context of Berkshire’s extremely high standards. Directors do not receive stock grants or options and, with the possible exception of Buffett family members who might have received stock as gifts, each director purchased shares on the open market. Anyone familiar with proxy statements of “typical” large companies knows that this is hardly the norm.
I was surprised to see that Berkshire now has an age limitation of 80 for most directors:
Unfortunately, this new policy has forced the retirement of Ronald Olson who owns over $105 million of Berkshire stock. It would be perfectly understandable if Mr. Olson would like to retire at the age of 83, and perhaps that is his wish, but a rigid policy mandating retirement at a fixed age seems like a move contrary to Berkshire’s culture. The typical 80 year old is probably not someone who should be serving on a board, but appearances of Mr. Olson at events related to past Berkshire Hathaway annual meetings seem to indicate that he remains engaged with the company and cognitively sharp. His departure is unfortunate.
The language of the new policy clearly exempts Warren Buffet from the age limit, both because he currently serves as CEO and because he controls far more than 5% of the voting rights. The 5% provision will also allow Mr. Buffett’s children to serve on the board after their 80th birthdays which will occur in about a decade, assuming that by that time they will control the shares left by Warren Buffett to the family foundation. However, it would appear that Ajit Jain will no longer eligible to serve starting in 2032.
I expect that the age limitation will be addressed at the annual meeting due to its seeming contradiction with many of Warren Buffett’s past statements about retirement ages. I personally dislike the new policy, but I’ll keep an open mind regarding its rationale. Perhaps this is intended to protect Berkshire in some way in the distant future, but for now it only increases my concerns about the company’s culture in the long run.
Just yesterday, I wrote about Warren Buffett’s views on stock-based compensation for future Berkshire CEOs in my review of Buffett & Munger Unscripted. In the quotes I presented in the article, Mr. Buffett seemed open to using stock to compensate top executives in the future. However, I forgot that starting in 2024, proxies have indicated that Berkshire never intends to use stock to compensate employees:
“The [Compensation] Committee has established a policy that neither the profitability of Berkshire nor the market value of its stock are to be considered in the compensation of any executive officer. Under the Committee’s compensation policy, Berkshire never intends to use Berkshire stock in compensating employees.” [Emphasis Added]
Presumably this means that Greg Abel’s future compensation will comprised of cash only, although I assume that there will be a base salary and bonus component that is somehow tied to performance. In my view, Mr. Abel has a large enough holding in Berkshire to align his incentives with the company, but it is obviously impossible to know how much stock Mr. Abel’s eventual successor might hold.
I look forward to Berkshire’s webcast on May 3. I might resubmit some of the questions I sent to Becky Quick last year which included one question regarding future CEO compensation.
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Individuals associated with The Rational Walk LLC own shares of Berkshire Hathaway.
As I explained in more detail in my article on the 2024 Proxy Statement, I believe that Greg Abel’s shares held in trust most likely relate to family interests. In addition to my interpretation of Greg Abel’s ownership interests, I made similar judgment calls regarding the nature of shares held in trust for Howard Buffett, Susan Buffett, Ajit Jain, Ronald Olson, Wallace Weitz, and Meryl Witmer. The footnotes sometimes refer to “charitable foundations” and other times refers to “private foundations.” I interpret “private foundation” to imply a charity. Other references to “trusts” are assumed to be held for the benefit of the director’s family. Obviously, I could be mistaken regarding the ultimate beneficiaries of “trusts” where the nature of the trust is not specified explicitly.