2004: Will Berkshire continue to run as smoothly after Buffett?

AUDIENCE MEMBER: Good morning. I’m Jay Leiber (PH) from Houston, Texas.

Mr. Buffett, since I’m older than you and maybe even as old, or older, than Charlie, I feel like I can ask this question. And I’ll ask it as delicately as possible.

When the time comes that you, I, and Charlie have gone to that big stock market in the sky, I understand that you planned — or at least, I have read — that you plan to give the bulk of your Berkshire Hathaway stock to your charitable foundation, along with your 30 percent of the votes of the company.

If this is correct — and if it’s not correct, this question is moot — but if so, what assurance do the Berkshire Hathaway shareholders have that the company will continue to be run as honestly and straightforward as it is now, such as only 15.8 employees or so at headquarters and no —

WARREN BUFFETT: Yeah, the —

AUDIENCE MEMBER: — huge salaries or other ridiculous giveaways to dilute and weaken the equity of the shareholders at that time.

WARREN BUFFETT: Well, for a short while there’ll only be 14.8, actually. (Laughter)

But it’s a good question — a very good question. Since you’re older than I, apparently, I hope we don’t go at the same time. The —

There’s one slight twist to the estate plans we have. If I die first, all of my Berkshire goes to my wife. And if we died simultaneously, it would all go to the foundation.

But all of the stock will end up in the foundation. In fact, if I died first, she might put my stock in the foundation before her death, but that would be up to her. But it will end up in the foundation — all of the stock.

As you mention, it has 30-odd percent of the votes, although under the tax law, once it’s in the foundation, within five years, it would have to either convert to be some of it — it would have to get down to 20 percent of the vote. That’s required under foundation law.

In terms of how it would be run in the future, I think it has a far better chance than any company — any major company I know in the country — of maintaining the culture, because it has — it will have people running it who have grown up in the culture.

Earlier, it was — the criticism was made about my wife and my son being on the board, but they are guardians of the culture. They are not there to profit themselves, they are there to profit as the shareholders profit, but also to keep the company in the same way as previously.

One great example of that, of course, has been at Walmart where, when Sam Walton died, a not too dissimilar amount of stock was left among the family. And essentially the Walton family has, in my opinion, done a magnificent job, not only of selecting successors to run the place, but having successors who, if anything, reinforced the culture of Walmart. And it’s been an enormously successful arrangement.

The Waltons are there, in case anything goes wrong, to make a change if needed, but they’re not there to run the business. And that’s exactly the pattern that we hope to have at Berkshire. And I think we have it.

I think I — you know, I can’t give you a hundred percent guarantee, but I would far rather bet on the integrity of the family that succeeds me, plus the managers that succeed me, at Berkshire remaining true than I would any other company in — for a long, long time — any other company I can think of.

Charlie?

CHARLIE MUNGER: Well, I would have a reason to fret about this subject, just as you would. And I, of course, have known the members of the Buffett family that would be here after Warren is gone for decades. Don’t worry about it. You should be so lucky. (Laughter and applause)

WARREN BUFFETT: It’s a question we don’t wish to have an instant answer for, though, however. (Laughter)

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