Berkshire Hathaway 1999 Annual Report Download - page 63

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Charlie and I mainly attend to capital allocation and the care and feeding of our key managers. Most of these
managers are happiest when they are left alone to run their businesses, and that is customarily just how we leave them.
That puts them in charge of all operating decisions and of dispatching the excess cash they generate to headquarters.
By sending it to us, they don't get diverted by the various enticements that would come their way were they responsible
for deploying the cash their businesses throw off. Furthermore, Charlie and I are exposed to a much wider range of
possibilities for investing these funds than any of our managers could find in his or her own industry.
Most of our managers are independently wealthy, and it's therefore up to us to create a climate that encourages
them to choose working with Berkshire over golfing or fishing. This leaves us needing to treat them fairly and in the
manner that we would wish to be treated if our positions were reversed.
As for the allocation of capital, that's an activity both Charlie and I enjoy and in which we have acquired some
useful experience. In a general sense, grey hair doesn't hurt on this playing field: You don't need good hand-eye
coordination or well-toned muscles to push money around (thank heavens). As long as our minds continue to function
effectively, Charlie and I can keep on doing our jobs pretty much as we have in the past.
On my death, Berkshire's ownership picture will change but not in a disruptive way: First, only about 1% of
my stock will have to be sold to take care of bequests and taxes; second, the balance of my stock will go to my wife,
Susan, if she survives me, or to a family foundation if she doesn't. In either event, Berkshire will possess a controlling
shareholder guided by the same philosophy and objectives that now set our course.
At that juncture, the Buffett family will not be involved in managing the business, only in picking and
overseeing the managers who do. Just who those managers will be, of course, depends on the date of my death. But I
can anticipate what the management structure will be: Essentially my job will be split into two parts, with one executive
becoming responsible for investments and another for operations. If the acquisition of new businesses is in prospect,
the two will cooperate in making the decisions needed. Both executives will report to a board of directors who will be
responsive to the controlling shareholder, whose interests will in turn be aligned with yours.
Were we to need the management structure I have just described on an immediate basis, my family and a few
key individuals know who I would pick to fill both posts. Both currently work for Berkshire and are people in whom
I have total confidence.
I will continue to keep my family posted on the succession issue. Since Berkshire stock will make up virtually
my entire estate and will account for a similar portion of the assets of either my wife or the foundation for a considerable
period after my death, you can be sure that I have thought through the succession question carefully. You can be equally
sure that the principles we have employed to date in running Berkshire will continue to guide the managers who succeed
me.
Lest we end on a morbid note, I also want to assure you that I have never felt better. I love running Berkshire,
and if enjoying life promotes longevity, Methuselah's record is in jeopardy.
Warren E. Buffett
Chairman