Berkshire Hathaway is not a hereditary dynastyEconomics Professor Shin Jang-sup argued that Korea’s big family-owned conglomerates are wrongly subjected to standards their more successful American brethren are not. In the May 14 issue of the Korea JoongAng Daily, he presented Berkshire Hathaway, headed by Warren Buffett, as a prime example of a successful, family-owned American business. Analogizing Berkshire to generationally owned chaebol is an error.
Ownership and control of Korean chaebol, even those broken up such as Hyundai Group, pass down to the next generation. Children often head the top and subdivisions. Contrary to the author’s argument, Buffett’s children will not.
Mr. Shin states that Warren’s eldest son, Howard, will inherit the helm of Berkshire Hathaway upon his father’s death. Not true.
Buffett holds three positions in the company: chairman, president and CEO. None of these positions will go to his son Howard. Warren has stated on many occasions that “his multiple roles will be divided among different people.” While he has not publicly named his CEO successor, the most important position, it will not go to Howard. Furthermore, Todd Combs and Ted Weschler will eventually oversee all of the company’s investments, according to The Wall Street Journal. They will also advise the future CEO in acquisitions.
Howard will not be able to control the company from his future nonexecutive chairman position. It is no secret that Buffett detests inherited wealth. He will not follow the Hilton or Walmart models. Warren owns about 31 percent of Berkshire Hathaway and the vast majority of that is being given to charity - 83 percent to the Gates Foundation alone. As Warren has said, “I want to give my kids just enough so that they would feel that they could do anything, but not so much that they would feel like doing nothing.”
Howard’s responsibility is to preserve the company’s culture after Warren is gone. Yes, that’s a little murky. But with the CEO and portfolio management formally designated to others, and without command of his father’s shares and in the company, Howard is deprived of the means for creating a hereditary dynasty. He will have less voting power than the Ford family has in the Ford Motor Company, hardly a hereditary dynasty in the chaebol model.
By Earl Stuart, English teacher in Daejeon
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