Democracy be damned (in the business world)!

Warren Buffet seems to have taken a different approach in governing his iconic Berkshire Hathaway company. The legendary investor recently chose not to name his successor in a public letter to his shareholders, though he has indicated that he has selected one, as well as two backups. The most interesting aspect of it is this: no one knows who he has chosen…not even the successors themselves.

It is assumed that Buffett was able to recover the loss of purchasing that meal before he even picked it up off the counter

Before we start writing Disney movies about this sort of stuff, let’s analyze this a bit. It’s interesting to see how rising to such powerful posts in the private sphere doesn’t really seem to annoy shareholders as much as it might annoy the voting public if a similar stunt was pulled in politics. Are they two different contexts? Maybe yes, maybe no.

Consider that the business world is so closely interlinked with the livelihood of a country’s economy nowadays. The bigger a company gets, the more closely it is associated with the state of an economy’s health (at least, that’s what the 2008 economic meltdown has taught us). Whether or not you like the fact that a lot of big companies in the US made bail after the economic meltdown, this is a reality that we have to deal with: a precedent has been set, and if we ever face this situation again in the future, it will be at least discussed, if not implemented again.

So when considering the operating structure of such a big company as Berkshire Hathaway, you have to wonder if examining the potential governing structure should be of concern to the public, or at least the government. While it’s crazy to think of any government having a say in how a private company runs, it’s something that should be considered, especially for Berkshire Hathaway. What if the company’s fortunes go south after Buffett leaves? What if the company becomes too big to fail? What will happen then?

Suddenly, the question of who runs the company in the future starts to become an issue. When you become a company that is so integral to the economic well-being of a company, you might want to take your corporate social responsibility to more than just meeting environmental standards and behaving in an ethical way with the consumers and competitors. You should begin to realize that your survival as a company influences more than the employees’ livelihoods, but the livelihoods of numerous other stakeholders.

If advocating for government regulation to consider things like corporate structure or governing decisions is too much for business people (who are probably in favour of minimal government intrusion), that’s fine and perfectly understandable. But that needs to be coupled with the realization that as companies grow, the responsibility increases to beyond the walls of the company and beyond an obligation to shareholders. It now extends to people who we never thought could be affected by such decisions. If companies don’t make that realization, then can we say that they have learned anything from the 2008 meltdown? Can we say that they have a truly viable long-term plan?

Of course, there’s something appealing about ‘hand-picking’ a successor to such a power corporate entity. The idea that a business giant like Warren Buffett sees the potential for someone to be as successful (or more successful) than him intrigues us. But this idea of ‘successful succession’ has become far too unpredictable for people to play along with. Surely, there must be a way to stabilize this process without stifling the innovation needed to make a company thrive. I don’t claim to have a perfect solution for this dilemma, but all I’m saying is it needs to be discussed more openly.

At least, I hope that is what Mr. Buffett has considered before making his choice. If he has, good on him!

PS: In the WILDLY unlikely scenario that I am his chosen successor, I would still advocate for what I’ve mentioned here. Though I probably wouldn’t say that before I’ve taken a few rides on my private jet and had really, REALLY expensive sushi.

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