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By Jeremy Glaser and Drew Woodbury, CFA | 05-04-2013 12:00 PM

Berkshire Culture Takes Center Stage at Annual Meeting

Morningstar's Drew Woodbury and Gregg Warren give their take on how Berkshire's culture will change after Buffett departs and other key issues from the first half of the Berkshire Hathaway Annual Meeting.

Jeremy Glaser: For Morningstar, I'm Jeremy Glaser. We're half way through the 2013 Berkshire Hathaway Annual Meeting. I'm here with Gregg Warren and Drew Woodbury, our Berkshire analysts, to get their take on the first half of the meeting.

Gentlemen, thanks for joining me.

Drew Woodbury: Thanks for having us.

Gregg Warren: Thanks for having us.

Glaser: So let's start with the successor. That was a big topic. We had a couple of questions on it. Warren Buffett basically said that he thinks the culture will be able to sustain itself, but he did mention there might be some reorganization that would have to go on for the CEO to run it. What were your takes on those comments? What do you think about the successor?

Woodbury: Yeah, the successor was talked about a few times. Buffett still has not named a specific name but has assured investors that there is someone that the board and him have agreed upon. In our opinion, we'd like them to be a little bit more forthcoming on that score, maybe some kind of a transitional role in some regard.

Warren: I think one of the more interesting points that came out that I noted was, he said that the successor who they want taking over the role has a more intimate knowledge of the subsidiaries and has gotten more involved with what the subs are doing. So I think that's important to look at. I think he also noted that because of how Berkshire is structured now, it's completely decentralized. Mainly it's the major subs, the heads of the major subs, that are reporting up to him. It's about a dozen people.

He anticipates that potentially changing when the successor takes over. They may want to reorganize just to get a better feel for a lot of the smaller operations that they may not be as familiar with. So, overall, Berkshire is not going to change its decentralized structure. Managers down at the subsidiary level are still going to run things when the new CEO takes over. It’s just they may do things a little bit differently.

Glaser: He mentioned culture maybe a dozen times through a couple of different answers. Will they be able to sustain that culture? Do we have any signs of what they're doing to keep the culture intact?

Warren: I think it's a lot easier to keep the culture intact because, again, as a conglomerate, it's almost a true conglomerate, because it is completely decentralized all the way down. Really, Warren's job and role as CEO is to allocate the capital that comes up from the subsidiaries and talk to them about business strategies that they want to. But ideally he wants them to run their own operations. So, I can't really see the culture changing dramatically, unless the CEO that comes in decides that they want a more centralized focus, and that I think could really upend the apple cart for them.

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