Is Greg Abel a Good Successor to Warren Buffett?

Ahead of Berkshire Hathaway’s (BRK.A, Financial) (BRK.B, Financial) annual shareholder meeting last week, I knew that one of the things investors should be looking out for at the meeting was comments regarding the future management of the enterprise.

Last year, Charlie Munger (Trades, Portfolio) let slip that Greg Abel would be succeeding Warren Buffett (Trades, Portfolio) as the corporation’s CEO. The company later issued a statement confirming this. As such, investors were expecting that Abel would join Buffett and Munger on stage this year to give shareholders a bit more time to ask questions of the man that will eventually be managing their investments.

Abel was given some time to speak, but not really enough considering his position in the company, in my view. I think he still has a lot more work to do in order to win over shareholders.

Learning more about Abel

Abel currently looks after most of Berkshire’s non-insurance businesses, which means he’s responsible for a good chunk of the group’s earnings and capital allocation. When Buffett is no longer running the business, he will also be responsible for having the last word on big deals and big investments.

But Abel is seen as more of an operations man than a public personality, like Buffett or Munger, and he was hardly given enough time to dispel that myth with his short spell in the limelight this year.

One major criticism against Berkshire‘s future CEO is the fact that he owns a stake in Berkshire Hathaway Energy. Berkshire does not actually fully own all of its utility business. It only owns 91%, with a further 8% owned by the family of its founder and the last 1% owned by Abel. This is where the majority of his wealth is concentrated, unlike Buffett, who has always kept the majority of his wealth in Berkshire shares.

Some investors have questioned whether Abel’s stake could be a conflict of interest, and Buffett has said that is something that the conglomerate‘s compensation and executive committee will look into when the time is right.

According to the Financial Times, several shareholders who posed questions to the future CEO were disappointed with their answers. One fund manager even said that his appearance was “fumbled.”

This is not really a good look. The market needs to have confidence in Abel and be sure that he is the right man for the job. There are already concerns that splitting the CEO and chairman role, which will occur when Buffett leaves, could cause the company to become more sluggish and restrict its ability to move quickly to take advantage of opportunities.

I think these concerns are valid, but we also need to consider the fact that Berkshire has an ingrained culture, a culture that the Oracle of Omaha has been carefully curating over the past five decades.

I would like to hear a little more from the future CEO, but there is no doubt that he is a very capable operator.

A very capable operator

I see parallels here with Tim Cook after he took over as CEO of Apple (AAPL, Financial). Following Steve Jobs, he had big shoes to fill, and analysts speculated whether or not he was up to the job. What Cook lacked in creative flair, he more than made up for in organizational skills, and this skill has helped the corporation grow to become one of the largest publicly listed companies in the world.

That could be what Berkshire needs next. Abel has shown incredible skill growing the conglomerate's non-insurance businesses. Suppose he continues to follow this path, while letting the insurance side of the enterprise run itself under its own managers, and the fund managers Todd Combs and Ted Weschler do what they do best. In that case, the corporation could continue marching forward after Buffett.

Hopefully, we’ll hear more from Abel in future. It is clear that Berkshire is starting to look to a future after Buffett, and that cannot be a bad thing.