Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) is in the spotlight today as a management shakeup may be at play. Currently, shares of Berkshire Hathaway stock are up 14% year-to-date (YTD). That massively outperforms the S&P 500’s YTD loss of more than 7%.
Recently, the California Public Employees’ Retirement System, or Calpers, stated that it was in favor of replacing Warren Buffett’s position as Chair of Berkshire Hathaway. Calpers is a significant shareholder of the company, owning a $2.3 billion stake.
This idea was originally posed by the National Legal and Policy Center (NLPC), which says the chair should be independent from management. The NLPC explained, “Having the same person hold both roles weakens corporate governance.” The NLPC has also filed similar proposals to five other companies, including Home Depot (NYSE:HD) and Goldman Sachs (NYSE:GS).
Buffett is currently both the CEO and Chairman of Berkshire Hathaway. However, Buffett alone has a 32% voting interest and a 16% equity interest in the company. As such, the proposal “likely faces long odds.”
Berkshire Hathaway Stock: Buffett Could Be Ousted as Chair
This proposal will be considered at Berkshire’s annual meeting on April 30. Meanwhile, Berkshire’s board has responded, saying it’s against the measure. The board argues Buffett should serve as Chair until retirement. When that happens, the board then plans to bring on someone not already a part of Berkshire management. Specifically, Howard Buffett — Warren Buffett’s son — is slated to become non-executive chair after his father retires. Vice Chairman Greg Abel is also expected to become CEO. As Reuters notes, “Shareholder proposals that Berkshire opposes are generally defeated by large or overwhelming margins.”
That’s not all, however. In addition to the new Chair proposal, Calpers has also co-sponsored another proposal asking for more information on how Berkshire manages climate risks. Pension funds in New Jersey and Quebec are in favor of the proposal. Calpers claims the “company’s existing disclosures are insufficient” and plans on withholding votes for board members Susan Decker and Meryl Whitmer in response.
This isn’t the first time that Calpers has butted heads with Warren Buffett. In 2004, it argued against the legendary investor’s election to Coca-Cola’s (NYSE:KO) board. That opposition was unsuccessful, although Buffett eventually stepped down from the board in 2006.
Right now, Berkshire Hathaway stock is down about 1% for the day.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
