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Todd Combs’ unexpected exit from Berkshire Hathaway grabbed most of the headlines this week.
But buried inside Monday’s three-page announcement were several other leadership changes that point to something bigger: Berkshire is starting to look more like a conventional corporation as Warren Buffett prepares to hand over the CEO role to Greg Abel in less than three weeks.
Broadcom’s Blockbuster AI Boom Stuns Wall Street — But the Stock Still Sinks
Todd Combs Heads to JPMorgan
Combs will join JPMorgan Chase next month to lead a new $10 billion “Strategic Investment Group,” part of the bank’s massive $1.5 trillion “Security and Resiliency Initiative.” The effort is aimed at helping companies boost growth, drive innovation, and accelerate manufacturing—primarily in the United States.
He has served on JPMorgan’s board since 2016 but will step down as he takes on the new role.
JPMorgan CEO Jamie Dimon praised Combs in the announcement, calling him “one of the greatest investors and leaders I’ve known.”
Warren Buffett, in Berkshire’s own release, echoed that sentiment, saying, “JPMorgan, as usual, has made a good decision,” and crediting Combs with making “many great hires at GEICO.”
Combs, now 54, joined Berkshhire in 2010 as a portfolio manager. In 2020, he took on an additional role as CEO of GEICO, sparking speculation that he could one day succeed Buffett.
At Berkshire’s annual meeting in May, insurance chief Ajit Jain said Combs “has done a great job” turning around GEICO, pointing to better pricing discipline—matching rates more closely to risk—and the expanded use of telematics to track driving behaviour.
Still, Jain added, “I still think we need to do more in technology.”
A New Leader at GEICO—and an Open Question
That technology push will now fall to GEICO’s new CEO, Nancy Pierce, who was promoted from chief operating officer. Pierce has been with GEICO since 1986, when she began her career as a claims associate.
What remains unclear is who will take over Combs’ responsibilities as a portfolio manager.
Buffett has said Greg Abel will ultimately have oversight of Berkshire’s investment portfolio, but it’s uncertain how much authority will be shared with the remaining portfolio manager, Ted Weschler. Berkshire could also bring in additional portfolio managers, and Buffett himself—now transitioning to chairman—could help bridge the gap.
Historically, Berkshhire has revealed little about who manages its smaller stock holdings or how individual portfolio managers have performed.
That may need to change.
In an email to Buffett Watch, Hudson Value Partners’ Christopher Davis urged Berkshhire to “become more transparent about the roles and responsibilities of Abel and Weschler in managing the public equity portfolio.”
“We all love the ‘Berkshire way,’” Davis wrote, “but there needs to be some concessions to the fact it is now a trillion-dollar enterprise undergoing its first leadership transition.”
Moving Away From the ‘Berkshire Way’
Several of the latest changes suggest Berkshire is slowly stepping away from its famously hands-off management style.
Abel has already taken a more active role in overseeing Berkshire’s non-insurance businesses than Buffett ever did. Now, some of those companies are getting an additional management layer.
Adam Johnson, the chairman and CEO of NetJets, has been named president of Berkshire’s Consumer Products, Service, and Retailing businesses—a newly created role. He will support the CEOs of 32 operating companies in that group.
In the announcement, Abel called Johnson an “accomplished leader with a proven ability to deliver long-term shareholder value,” adding that he will help uphold Berkshire’s culture and values.
Other major non-insurance units, including BNSF, Berkshire Hathaway Energy, and Pilot, will continue reporting directly to Abel.
Berkshire is also appointing its first-ever general counsel. Michael O’Sullivan, who has served in that role at Snap since 2017 after more than 20 years at Munger, Tolles & Olson, will take the position. Until now, Berkshire has relied on outside law firms for legal matters.
More changes could be coming. It wouldn’t be surprising to see Berkshire eventually add investor relations, media, or government affairs functions at its famously lean Omaha headquarters. A dividend, however, still seems unlikely as long as Buffett is showing up to the office.
CFO Retirement Marks Another Milestone
In a more traditional transition, longtime Chief Financial Officer Marc Hamburg will retire next June after 40 years at Berkshire.
Buffett called Hamburg “indispensable,” saying he “has done more for this company than many of our shareholders will ever know.”
Hamburg will be succeeded by Charles Chang, the CFO of Berkshire Hathaway Energy.
Investors Weigh the Changes
For a company that has barely changed its structure for decades, it’s a lot to absorb.
“There’s so much emotional investment in the persistence of Berkshire as a culture,” Keefe, Bruyette & Woods analyst Meyer Shields told The Wall Street Journal, “that when you have decent-sized changes, that’s going to cause more worry than jubilation over the company’s dynamism. That’s not why people own Berkshire Hathaway.”
Earlier this year, KBW downgraded Berkshire shares to “underperform,” citing Buffett’s upcoming departure as a key concern.
Still, Berkshire’s Class A and Class B shares held up relatively well this week, slipping nearly 1%. Even so, both remain more than 7% below their all-time highs set in May, shortly before Buffett disclosed plans to step down as CEO at the end of the year.
