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Berkshire Adds Son of Buffett Confidant to Board

Berkshire Hathaway CEO Warren Buffett

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Johannes Eisele/AFP via Getty Images

Warren Buffett is keeping it in the family.

Thomas S. Murphy Jr., the son of a friend, has been elected to the board of Buffett’s
Berkshire Hathaway
(ticker: BRK/A, BRK/B), the company said Monday.

Murphy, 63, is a co-founder of Crestview Partners, a New York private-equity investment firm. His father was former Capital Cities CEO Thomas S. Murphy, who was not only a Buffett confidant but a Berkshire director. He resigned from the board in February and died in May at age 96.

Murphy is taking the board seat held by another longtime director and Buffett friend, David “Sandy” Gottesman, who died this year as well at 96.

His election follows last year’s election of Buffett’s daughter, Susan, to the board, where she joins brother Howard Buffett, who is likely to become Berkshire’s non-executive chairman when his 92-year-old father, who is both CEO and chairman, dies or is no longer capable of being chairman.

The naming of Murphy adds another man to the board, which is largely made up of older, white men. Murphy didn’t immediately respond to a request for comment.

Of the board’s 15 directors, 11 are men and two are non-white, Vice Chairman Ajit Jain and former American Express CEO Ken Chenault. Jain is Indian American and Chenault is African American. All are over 55.

At a time when many corporations are focused on adding women and people of color to their boards, Berkshire has no diversity goal, reflecting the philosophy of the Buffett.

Berkshire described its approach in its proxy earlier this year:

“In identifying director nominees, the Governance Committee does not seek diversity, however defined. Instead, as previously discussed, the Governance Committee looks for individuals who have very high integrity, business savvy, an owner-oriented attitude and a deep genuine interest in the Company.”

Earlier this year, investment research firm MSCI criticized Berkshire’s board composition.

“Berkshire Hathaway continues to lag peers in corporate governance. The concerns include board entrenchment (over 42% board members are over 70 years old and 57% have served on the board for over 15 years), lack of board independence and diversity (57% not independent of management and less than 30% women on the board), combined CEO-chairman functions, and high voting power of the controlling shareholder.”

Some of the qualities that MSCI criticized, such as “entrenchment,” are viewed favorably by many Berkshire shareholders who like that the board has considerable knowledge of the company and that Buffett wields enormous power. Buffett has suggested that if the board decided to rein him in, he would no longer want to be CEO.

Buffett and Vice Chairman Charlie Munger have scoffed at the independence issue, saying board members care deeply about the company whether they are characterized as independent or not.

Buffett has criticized corporate directors outside Berkshire who are deemed independent, but garner much of their income from director fees, compromising their willingness to buck management.

Buffett noted there were big investors who withheld support for him about 15 years ago when he was on the board of
Coca Cola,
in which Berkshire held a big stake now worth about $25 billion.

At Berkshire’s annual meeting in late April, Buffett said of the Coke episode that the opponents said he wasn’t independent because Dairy Queen, which is owned by Berkshire, “bought some Coca-Cola … I mean, do they think I can add things and if we’ve got billions and billions and billions of dollars (invested) that I’m going to be compromised, but it’s just nutty.”

Added Munger: “Well, they don’t want them just independent. Now they want 1 horse, 1 rabbit, 1 cow, 1 whatever.”

Write to Andrew Bary at andrew.bary@barrons.com

Credit: marketwatch.com

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