Corporate-governance advocates for years have been calling on companies not to have their chief executives also chair the board.
The idea is to keep the board independent from management. Now, California Public Employees’ Retirement System, known as Calpers, the nation’s largest public pension fund, wants to put that idea into practice at Berkshire Hathaway (BRK.B).
It said in an April 19 filing with the Securities and Exchange Commission that it’s supporting a proposal to replace Warren Buffett as chairman of Berkshire Hathaway. He would remain CEO.
Calpers has about $2.3 billion of Berkshire shares. The National Legal and Policy Center, which made the proposal, has more than $2,000 in Berkshire shares.
Calpers didn’t say why it supported the proposal. Berkshire’s board said last month that Buffett should remain chairman as long as he’s chief executive. Once Buffett is no longer chief executive, a non-management director should then be named board chair, it said.
Morningstar's Fair Value on Berkshire
Morningstar analyst Greggory Warren currently has a fair value estimate of $350 for Berkshire’s B shares, compared with a recent quote of $348.22.
If Berkshire’s $11.6 billion bid for insurance company Alleghany (Y) makes it through the 25-day go-shop period and equity markets behave normally, Warren would raise his fair-value estimate to $363, he wrote in a March 29 commentary.
Close to $7.25 of the $13 increase would come from the absorption of Alleghany into Berkshire, Warren said. That assumes:
· “A slightly more consistent and profitable insurance and reinsurance operation,
· “A less ambitious Alleghany Capital unit, which has grown aggressively the past five years through acquisitions, and
· “An insurance investment portfolio that is more equity heavy than it has been, with 70% to 75% of holdings in equities versus 15% to 20% the past two years,” Warren said.
Another $3.50 of the fair-value increase would come from Berkshire’s nearly $8 billion investment in Occidental Petroleum (OXY) during the first quarter, with warrants to acquire more.
The rest of the fair-value increase would come from recent price increases in Berkshire's top three stockholdings: Apple (AAPL), Bank of America (BAC) and American Express (AXP), Warren said.
