
The recent news that Warren Buffett is stepping down as Berkshire Hathaway’s CEO has drawn the attention of the business pages around the world. But along with Buffett’s move, there have been other CEO-related developments that have attracted the attention of the corporate and securities world, including with respect to Tesla CEO Elon Musk. In the following guest post, Sarah Abrams, Head of Claims Baleen Specialty, a division of Bowhead Specialty, examines these CEO moves and considers their implications . I would like to thank Sarah for allowing me to publish her article as a guest post on this site. I welcome guest post submissions from responsible authors on topics of interest to the blog’s readers. Please contact me directly if you would like to submit a guest post. Here is Sarah’s article.
Warren Buffett’s May 3 announcement that he will step down as CEO by year’s end, along with recent speculation about Tesla seeking Elon Musk’s successor, presents a timely opportunity to explore board influence at companies where the CEO is deeply synonymous with the brand. Buffett and Musk have long been known for their dominant leadership styles, often making major decisions single-handedly on behalf of their companies.
When CEOs make and publicly announce dramatic unilateral decisions, it can raise concerns about board governance and expose both the board and the company to heightened D&O risk. The following discusses the parallels between Berkshire Hathaway (BH) and Tesla board engagement, as well as potential governance liability stemming from CEO behaviors exhibited by Buffett and Musk.
According to Buffett, no one on BH’s board (except his two children) or succeeding CEO Greg Abel knew that he would be resigning effective January 1, 2026. Even though Buffett has stated in writing over the last couple of years that Greg Abel would be his replacement, catching the board and named successor by surprise can cause investor scrutiny of board oversight. Readers of the D&O Diary know that Buffett’s annual letter to Shareholders, which is part of BH’s annual report, is often a blend of financial insights, personal reflections, and forward-looking statements, emphasizing transparency, humility, and the importance of long-term thinking.
This year was no different, and on Page 2 of the letter published on February 22, 2025, Buffett stated that “[a]t 94, it won’t be long before Greg Abel replaces me as CEO and will be writing the annual letters.” Buffett also recalled his investment and relationship with Pete Liegl, founder of Forest River, and strong BH equity activity, including Buffett-directed holdings in large, profitable businesses like Apple, American Express, Coca-Cola, and Moody’s. The February 22 letter was not a dramatic departure from last year, so no reason for shareholders to anticipate him stepping down.
Buffett’s investment decisions on behalf of BH have resulted in a market cap of $1.104 Trillion USD. When Buffett took over in 1965, BH’s market value was approximately $18 million. BH shares have increased 5,502,284% under Buffett. On the first day of trading after Buffett’s announcement, BH shares fell as much as 5%. Buffett emphasized that he will not sell a share of BH stock, which may help protect leadership from shareholder activism while Buffett is alive.
Even so, the board of a publicly traded company is responsible for overseeing executive leadership and succession planning. While succession planning has occurred at BH, being unaware of the timing of Buffett’s departure may be spun as a failure in the board’s duty of care. Succession risk for a public company board can result in operational disruption and internal uncertainty. In short, a CEO stepping down without informing the board may undermine governance fundamentals, even if the CEO is Warren Buffett.
Tesla’s board has faced, very publicly, allegations of governance failures relating to Musk in recent years. The first example discussed below involved the Tesla board’s 2018 approval of Musk’s outside compensation: purportedly the result of the Compensation Committee not being sufficiently independent to negotiate with Musk. The derivative litigation against the board not only voided Musk’s pay package but also resulted in a change to Delaware corporate law.
D&O Diary readers may be aware that the impetus, in part, of Delaware SB 21 (SB 21) passed in March 2024 was the investor lawsuit filed against Elon Musk and Tesla Tornetta v. Elon Musk. Tornetta, on behalf of himself and other shareholders, filed a derivative lawsuit in Delaware Chancery Court alleging breach of fiduciary duty against an allegedly influenced board that approved a compensation plan for Musk with $55.8 billion maximum value based upon certain vesting benchmarks. At the time of the offer, Tesla had a market capitalization of around $60 billion. Musk’s package was approved at the 2018 annual meeting and ratified at the 2020 annual meeting.
The Delaware Court in Tornetta opined that rescission of Musk’s compensation award would be appropriate because, in part, Musk heavily influenced the design of the compensation plan. Unsurprisingly, shortly after the Tornetta decision, Tesla and its board filed a proxy statement asking shareholders to approve moving its corporate headquarters from Delaware to Texas. Shortly thereafter, SB 21 was proposed and fast-tracked with a specific “clarification” of the definition of a controlling shareholder (i.e. Musk), which would have likely changed the outcome of the Tornetta case.
Despite the subsequent change in Delaware law, Tesla’s board was still exposed to liability stemming from its pay package dispute. Musk’s involvement and control over his compensation award exposed the board to a shareholder lawsuit. His subsequent involvement in the Trump Administration and DOGE has again exposed the Tesla board to potential derivative litigation.
Musk’s political activities have hurt Tesla earnings and share price. Tesla’s market value hit a record high of $1.5 trillion in December 2024 and has fallen to about $900 billion since that time. The board allegedly told Musk he needed to spend more time with Tesla after first-quarter profits had reportedly plunged 71% and the stock value had decreased 27%. The board’s failure to establish interim leadership and strategic clarity while Musk was engaged with the Trump administration may expose the board to a breach of its duty of oversight, resulting in corporate destabilization and decline in Tesla’s profitability.
While BH and Tesla are very different companies with very different leadership, a D&O underwriting risk to consider is how the board interacts with a CEO synonymous with the company. The reason why shareholders of BH have remained shareholders for the same as shareholders of Tesla. Buffett and Musk. In the case of both boards, the CEOs seem to have a significant amount of control. For D&O underwriters there are certainly takeaways from the latest BH and Tesla dramas. In particular, underwrite to the level of board oversight publicly exhibited.
The views expressed in this article are exclusively those of the author, and all of the content in this article has been created solely in the author’s individual capacity. This article is not affiliated with her company, colleagues, or clients. The information contained in this article is provided for informational purposes only, and should not be construed as legal advice on any subject matter.