The CEO is the person who runs a company on a day-to-day basis. However, technically speaking, the CEO reports to the board of directors. The board of directors, in turn, report to the shareholders who elected them. This chain of control is important to remember because it means that very large shareholders often have a huge say in how a company is managed.
That is the backdrop investors need when considering Warren Buffett's plans to give away around $17 billion per year in shares he owns in Berkshire Hathaway (BRKA +1.15%)(BRKB +0.97%), the company he used to run as CEO. And it is also why Greg Abel's, Buffett's handpicked successor, repurchase of $4.5 billion in Berkshire Hathaway stock comes into the picture. But you probably shouldn't read too much into the timing of these two decisions. Here's what you need to know.
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Could Berkshire Hathaway eventually pay a dividend?
Warren Buffett didn't like the idea of paying dividends. He was the CEO and a large shareholder of Berkshire Hathaway (and a Wall Street icon because of his long history of investment success), so nobody questioned that decision. However, Buffett's plan to give his shares to foundations run by his children could change the dynamic here in a big way.
Foundations created with large stock donations, such as the Hershey Trust or the Hormel Foundation, often use the dividends they collect to fund their philanthropic efforts. That way, the foundations don't have to sell shares to pay their bills. Meanwhile, these two foundations have significant influence over how Hershey (HSY +0.73%) and Hormel (HRL +1.32%) are operated because of their large stakes in the respective companies. The Hershey Trust has stepped in to prevent Hershey from being acquired, while one of the Hormel Foundation's specific goals is to ensure Hormel remains independent.
While it is unlikely that Buffett's children will do anything to change the way Berkshire Hathaway is run while their father is alive, it will be a whole new ballgame after he passes. It wouldn't be at all shocking to see these foundations agitate for Berkshire Hathaway to start paying dividends.
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Is Abel trying to limit the impact of Buffett's stock giveaway?
There's not much that Greg Abel can do about this control dynamic. He will simply have to make his dividend case to the board of directors and hope they see things his way. Of course, Abel might decide that paying a dividend makes sense, noting that many large insurance companies pay dividends. Still, while Buffett is alive, it is unlikely that anything will change on the dividend front, given that Buffett is the chairman of the board. So Abel's buying back around $4.5 billion in Berkshire Hathaway stock in the second quarter probably wasn't related to Buffett's plans to give away stock.
However, Buffett's shares are effectively "off the market" today because he owns them and isn't going to trade them. But once they are owned by foundations, the shares could be traded. And that could increase the number of Berkshire shares that get regularly traded in the future. Abel might be trying to offset that impact with his purchase. Only the shares are going to foundations that are also unlikely to sell them immediately. At least in large quantities. So, this probably isn't the reason for the move, either.
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Investors should probably just take Greg Abel at his word that he believes Berkshire Hathaway shares are attractively priced. That he bought shares with his own money at the same time adds credence to this take. It is unusual for Berkshire Hathaway to buy back stock, but not unheard of. Trying to read more into the move than the CEO has stated is probably overthinking things.
Should you buy along with Abel and Berkshire?
With Abel only taking on the role of CEO at the start of 2026, Berkshire Hathaway remains in the early days of a massive leadership change. But so far, Abel hasn't done anything that should worry investors, and he still has Buffett around to offer guidance when asked. If you are fond of Berkshire Hathaway's business, the company's move to buy back its own stock is probably more telling than Buffett's plans to give his shares to his children's foundations.
That said, you'll still want to keep an eye on what those foundations plan to do with all of the shares they will eventually control. But that's unlikely to be an issue for at least several years, and you might even like the notion that it could increase the chances that Berkshire Hathaway someday becomes a dividend stock.
