Few CEOs in corporate history have sustained shareholder trust as long as Warren Buffett. For boards, his legacy is not just about investment returns, but also enduring leadership. Buffett understood what many boards only realise too late: a strategic succession plan, years in the making, protects not only leadership but also long-term value, culture and credibility.

CEO succession remains underdeveloped in many companies. Common pitfalls are lack of benchmarking, short-termism, unprepared candidates, overconfident executives and weak assessments.

Buffett’s model is not easily replicable, but it contains principles that can guide any board. The central message: whether hiring from within or outside, boards must treat CEO succession as a strategic, long-term and rigorous process—with culture, development and foresight at its core.

Start early. Think long. Test quietly.

Appointing the wrong CEO is not just a reputational risk—it is a financial one. Unplanned CEO turnover is estimated to cost shareholders more than $100 billion in lost annual returns.

Buffett’s spoke publicly about succession more than 20 years ago. In his 2006 shareholder letter, he wrote: “I have told you that Berkshire has three outstanding candidates to replace me as CEO and that the Board knows exactly who should take over if I should die tonight.”

This kind of early and open communication reassured investors. Buffett was doing what most boards struggle with: planning succession well in advance, while keeping the process disciplined, and rooted in trust and long-term observation.

The lesson: start early. Succession is not a one-time event. It is a continuous process that requires proactive board engagement.

Culture and character matter more than CV

Buffett famously said during a 2001 talk at the University of Georgia: “We look for three things when we hire people. We look for intelligence, we look for initiative or energy and we look for integrity. And if they don’t have the latter, the first two will kill you.”

Greg Abel, who joined Berkshire in 2000 via the acquisition of MidAmerican Energy, earned Buffett’s trust over more than two decades. His track record showed low ego, high integrity and long-term thinking—all traits aligned with Berkshire’s decentralized culture.

For most boards, the challenge lies in how to evaluate these traits—especially in external candidates. It is not enough to review past performance or impressive CVs. Boards must also consider the candidate’s character and leadership style.

Modern tools can help. Structured assessments—such as psychometric evaluations, simulations and competency-based interviews—offer insight into leadership potential and cultural fit, and derailers. These are especially useful for external candidates whose styles have not been evaluated over time. For internal candidates, observation, informal testing and development through stretch roles remain essential. Boards should ensure every new CEO receives robust onboarding, mentorship and support.

Internal versus external: it’s not either/or

While Abel is an internal appointee, Buffett did not limit his search to insiders. He frequently looked outside to identify, learn from and even hire talent. Notably, he brought in Todd Combs and Ted Weschler to manage investments—developing them over time.

In his 2006 shareholder letter, Buffett wrote: “I intend to hire a younger man or woman with the potential to manage a very large portfolio. Picking the right person(s) will not be an easy task… It’s not hard, of course, to find smart people… But there is far more than brains and performance… Independent thinking, emotional stability, and a keen understanding of both human and institutional behavior is vital.”

Boards often need to hire externally—especially in periods of transformation. That is not inherently problematic, but it raises the stakes. Even when an internal candidate seems strong, external benchmarking plays a vital role. It helps boards to:

• identify capability and leadership gaps
• stay attuned to market standards
• pressure-test internal assumptions
• avoid groupthink or overreliance on known quantities

Looking outside does not mean abandoning internal talent—it strengthens the board’s ability to make a robust and confident choice. When hiring externally, onboarding becomes even more critical.

Discretion and stability

Buffett’s greatest legacy may be how smoothly succession was handled. At the 2025 annual meeting, he said: “I will ask the board to make Greg Abel CEO at the end of the year.”

There was no drama. No contest. No uncertainty. The board was aligned. Investors were informed. Trust remained high.

Boards should take note: succession should be managed with the same care and discretion as capital allocation or strategic shifts. Transparency is important—but so is protecting internal stability and avoiding external speculation.

The role of an effective board

None of this happens without a strong board. Effective succession is a sign of effective governance. Buffett’s model underscores principles that are widely applicable:

• Start early—long before it is urgent.
• Assess character and culture, not just performance.
• Use structured tools for external benchmarking.
• Support and integrate new leaders—do not just appoint them.
• Prioritise stewardship—choose leaders who will build, not just lead.

In 1992, Buffett wrote: “You only find out who is swimming naked when the tide goes out.” Succession planning is the board’s tide. Make sure the company is dressed for the future.

In a world of quick wins and public scrutiny, Buffett reminds us: succession done right is the ultimate act of board-level leadership.

Nuno Fernandes is a professor of finance and governance at IESE Business School; managing partner of Odgers Berndtson Board Solutions; and an author and consultant.