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On Saturday, at the end of the 5-hour Q&A preceding Berkshire Hathaway’s formal annual meeting of shareholders, Warren Buffett announced that he would recommend that the company’s board of directors consider appointing his replacement, Vice Chair Greg Abel, effective as of year-end. The announcement came as a surprise to shareholders, most of the board, and even Greg Abel. From the transcript:

Tomorrow we’re having a board meeting of Berkshire and we have 11 directors. Two of the directors who are my children, Howie and Susie, know of what I’m going to talk about. The rest of them – this will come as news to them.

I think the time has arrived where Greg should become the chief executive officer of the company at year-end. I want to spring that on the directors effectively and then give that as my recommendation. Let them have the time to think about what questions or what structures or anything that they want, and then the meeting following that, which will come in a few months, we’ll take action on whatever the view is of the 11 directors. I think they’ll be unanimously in favor of it.

That would mean that at year-end Greg would be the chief executive officer of Berkshire. I would still hang around and could conceivably be useful in a few cases. But the final word would be what Greg said, in operations, in capital deployment, whatever it might be.

I could be helpful, I believe, in certain respects if we ran into periods of great opportunity or anything. I think that Berkshire has a special reputation that when there are times of trouble for the government, we are an asset and not a liability, which is very hard to have because usually the public and government get very negative on business if there’s a time like that.

But Greg would have the tickets. Whether it’s acquisitions – I think the board would be more welcome to giving him more authority on large acquisitions probably if they knew I was around. But Greg would be the chief executive, period.

The plan is – and Greg doesn’t know anything about this until what he’s hearing right now – that the board will be able to ask me questions tomorrow about more of the specifics of what they should be thinking about. They’ll digest it, and then at the next board meeting after that, if they act, then obviously we have something to announce to the world as a material change and we’ll go forward with that operation.

Although Berkshire’s meeting was only available to in-person attendees in years’ past, these days it’s broadcast on CNBC. Moreover, news outlets immediately publish writeups that cover everything about the meeting – ranging from the swag, to Buffett’s witty nuggets, to – in this case – business-related announcements. So, there’s probably no need to worry about Regulation FD issues. But what if a CEO makes a surprise announcement of potentially “material” news at an annual meeting that isn’t widely followed enough to be known as the “Woodstock of Capitalism”? I know I’m always sweating it out during Q&As for even the most perfunctory of AGMs. Our Reg FD Handbook gives thoughts on how to handle unplanned MNPI disclosures:

Question: If an executive responding to shareholder questions at a virtual shareholder meeting discloses material non-public information, is the company required to make a replay of that meeting publicly available for a certain period of time? I see that in the footnote to Reg FD adopting release, the SEC encouraged companies to make such replay available (and to indicate how long it will be available), but is it required?

Answer: The first question to consider is whether your virtual annual meeting is compliant with Regulation FD’s requirements. If the virtual meeting isn’t made available to the public and advance notice of how the public may access the meeting is not provided, then it won’t satisfy Regulation FD’s requirements (just as most traditional annual meetings don’t). See Reg FD CDI 102.05. So, if your meeting isn’t Regulation FD compliant and an executive inadvertently spills the beans on MNPI during the meeting, you will have to promptly disclose the information in a Regulation FD compliant manner (press release, Form 8-K, etc.)

Assuming that the virtual annual meeting is Regulation FD compliant, there’s no specific requirement for a transcript to be posted, but it is clearly a best practice when it comes to earnings calls and other management presentations. Most annual meetings have not been structured to comply with Regulation FD in the past, and the universe of virtual annual meetings isn’t very extensive. That means there isn’t a lot of precedent when it comes to posting transcripts. Since that’s the case, we recommend companies post a transcript and keep it up for as long as they customarily keep earnings releases posted.

What about Item 5.02 of Form 8-K, which requires disclosure within 4 business days of certain executives’ decision to retire or resign? Well, according to CDI 117.01, no disclosure is required solely by reason of discussions or consideration of retirement – and whether communications represent discussion or consideration vs. notice of a decision to retire is a facts & circumstances determination. Buffett seemed careful to frame this as something that is being considered and possibly determined at a later date, but that’s not legal advice! The people with all the facts will have to make the call. Our Form 8-K Handbook can help with these types of questions if you ever find yourself in a similar situation…

– Liz Dunshee