Key Points
There are times when incentive structures on Wall Street are misaligned. When that happens, you can get very bad outcomes. Greg Abel, who took over as CEO of Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) in 2026, made an early commitment to align himself with shareholders. That’s a good omen for his tenure atop the giant conglomerate. Here’s what you need to know.
You get what you incentivize for
Banking giant Wells Fargo (NYSE: WFC) caused material damage to its image by incentivizing employees to open new accounts without proper customer safeguards. Employees ended up earning bonuses for new accounts that customers didn’t approve. This scandal is now in the past, but shareholders were hit, too, with legal and settlement costs and a long government cap on the company’s ability to expand.
When it comes to CEOs, one of the best ways to ensure shareholders are top of mind is for the CEO to be a shareholder as well. You can look at a CEO with stock as that leader betting on their own ability. That is, of course, true. But for shareholders, the bigger benefit is that they are investing alongside the CEO. That had basically been the story with Berkshire Hathaway for years, with Warren Buffett at the helm, since he had a huge stake in the company.
This is why it is notable that Greg Abel, the current CEO, bought $68 million in stock way back in 2022, well before he ascended the throne. That’s a large chunk of change and means that Greg Abel has material capital at risk every time he makes a decision about Berkshire Hathaway’s future. He isn’t likely to make decisions lightly, given how much he has at stake beyond his salary.
Mistakes will happen, but Abel is on your side
Having a large stake in Berkshire Hathaway doesn’t mean Abel won’t make mistakes. He’s human, he definitely will. In fact, even Buffett made the occasional mistake despite an overall impressive record with his investment approach.
The real story here is incentive alignment. And Greg Abel made it clear well before he became CEO that his interests would align with shareholders’ interests through his $68 million investment in Berkshire Hathaway shares. Sure, it was a bet on himself, but it was also a commitment to shareholders that is far more important today than it was when he bought those shares in 2022.
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Wells Fargo is an advertising partner of Motley Fool Money. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.