27 jun: Carlsberg/RBC: Indleder dækning med "sector perform"
28 jun: USA/aktier: Opløstende nøgletal løftede markedet
27-06-2012 21:03:00

UPDATE: Buffett Ousts Benjamin Moore CEO for Strategy, Not Party

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--Warren Buffett says Benjamin Moore CEO ousted over "differing views" on strategy

--Mr. Buffett calls report that tied CEO departure to party on a boat "completely false"

--Mr. Buffett says he has "no objection" to party for senior executives

(Adds comments from Mr. Buffett's letter in the seventh paragraph, and comments from departed CEO beginning in the 10th paragraph.)

By Erik Holm

The ousted chief executive at Berkshire Hathaway Inc.'s (BRKA, BRKB) Benjamin Moore & Co. may not have been sunk by a lavish party on a boat after all.

Warren Buffett, the head of Berkshire Hathaway, wrote in a letter to the departed CEO, Denis Abrams, that the decision to replace him "was based on a differing view about distribution channels and brand strategy." It wasn't because Mr. Abrams had reportedly hosted a gathering of senior Benjamin Moore executives on a boat in Bermuda just weeks prior to his firing, Mr. Buffett said.

Earlier this month, the New York Post reported the party may have proved to be the final straw in causing Mr. Buffett to fire Mr. Abrams. The Post also said the paint company had made several strategic missteps and asserted that employee morale had fallen on Mr. Abrams' watch.

"The recent story coupling a top management convocation on a boat with the decision to make a management change at Benjamin Moore is completely false," Mr. Buffett wrote in the letter to Mr. Abrams. "I had never heard of the boat trip prior to reading about it in the paper on June 14. There was no reason for you to let me know about the meeting and, if you had, I would have had no objection to it at all."

The letter, dated June 21, was provided to Dow Jones Newswires by a representative of Mr. Abrams. Its authenticity was confirmed by Mr. Buffett's assistant.

Mr. Buffett, whose conglomerate includes car insurer Geico Corp., railroad Burlington Northern Santa Fe, ice-cream maker Dairy Queen and dozens of other companies, is famous for his hands-off management style when it comes to individual units under the Berkshire umbrella. He has said he delegates authority to the heads of Berkshire's subsidiaries "almost to the point of abdication."

In the letter to Mr. Abrams, Mr. Buffett said "no one can know which of us will be proven right" in their disagreement, "but it was a decision of key importance and therefore one I needed to make."

Berkshire bought Montvale, N.J.-based Benjamin Moore in late 2000 for about $1 billion. Mr. Abrams took over as CEO in 2007, just before housing-related businesses across the U.S. began suffering massive sales declines amid the mortgage crisis. But in 2010, he was identified in Mr. Buffett's widely read annual shareholder letter as being among Berkshire managers who headed "companies at which profits improved even as sales contracted, always an exceptional managerial achievement."

But the Post said Mr. Abrams hurt the company by firing veteran sales executives, introducing new product lines and clashing with distributors.

Mr. Abrams declined through a representative to comment, but said in a written statement that his departure "was about strategy and not performance.

"I leave Benjamin Moore the strongest it has ever been," he said in the statement. "The brand is at its peak, it has the best array of products ever, its dealer relationships are excellent, and it produces record financial results."

Mr. Abrams was replaced by Robert Merritt, a longtime executive in the restaurant industry. Mr. Merritt is a director at Ruth's Hospitality Group Inc. (RUTH) and Cosi Inc. (COSI), a board he chaired until 2010. He also served as chief financial officer of the company behind the Outback Steakhouse chain.

A spokeswoman for Benjamin Moore confirmed Mr. Merritt had replaced Mr. Abrams but declined further comment.

Mr. Buffett is famous for lavishly praising successful Berkshire managers--but leveling criticisms only behind closed doors. Even when executives depart under a cloud, he has been known to praise them publicly.

When David Sokol, once thought to be in line to replace Mr. Buffett, left amid revelations he had purchased stock in a company before suggesting that Berkshire acquire it, Mr. Buffett said his "contributions have been extraordinary." He credited Mr. Sokol with turning around troubled Berkshire units, including fractional-jet business NetJets.

Yet in 2009, Mr. Buffett said he accepted the resignation of Sokol's NetJets predecessor, Rick Santulli, "with reluctance" and said "his vision and energy has made NetJets the leader that it is today" without mentioning its problems. Only later did Mr. Buffett describe the unit's financial results as "a failure" and admit it had been "hemorrhaging" cash--without mentioning Santulli by name.

Write to Erik Holm at erik.holm@dowjones.com

(END) Dow Jones Newswires

June 27, 2012 15:03 ET (19:03 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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