Updated February 15, 2007. Warren Buffett, ranked by Forbes as the second richest man on earth - second only to Bill Gates - is implementing a succession plan for his position as Chairman and CEO of Berkshire Hathaway. Announced in June 2006, recently filed papers with the SEC show the plan is well under way.

While on the one hand, Buffett is converting his class A shares to class B shares as part of his succession plan, his company continues to make strategic investments and divestments of stocks on a large scale. On February 14, 2007, Berkshire disclosed that through 2006, it had acquired a 23.31 million share stake in US Bancorp, increased its holdings in Wells Fargo, and lowered in holdings of H&R Block and Ameriprise Financial. Regulators allow Berkshire to delay purchase-sale disclosures, in the interest of market stability.

Born August 30, 1930, the 76 year-old Buffett, also known as the Oracle of Omaha for his investing skills, receives only $100,000 a year in salary with no stock options as CEO (the lowest CEO salary of the Fortune 500 companies). He has made his fortune the old-fashioned way - as a 31% shareholder of his company. A $1000 invested in Berkshire in 1965 was worth over $5 million in 2000. A single class A Berkshire share trades for about $91,000. Berkshire is based in Omaha, Nebraska.

His succession plan has two primarily sides. One, leaving behind a legacy, and second, ensuring that the governance structure of Berkshire will continue to champion a unique style of leadership and investment growth. His style of governance is a legacy that exceeds any monetary amount. At a time for skyrocketing CEO compensation packages, he has resisted the trend to enrich himself at the expenses of his shareholders. He profits when his shareholders profit - through a rise in share value and not through a stock option give-away.

In 1965, at the age of 35, Buffett bought a textile company, Berkshire Hathaway, and turned it into a holding company for investments in businesses such as Coca-Cola, Geico Insurance, Gillette, and the Washington Post Company. In the early 1970s , he bought control of Berkshire, using $15 million he got from the disbanded Buffett Partnership. His salary was $50,000 a year.

In June of 2006, with his personal wealth valued at roughly $44 billion, Warren Buffett announced plans to give 85% of his Berkshire stock to five charitable foundations: Over $30 billion worth to the Bill and Melinda Gates Foundation (already the largest charity in the world and more on the subject below), and the balance to the Susan Thompson Buffett Foundation, named in honour of his wife, and the foundations run by his three children Susan, Howard, and Peter (but apparently, not to them personally). Buffett will start with a $15 billion dollar donation and will continue donating 5% of his pledge annually every July.

Warren Buffett made his fortune by purchasing businesses he could understand and then allowing his managers to run them without operational interference.

As a person who holds the position of Chair and CEO, Buffett knows the conflict of interest created by holding both positions -where the goals of management can conflict with shareholder interests. He has written that while as a CEO and shareholder he can reconcile his interests and those of Berkshire shareholders, other CEOs would rather sell their stock at the highest possible price.

Buffett says there is a need for full and fair reporting by management. As a CEO, he practices what he preaches by holding himself accountable to the Berkshire's shareholders. In addition, he feels that when CEOs make unrealistic predictions in order to promote their personal interests, what results is an unwholesome maneuvering with earnings statements.

According to Warren Buffett, a difficult relationship between boards and CEOs often arises because of poor management skills, inadequate performance standards (in contrast with the carefully developed performance standards of subordinate managers) and because directors are often incapable of or unwilling to make needed changes.

Buffett seeks out competent managers, provides clear direction, as well as a corporate ethic, and then leaves the managers alone to run the corporations rather than involve themselves with shareholder issues. The incentive compensation system for Berkshire managers provides rewards on the basis of results achieved rather than the price of the corporation's stock. Nevertheless, they all have a direct financial interest in the businesses they manage - some are the founders of the businesses who have chosen to remain as managers after the sale of their companies.

The CEO's in the Berkshire group, do not meet with shareholder groups or analysts. With no outside pressures or distractions, they have the ability to focus completely on long-term goals and operations. They are competent, successful and independently wealthy. They have no forced retirement age and can continue in their positions until they choose to retire.

Returning to the topic of Warren Buffett's donation to charitable foundations, Buffet decided to give the lion's share of his wealth to the Bill and Melinda Gates Foundation rather than to his own foundation named after his late wife. If The Gates Foundation were a country, according to World Bank statistics, it would rank number 56 out of 177.

Buffett and the Gates share mutual admiration for each other's work. Bill Gates says Buffett inspired the Gates to give back their money to society. Warren Buffett on his part admires the work of the Gate's foundation to the extent that he has given the Gate's foundation the bulk of his fortune rather than the Buffett foundation, now renamed named after his late wife. The caveat that Buffett has placed on his donation to the Gates' foundation is that at least one of them is active (presumably in control) of their foundation.

As an aside, conservative-fundamentalist groups, already upset with the Gates' and Buffett's support of pro-choice institutions, are now even more alarmed. The Buffett foundation has supported reproductive health, family planning, and pro-choice causes, and on preventing the spread of nuclear weapons and the Gate's foundation has supported combating diseases like malaria, HIV/AIDS, and tuberculosis.

Buffett will joining Bill and Melinda Gates them as the only trustees of their foundation.

The Susan Thompson Buffett foundation was for 40 years known as the Buffett Foundation It was recently renamed in honour of Buffett's late wife, Susan Thompson, who died after a stroke in 2004 at the age of 72. She had donated $2.5 billion to the foundation in her will.

Buffett's original plans were to will his fortune to his wife. In an interview with Carol J. Loomis, FORTUNE's editor-at-large, Buffett said, "Susie was two years younger than I, and women usually live longer than men. She and I always assumed that she would inherit my Berkshire stock and be the one who oversaw the distribution of our wealth to society, where both of us had always said it would go." Her untimely death changed his plans. In the same interview he goes on to say "When we got married in 1952, I told Susie I was going to be rich. ...Susie didn't get very excited when I told her we were going to get rich. She either didn't care or didn't believe me - probably both.

"Certainly neither Susie nor I ever thought we should pass huge amounts of money along to our children. Our kids are great. But I would argue that when your kids have all the advantages anyway, in terms of how they grow up and the opportunities they have for education, including what they learn at home - I would say it's neither right nor rational to be flooding them with money.

"In effect, they've had a gigantic head start in a society that aspires to be a meritocracy. Dynastic mega-wealth would further tilt the playing field that we ought to be trying instead to level."

Also see: Berkshire's Corporate Governance Guidelines