Finance

Tara Lachapelle is a Bloomberg Gadfly columnist covering deals. She previously wrote an M&A column for Bloomberg News.

Warren Buffett wasn't a supporter of Donald Trump, but that didn't stop him from calling on the American public to unify behind their new president-elect in the days after the vote. It also didn't keep him from making a guest appearance on "Celebrity Apprentice," the reality show that made Trump a TV star and is now hosted by terminator Arnold Schwarzenegger while the Donald is...well, you know. 

If you watched Monday night's episode, you got to see Buffett indulging in one of his favorite guilty pleasures: chocolates. 

The contestants -- from Boy George to Laila Ali and Vince Neil of Motley Crue -- competed to make the best new See's Candies concoction and raise money for charity. See's is a brand of chocolate treats owned by Buffett's Berkshire Hathaway Inc., and representatives from each of the two teams were flown to Omaha to watch the Oracle himself taste-test their products. (Spoiler alert, former NFL running back Ricky Williams's team made a key miscalculation: Buffett is known to love dark chocolate especially, so their treat didn't quite hit the spot for the 86-year-old billionaire.)

The See's brand is well known on the U.S. west coast with almost 250 shops, and among Berkshire's businesses it's arguably one of Buffett's favorites. But within the $396 billion company, See's is about as bite-size as the truffles it makes. For that reason, little is known about this unit's performance. Perhaps that's not really an issue -- are Berkshire shareholders pounding the table demanding more information about the conglomerate's tiny candy line when it also runs one of America's largest railroads, a network of utilities, plus giant manufacturing and insurance divisions? No. 

Still, it drives home a larger point I've been making about Berkshire: insufficient transparency. Berkshire's sheer size and sweeping operations along with Buffett's aura of trustworthiness have contributed to a corporate culture of opacity, which few challenge. See's Candies, for example, is mentioned just once in Berkshire's earnings report for the third quarter, ostensibly deemed irrelevant. Its performance was lumped in with the company's hodgepodge of retailing businesses, including Pampered Chef kitchen tools, Nebraska Furniture Mart and Detlev Louis Motorrad motorcycle accessories. 

Peek Inside
Here's how Berkshire Hathaway's vast business units are organized at a high level:
Source: Bloomberg

Again though, the division is relatively small. Revenue from the retailing operations increased by $8.8 billion in 2015, but $8.3 billion of that came from the recent acquisitions of Berkshire Hathaway Automotive and Detlev Louis Motorrad. (The company does note that See's sales are "highly seasonal," with almost half taking place in the fourth quarter amid the holidays.) 

Investors may not care much about the performance of tiny brands such as See's because it's easy to gloss over any would-be lumpiness or problems in their financials when Berkshire's major businesses are so immensely profitable and together make the sprawling entity a cash machine.

But Buffett himself hit the nail on the head when he said this in a 2015 interview:

"Our biggest errors have been errors of omission, not commission."

It's the principle of the matter, that Buffett gets the benefit of the doubt not afforded to other CEOs. And when the time comes for his successor to step in -- whether it's Greg Abel or Ajit Jain -- there will be a push for greater transparency and adherence to more normal corporate governance guidelines. Berkshire's opaque culture will have to end with the man who created it. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tara Lachapelle in New York at tlachapelle@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net