Is it possible to own a company without controlling it, or even being “affiliated” with it?
That’s the fine point of corporate governance state officials and Warren Buffett’s Berkshire Hathaway are debating and weighing.
The issue stems from Berkshire Hathaway’s efforts to maneuver around a Texas state law that has jeopardized the conglomerate’s ongoing operation of nearly three dozen Texas car dealerships because it also owns a company that manufactures RVs, Indiana-based Forest River.
This story by Bob Sechler originally appeared in My Statesman.
State law prohibits a motor vehicle manufacturer from also owning dealerships, even if the vehicles aren’t of the same type. However, the law defines a “manufacturer” as someone “affiliated with” a manufacturer or “controlled by” a manufacturer.
That has constituted enough potential wiggle room for Raymond Palacios Jr., board chairman of the Texas Department of Motor Vehicles, to request an opinion from Texas Attorney General Ken Paxton as to whether it’s possible for a company that wholly owns a motor vehicle manufacturer — in this case, Berkshire Hathaway’s ownership of Forest River — to “cease to be ‘affiliated with’ the motor vehicle manufacturer by relinquishing control of the manufacturer while maintaining ownership of it.”
In Palacios’ request for Paxton’s legal opinion, he doesn’t doesn’t detail precisely how that might be achieved, other than noting “it has been suggested” that Berkshire Hathaway and Berkshire Hathaway Automotive could come into compliance if Berkshire Hathaway “relinquishes control of Forest River while maintaining ownership of Forest River.” Berkshire Hathaway Automotive is the conglomerate’s dealership unit, which is based in Irving.
Berkshire Hathaway recently was found to be in violation of the Texas law by the enforcement division of the Department of Motor Vehicles, which recommended revoking licenses from 30 Berkshire dealerships in Texas and $1,000 civil penalties for each, as well as a $1,000 fine for Forest River.
The dealerships and Forest River all have asked for hearings before administrative law judges regarding the findings; none of the hearings have been scheduled yet.