Warren Buffett (Age 83) is the CEO and Chairman of Berkshire Hathaway, the fifth largest corporation in America, with $162.5 Billion in Revenue and 300,000 Employees. Buffett and his long-time Co-Everything, Charlie Munger (Age 90), literally took center-stage at the company’s recent Annual Meeting. Each year, the pair holds a town hall meeting, at which Investors may ask questions.
The linked article, from NY Times, reveals a little insight into the pair of Octogenarians’ management style, http://dealbook.nytimes.com/2014/05/05/berkshires-radical-strategy-trust/?ref=business. Given the fact that Buffett is one of the World’s most-renowned investors, and one of the most-admired corporate managers, you might find these revelations truly amazing.
Consider the following: Berkshire Hathaway does not have a General Counsel to overseas its dozens of subsidiaries, each of which operate autonomously; there is not a Human Resources (A/K/A Personnel) Department; and there is not a Compliance Officer to follow-up on any other loose details that might have been missed. Basically, according to Mungerr, they believe that the trust that he and Buffet place in the Division Presidents far outweighs the risks.
The pair believes that they have bought great companies with capable managers, and they generally prefer to just get out of their way. Most corporations establish layer upon layer of management, and micromanage the fine details right down to the lowest level.
Behavioral scientists and psychologists have long held that “Trust” can be a powerful force within an organization. Two professors at the University of Zurich agree with Munger’s premise since, they write, greater monitoring and sanctioning might actually create a system of governance in which crooks could thrive. Also, a professor at Stanford University’s Rock Center for Corporate Governance has researched the Berkshire Hathaway approach and written a paper on the unconventional management style. What’s next: Berkshire Hathaway 101?