Buffett, Corporate Objectives, and the Nature of Sheep
Cardozo Law Review, Vol. 19, No. 2 (1997) (Symposium on the Essays of Warren Buffett)
Posted: 17 Sep 1998
Date Written: January 1998
The "Nature of Sheep" deals with a central issue of corporate finance and corporate law: the core objectives of the publicly held corporation. The article discusses a framework for thinking about this issue that the author has worked on over the years and some of the business principles adopted by Warren E. Buffett and Charles T. Munger of Berkshire Hathaway. The article shows some ways in which "shareholder wealth maximization" can be a surprisingly incomplete specification of even the pecuniary aspects of the corporate objective function. Matters relating to, among other things, disclosure (transparency), risk considerations in corporate investment, hedging, and financing decisions, shareholder clientele effects, and conflicts among "generations" of shareholders are touched on.
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