25 Pages Posted: 30 Aug 2014 Last revised: 18 Sep 2014
Date Written: 2014
Berkshire Hathaway, the $300 billion conglomerate that Warren Buffett built, is among the world’s largest and most famous corporations. Yet, for all its power and celebrity, few people understand Berkshire, and many assume it cannot survive without Buffett. This book proves them wrong.
In a comprehensive portrait of the corporate culture that unites Berkshire’s subsidiaries, Lawrence Cunningham unearths the traits that assure the conglomerate’s perpetual prosperity. Riveting stories of each subsidiary’s origins, triumphs, and journey to Berkshire reveal how managers generate economic value from intangibles like thrift, integrity, entrepreneurship, autonomy, and a sense of permanence.
In chapter 8, excerpted here, Cunningham discusses the value of autonomy in a business organization, highlighting Berkshire’s Pampered Chef subsidiary and noting the model and some of its limits at its Scott Fetzer subsidiary.
The chapter portrays Berkshire’s embrace of autonomy as reflecting a trust-based model of corporate governance, in contrast to the prevailing control-oriented model. It dramatizes with a close look at the case of David Sokol, a top Berkshire executive widely seen as Buffett’s heir apparent, until his purchase of the stock of a potential Berkshire takeover target caused a rare scandal at the conglomerate.
Keywords: Buffett, Berkshire, Doris Christopher, corporate governance, corporate culture, autonomy, delegation, independent contractors, distributors, subsidiaries, conglomerates, decentralization, Sokol, Munger, internal control, trust, insider trading
JEL Classification: L1, L2, M10, M11, M12, M14, K2, K42
Suggested Citation: Suggested Citation
Cunningham, Lawrence A., Berkshire Beyond Buffett: The Enduring Value of Values (Chapter 8) (2014). GWU Law School Public Law Research Paper No. 2014-45; GWU Legal Studies Research Paper No. 2014-45. Available at SSRN: https://ssrn.com/abstract=2488476
By Andrew Lo