Berkshire bungle leads to penalty
The world’s greatest investor could use some help with record-keeping. In the past two weeks, Warren Buffett’s Berkshire Hathaway said it missed filing deadlines for investments in Dow Chemical and wallboard maker USG. The latter resulted in an $896 000 (R9.5 million) penalty.
Buffett (83) has boasted about running Berkshire with a shoestring staff and delegating responsibilities to the heads of operating units. Yet the mistakes raise questions about whether his management approach is suited to an era of increased reporting requirements.
“These are some of the growing pains that come from having a trust-based culture in a world that requires compliance procedures,” said Brian Tayan, a researcher at the Stanford Graduate School of Business.
Shareholders have been served well by Buffett’s management approach. He built the company into the fifth-largest in the world by market value, amassing a personal fortune of more than $65 billion. As Berkshire grew to employ more than 300 000 workers, Buffett kept staff at headquarters in Omaha, Nebraska, to about 24 people.
Charles Munger, Berkshire’s 90-year-old vice-chairman, has highlighted the company’s counterintuitive approach.
“A lot of people think if you just had more process and more compliance, you could create a better result,” he once told investors. “Well, Berkshire has had practically no process. We had hardly any internal auditing until they forced it upon us. We just try to operate in a seamless web of deserved trust and be careful whom we trust.”