Berk­shire bun­gle leads to penalty

CityPress - - Business -

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.”

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