Berkshire Hathaway an Ethical Corporation

For the purpose of this analysis, I will examine Berkshire Hathaway and its long standing CEO Warren Buffet. In some circles, the name Berkshire Hathaway and Warren Buffet himself are synonymous with ethics in business. In March 2011, the Wall Street Journal reported on the departure of Buffett’s long-standing lieutenant David Sokol, often thought to be the imminent successor after Buffett’s retirement (Ovide, 2011).

As published in the article, Buffett made it clear how important it is to avoid the appearance of impropriety in business: The priority is that all of us continue to zealously guard Berkshire’s reputation. We can’t be perfect but we can try to be. As I’ve said in these memos for more than 25 years: We can afford to lose money – even a lot of money. But we can’t afford to lose reputation – even a shred of reputation. (Ovide, 2011). Berkshire Hathaway is a holding company; they own interest in companies as varied as Geico and GM to HH Brown Shoe Company (Links to Berkshire Hathaway Sub Companies, 2013).

Ethics is a core competency of Berkshire Hathaway as much of the business model is reliant on a good reputation. “An ethical system that determines what is good or bad, right or wrong, and appropriate or inappropriate leads to a code of behavior based on those principles.” (Baack, 2012). Buffet offers the following example of a test to determine if a given action is ethical. In an interview with the dean of the college of business at the University of Nebraska-Lincoln, his alma mater, Mr. Buffet outlined the following :

The simple test of good ethics, is how would you feel about any act, if a reasonably intelligent, but unfriendly reporter were to write it up and put it in tomorrow’s paper for everyone to see. If it passes that test, it’s okay, and if you have to think about it, it probably isn’t the right thing to do. I have seen plenty of people succeed that don’t have either one. And I have also seen an awful lot of people succeed that do; and those are the ones I admire and they are the ones I want to associate with. Honesty is a terrific policy.

What do you look back on in terms of whether you have been a success? You have certain things you want to achieve, but if you don’t have the love and respect of people, you are always a failure. That is the one thing you must earn, it can never be bought. No one that has the love and respect of others is ever a failure. (Buffett, 2005).

References Baack, D. (2012). Management communication. San Diego, CA: Bridgepoint Education, Inc. Links to Berkshire Hathaway Sub Companies. (2013, August 19). Retrieved from Berkshire Hathaway: http://www.berkshirehathaway.com/subs/sublinks.html

Ovide, S. (2011, March 31). Warren Buffet on Ethics: 'We Can't Afford to Lose Repuration'. Retrieved from WSJ Blogs: http://blogs.wsj.com/deals/2011/03/31/warren-buffett-on-ethics-we-cant-afford-to-lose-reputation/

Buffett, W. (2005). A 2001 Conversation with CBA Dean Cynthia H. Milligan. (C. Milligan, Interviewer). Retrieved from: http://gobigred.unl.edu/featured/husker/Warren_Buffett/