While reading the blog of Alephblog, I came to these quotes from Warren Buffet in his latest letter. It is amazing how straight out these comments can be used to measure other companies. I know in my own company the directors are not true owners. Most have shares but usually not purchased because they thought it was a good investment, but rather because they got them as “OPTIONS” or “GIFTS”. This has also been expounded on the Motley Fool many times in many of their missives about investing, “look for management ownership”. Correctly stated, when it is your money you play with you take a much more critical view of how it is spent and used. Like Dave Ramsey says, about credit cards, it is easy to use them because it does not hurt, cash leaving your hands causes pain.
The final paragraph follows suit in stating they spend little for their corporate offices and indicates they watch very closely the expenses of the very top controllers of the company. I wish I could say the same for many other companies. We get a good story about how to watch the expenses and bottom line but when you look around you find managers with better digs, better “office equipment”, better cars, perks and so on. You also find that most of the top managers now make a much higher multiple of the average employee wage than they did just 10 years ago – you can check out my comments on that here and here. – WD0AJG
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To start with, the directors who represent you think and act like owners. They receive token
compensation: no options, no restricted stock and, for that matter, virtually no cash. We do not provide them directors and officers liability insurance, a given at almost every other large public company. If they mess up with your money, they will lose their money as well. Leaving my holdings aside, directors and their families own Berkshire shares worth more than $3 billion. Our directors, therefore, monitor Berkshire’s actions and results with keen interest and an owner’s eye. You and I are lucky to have them as stewards.
This same owner-orientation prevails among our managers. In many cases, these are people who have sought out Berkshire as an acquirer for a business that they and their families have long owned. They came to us with an owner’s mindset, and we provide an environment that encourages them to retain it. Having managers who love their businesses is no small advantage.
Cultures self-propagate. Winston Churchill once said, “You shape your houses and then they shape
you.” That wisdom applies to businesses as well. Bureaucratic procedures beget more bureaucracy, and imperial corporate palaces induce imperious behavior. (As one wag put it, “You know you’re no longer CEO when you get in the back seat of your car and it doesn’t move.”) At Berkshire’s “World Headquarters” our annual rent is $270,212. Moreover, the home-office investment in furniture, art, Coke dispenser, lunch room, high-tech equipment – you name it – totals $301,363. As long as Charlie and I treat your money as if it were our own, Berkshire’s managers are likely to be careful with it as well.
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