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What Is It Like to Be Owned by Warren Buffett?


What Is It Like to Be Owned by Warren Buffett?

A new survey reveals Berkshire’s management style.
Illustration by Vivienne Flesher

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For many companies, there’s a bit of magic to being bought by Warren Buffett’s Berkshire Hathaway. The company’s “Powerhouse Five,” its largest noninsurance businesses, recorded $12.4 billion in pre-tax earnings last year, up nearly 13% from the previous year. Its smaller companies also grew, increasing 8% over the year.

Of course, not all his bets have paid off (think Tesco and Dexter Shoe). But from an outsider’s perspective, Berkshire’s strategy has been a wild success. Using market returns, shares gained a cumulative 1,826,163% since Buffett took the reins in 1965.

But what does it look like from the inside? Stanford Graduate School of Business professor David F. Larcker and Stanford GSB researcher Brian Tayan surveyed approximately 80 Berkshire subsidiary CEOs to determine how Buffett’s acquisition and management style translates on the ground.

Acquisition Time

Acquisitions in general can move quickly or take years, but Buffett moves fairly quickly when he’s ready to buy. The CEOs of Berkshire’s smaller subsidiaries (less than $1 billion in revenue) said about one to two months passed between initial acquisition discussion and a formal offer. Larger subsidiaries took longer — on average, six to nine months. Closing times also lined up similarly: Smaller firms took between one to two months to close, while larger firms took four to five months.

Immediate Changes

Most respondents said their companies experienced few major governance changes following their acquisitions. When there were changes, they were most often to the board of directors or CEO compensation contracts. Insurance subsidiary CEOs said they changed internal-audit and risk-management practices. Of course, companies that had been publicly traded eliminated their investor-relations departments.

Still, changes were relatively few, the CEOs reported. One respondent noted, “The only change is that I now discuss any major capital acquisitions with Warren. We run the business the way we always have.”

Long-Term View

The subsidiary chiefs also believe their companies’ performances are better under Berkshire (and even better than if they were stand-alone companies). Respondents point to Berkshire’s brand value and financial strength. Another reason? Berkshire lets CEOs focus on a longer performance horizon than they would expect under other ownership. Although each CEO varied on what that horizon would be, with estimates ranging from three years to 50, they all said Berkshire management encourages a long-term focus.


Another area of agreement: Survey respondents think they’d be paid better elsewhere. All say their annual bonus is calculated with two performance measures (typically, larger corporations use 2.4 measures). Berkshire CEOs are judged on metrics such as earnings, return on equity, and operating or profit margins. None have their compensation tied to Berkshire’s stock price, which is standard practice in many large companies.

Hands-Off Management

No one gives a company this kind of freedom.
Survey respondent

According to the survey, Buffett lives up to his “delegation just short of abdication” style. The CEOs provide monthly financial statements to headquarters, but they have infrequent contact with Buffett. Most report having phone calls with him on a monthly or quarterly basis. None have a pre-established schedule, and all said they initiate the communication themselves.

Buffett is also unlikely to get involved in the affairs of their companies, the CEOs noted. They would handle independently issues like labor disruptions, supply-chain issues, legal action against the company, or modest declines in sales. What would bring Buffett to the phone: anything that impacts Berkshire’s reputation or a severe restatement of previously reported financial results, respondents said. One CEO noted, “No one gives a company this kind of freedom.”

Life Beyond Buffett

Each CEO who took the survey agrees that common culture is shared across Berkshire’s subsidiaries, and that culture — focused on honesty, integrity, long-term orientation, and customer service — won’t change when Buffett steps down. As one said, “The more I interact with the board at Berkshire and other Berkshire managers, the more confident I am in the future of Berkshire post-Warren.”

Read more about the study published by the Corporate Governance Research Initiative at Stanford Graduate School of Business and the Rock Center for Corporate Governance at Stanford University. David F. Larcker is the James Irvin Miller Professor of Accounting and Brian Tayan is a researcher at Stanford GSB.

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