Warren Buffett Letter and Culture

Warren Buffett has published the latest Berkshire Hathaway letter to shareholders (see https://www.berkshirehathaway.com/letters/2021ltr.pdf ). As usual it makes for an amusing and educational missive including his comment on the $3.3 billion the company paid in taxes. He says “I gave in the office” is an unassailable assertion when made by Berkshire shareholders.

The company improved its per share value by 29.6% in 2021 which was slightly ahead of the S&P 500 with dividends included. That’s a big improvement on the previous two years when Berkshire lagged the index.

What has been one of the key reasons for the success of the company over the last 55 years? I would suggest culture is one. A culture of honesty, integrity and rational behaviour if you read the latest and prior newsletters.

Meanwhile the Chartered Institute of Internal Auditors (CIIA) have published a report entitled “Cultivating a Healthy Culture” (see https://www.iia.org.uk/policy-and-research/research-reports/cultivating-a-healthy-culture/ ). It suggests based on research among its members that culture is important and that 66% believe that the UK Corporate Governance Code should be strengthened in regard to the responsibilities of company directors. The Financial Times reported this as one of the causes of several company collapses in recent years such as at BHS, Carillion, Greensill and Patisserie Valerie. But if you read the reporting on this issue there is discussion of Environmental, Social and Governance issues (ESG) and equality issues as if adding those to the Governance Code might assist.

Yes I suggest culture is important but the key question to ask when looking to invest in a company from my experience is simply this “Is the Management Competent and Trustworthy?” (that’s a quote from my book on investing). If you don’t trust the management walk on by. And if you are holding shares in a company and news comes out that undermines your confidence in the directors, then sell the shares. Don’t wait for them to reform.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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