Wednesday, March 10, 2010

Warren Buffet on Corporate Governance

"Although our form is corporate, our attitude is partnership." - Warren Buffet

Warren Buffet in his annual reports states that he hopes Berkshire's shareholders do not view themselves as merely holding a piece of paper whose prices fluctuates daily. Instead, he encourages shareholders to view themselves as part owner of a business that they intend to stay vested in for an indefinite period of time.

In fact, Berkshire has a low turnover of stocks compared to other major American corporations. It shows that most of Berkshire's shareholders have embraced this partnership concept espoused by Warren Buffet. In this particular case, it seems that "like-minded people are attracted to each other".

Afterall, people who trust and believe in Buffet's methodology of acquiring stocks will necessarily stick to Berkshire stocks as they are mostly investors who are there for the long term.

Owner's Mentality

Warren Buffet and Charlie Munger have more than 90% of their networth tied up in Berkshire itself. So while they cannot promise stellar results all the time, what they do promise is that their financial fortune will move in lockstep with shareholders.

This is perhaps what should be rightly defined as an "Owner's Mentality"

Annual Meetings - A Royal Waste of Time

Many times, shareholders are to concerned about their own moment on stage than they are about the affairs of the business. At times, management might be reluctant to open up on matters that really matter. So what is meant to become a forum of business discussion becomes a forum of theatrics, and advocacy of certain issues. The company spends time and money organising and preparing for an event that eventually becomes a royal waste of time to the business itself, the management, the employees and the shareholders.

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