This chapter discusses Berkshire Hathaway’s corporate culture. Corporate culture is defined by a set of shared beliefs, practices, and outlooks that determine a corporation’s expectations and influence the behavior of its personnel toward colleagues, customers, and owners alike. The tone is set at the top and percolates throughout the organization through daily decisions, challenges, and crises. The values of a company are at the core of its culture, as they establish the standards to achieve its goals. At Berkshire, these values first began to take shape from the acquisition criteria Buffett established to identify potential subsidiaries: proven profitability, good unleveraged returns on equity, management in place, basic businesses, and a fair price. Another formal expression of Berkshire’s tone that helped shape its values is a set of owner-related business principles that define how Berkshire and its subsidiaries relate to its shareholders and other constituents. It is an impressive list of fifteen principles that Berkshire’s chief executive lives by. Examples include conceiving of the organization as a partnership despite using the corporate form, minimizing the use of borrowed money, assessing whether to reinvest earnings or pay dividends based on whether a dollar reinvested will increase shareholder value by at least as much, and holding subsidiaries forever.
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