This chapter discusses Berkshire’s hands-off management approach that stresses decentralization and individual autonomy. This approach was made by choice but became necessary by default—with such a large number of subsidiaries in such a broad range of businesses, strict hands-on control would not be feasible. The choice to operate in a decentralized manner from the beginning reflected a belief in the value of autonomy and a conviction that people properly entrusted with authority will generally exercise it faithfully. And just as Berkshire Hathaway takes a decentralized approach, so do many of its subsidiaries. Every two years, Warren Buffett issues written instructions that reflect a balance between autonomy and authority. The missive states the mandates Berkshire places on subsidiary CEOs and these are: to guard Berkshire’s reputation; to report bad news early; to confer about post-retirement benefit changes and large capital expenditures (including acquisitions, which are encouraged); to adopt a fifty-year time horizon; (to refer any opportunities for a Berkshire acquisition to Omaha; and to submit written successor recommendations.
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