The Management of Berkshire Hathaway

Case Solution

David F. Larcker, Brian Tayan
Stanford Graduate School of Business ()

Berkshire Hathaway is known to many as the investment vehicle of Warren E. Buffett. This reputation is partly well founded when the performance of the company’s investments under his leadership is considered. However, less attention has been paid to the success of Berkshire Hathaway’s management. In 2008, the diversity of businesses owned by Berkshire Hathaway was unique in its diversity. Even more unique was the operating structure with which the company managed these operations. It was a model based on extreme decentralization of operating authority, with responsibility for business performance in the hands of local managers. While many public companies implemented strict controls and oversight mechanisms to ensure management performance and regulatory compliance, Berkshire Hathaway took the opposite direction. Many of the company’s operating principles were in stark contrast to those generally used by most public corporations. Company shareholders would have to decide for themselves whether these principles of action pose a risk to long-term performance or whether, contrary to expert opinion, they represent a sustainable competitive advantage.

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