Question

The governance structure of Berkshire Hathaway does not conform to the recommended “best practices.” How does it differ and what does it teach us about best practices in governance?

Answer 1

Solution:

The best practices in the governance refer to the decision-making authorities provided to the different stakeholders of the company. Many organization has the Executives making the decision of the organization best faith of the shareholder and board members. This is sometimes referred to as the best practices in Governance but in the case of Berkshire Hathaway, the decision making body remains the board of the company except for reserved decision which is made by company level management. This indicates the active participation of the board in stakeholder management and taking decisions which match the best with maximizing the shareholders and stakeholders wealth. The important learning from their model is the active participation of shareholders in the decision-making process of the company which actually is necessary for healthy functioning of the business.