Lawrence A. Cunningham is the Henry St. George Tucker III Research Professor of Law at George Washington University. This post is based on a recent paper by Professor Cunningham.
While people routinely laud the value of Warren Buffett’s unique governance of Berkshire Hathaway, I have tallied the costs, highlighting lessons for Buffett’s successors, Berkshire’s peers, and public policy.
The most visible—and measurable—costs of the Berkshire model appear in capital allocation, principally acquisitions and investments. Buffett relies on himself in making these decisions, without board or executive input or oversight. While most such decisions have succeeded, many spectacularly so, some bloopers have appeared. The costs of error from such self-reliance could readily be mitigated by broader distribution of decision-making power.