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Exercising Leadership Power: Warren Buffett and the Integration of Integrity, Mutuality and Sustainability

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It is perhaps Warren Buffett's legitimate exercise of leadership power that helps explain why such a diverse range of independent and sustainable businesses in Berkshire Hathaway stay together under one umbrella. Berkshire now incorporates over eighty separate operating businesses employing over 250,000 people with a head office “umbrella staff” of only 19, i.e., there are no head office managers to manage the operating managers. Rather Buffett leads Berkshire by creating a context in which the operating managers manage their businesses and themselves free from head office interference, but not free from Buffett's influence.

In trying to understand the legitimate exercise of Buffett's leadership power and influence at Berkshire, I first note how his leadership has developed over three distinct periods in his career: as an investor in the early years, as a business leader in the mid to later years and currently as an elder statesman. I then note Buffett's responsibility within Berkshire as a “leader” rather than as a “manager” and how his leadership may be understood from a number of different theories of leadership. Then, applying a theory of character development, I consider how the virtues of Buffett's “integrity and awareness” in himself and his “mutuality” in dealing with others underpin his legitimate and sustainable exercise of leadership power at Berkshire.

Berkshire Hathaway is a diversified insurance, finance, retail and commodity business. With a market capitalization of $192 billion (July 2010), Berkshire is one of the largest companies in the world. Since the early 1970s Berkshire has been run by Warren Edward Buffett. In that time there has been a remarkably low turnover of senior managers. As Buffett noted, “I have 40 CEO's working for companies owned by Berkshire. Since 1965, not one of them has left Berkshire Hathaway” (Gad, 2007). What is it about Buffett's leadership that seems to make it so sustainable? Two factors stand out:

1 the sustainable qualities of the businesses that Berkshire acquires, businesses that have already demonstrated their sustainable competitive advantage and which are run by managers who are committed to maintaining and or expanding that advantage and

2 the legitimate exercise of leadership power based on the integrity of Buffett as the leader and the mutuality within which his leadership is exercised.

Document Type: Research Article

DOI: http://dx.doi.org/10.5848/CSP.3023.00015

Publication date: January 1, 2011

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  • From Critique to Action: The Practical Ethics of the Organizational World
    This book illustrates the application of ethical thinking to business, management and computing. This book brings together some significant areas of leading edge research and scholarship in the context of engagement with communities of practice, locally, regionally and professionally, with international students, police, teachers, housing managers, ambulance workers, etc. Most of the chapters are based on the practical experience of the contributors but written in an accessible way. There is a strong intercultural and transnational flavour in this book. It is explicitly cross-disciplinary, and will appeal to readers from areas like organization analysis, computer studies and information systems as well as philosophy and ethics.
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