Corporate Governance According to Charles Munger

Good read from Stanford Closer Look Series: Corporate Governance According to Charles T. Munger. (Charlie Munger is Vice Chairman of Berkshire Hathaway, and partner of Warren Buffett.)

A lot of people think [that] if you just had more process and more compliance –checks and doble-checks and so forth– you could create a better result in the world. Well, Berkshire has had practically no process. We had hardly any internal auditing until they forced it on us. We just try to operate in a seamless web of deserved trust and be careful whom we trust.
The right culture, the highest and best culture, is a seamless web of deserved trust1.
Good character is very efficient. If you can trust people, your system can be way simpler. There’s enourmous efficiency in good character and dis-efficiency in bad character2

(Don’t miss Exhibit 1 and 2 at the end of the document: CEO Compensation at Costco, and Director Compensation at Berkshire Hathaway.)

Via Farnam Street.

  1. Stanford University Director’s College (June 26, 2006). 

  2. Berkshire Hathaway, 1993 Annual Meeting, cited in Outstanding Investor Digest (June 30, 1993). 

character corporate-governance policies trust

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