Warren Buffett is perhaps the most recognized name in the history of American corporate governance. As the leader of Berkshire Hathaway, a multinational conglomerate holding company, Buffett has become one of the most accomplished businesspersons of all time. Because of his immense success, Buffett’s advice carries with it great weight and authority. Many of his essays and letters have been collected for publication, and he’s known among journalists for his quotable quips and reasonable advice for investors.
Recently, a George Washington University professor named Lawrence Cunningham compiled a list of Buffett’s most important guidelines for corporate directors, which was published in the latest edition of NACD’s Directorship magazine. You can read a condensed and edited version of that article here. These “ten commandments” for business leaders, as Cunningham calls them, are what Buffett cites for his vast amount of boardroom triumphs.
The commandments are:
- Selecting the right CEO comes before all other tasks.
- You should discuss a CEO behind his/her back.
- Act as if you work for a single absentee owner.
- Be fair, swift, decisive — and prepared to fire people.
- If you perceive a problem, speak up about it.
- When no one is listening, reach out to the absentee owner: shareholders.
- Sometimes a leader has to burp at the table.
- Don’t let any outside consultant decide how much people get paid.
- There is only one way to avoid audit issues: pry.
- When it comes time to choose your own replacement, refer to commandments 1 through 9.
We encourage you to read the full text of Cunningham’s article, which goes into great detail about what each of these commandments means for board directors. These instructions provide a balanced understanding of the importance of corporate governance responsibilities.