code of ethics - berkshire hathaway, inc

Mirolas Nove Adwas 29113145

1

1. BUSINESS ETHIC

Business ethics (also corporate ethics) is a form of applied ethics or professional ethics that

examines ethical principles and moral or ethical problems that arise in a business

environment. It applies to all aspects of business conduct and is relevant to the conduct of

individuals and entire organizations 1

Related tag to business ethics2

Business ethics has both normative and descriptive dimensions. As a corporate practice and a

career specialization, the field is primarily normative. Academics attempting to understand

business behavior employ descriptive methods. The range and quantity of business ethical

issues reflects the interaction of profit-maximizing behavior with non-economic concerns.

1 "Business Ethics (Stanford Encyclopedia of Philosophy)". Plato.stanford.edu. 2008-04-16. Retrieved

2013-06-04. 2 depositphotos.com/11672049/stock-photo-Business-ethics-concept-in-tag-cloud.html


2

Interest in business ethics accelerated dramatically during the 1980s and 1990s, both within

major corporations and within academia. For example, today most major corporations

promote their commitment to non-economic values under headings such as ethics codes and

social responsibility charters. Adam Smith said, "People of the same trade seldom meet

together, even for merriment and diversion, but the conversation ends in a conspiracy against

the public, or in some contrivance to raise prices."3 Governments use laws and regulations to

point business behavior in what they perceive to be beneficial directions. Ethics implicitly

regulates areas and details of behavior that lie beyond governmental control.4 The emergence

of large corporations with limited relationships and sensitivity to the communities in which

they operate accelerated the development of formal ethics regimes.5

Business ethics reflects the philosophy of business, one of whose aims is to determine the

fundamental purposes of a company. If a company's purpose is to maximize shareholder

returns, then sacrificing profits to other concerns is a violation of its fiduciary responsibility.

Corporate entities are legally considered as persons in USA and in most nations. The

'corporate persons' are legally entitled to the rights and liabilities due to citizens as persons.

Economist Milton Friedman writes that corporate executives' "responsibility... generally will

be to make as much money as possible while conforming to their basic rules of the society,

both those embodied in law and those embodied in ethical custom".6 Ethical issues include

the rights and duties between a company and its employees, suppliers, customers and

neighbors, its fiduciary responsibility to its shareholders. Issues concerning relations

between different companies include hostile take-overs and industrial espionage. Related

issues include:

Corporate governance

Corporate social entrepreneurship

Political contributions

Legal issues such as the ethical debate over introducing a crime of corporate

manslaughter

The marketing of corporations' ethics policies

3 Smith, A (1776/ 1952) An Inquiry Into the Nature and Causes of the Wealth of Nations. Chicago, IL:

University of Chicago Press, p. 55 4 Berle, A. A., & Means, G. C. (1932). The Modern Corporation and Private Property. New Jersey:

Transaction Publishers. 5 Jones, Parker & et al. 2005, p. 17 6 Friedman, Milton (1970-09-13). "The Social Responsibility of Business is to Increase Its Profits".

The New York Times Magazine. Retrieved March 11, 2011.


3

2. BERKSHIRE HATHAWAY INC

2.1. About Berkshire Hathaway Inc.

Berkshire Hathaway Inc is a holding company for a multitude of businesses run by Chairman

and CEO Warren Buffettt. Berkshire Hathaway is headquartered in Omaha, Nebraska and

began as just a group of textile milling plants, but when Buffettt became the controlling

shareholder in the mid 1960s he began a progressive strategy of diverting cash flows from

the core business into other investments.7

Berkshire Hathaway logo8

Insurance subsidiaries tend to represent the largest pieces of Berkshire Hathaway, but the

company manages hundreds of diverse businesses all over the world. The company wholly

owns GEICO, BNSF, Lubrizol, Dairy Queen, Fruit of the Loom, Helzberg Diamonds and

NetJets, owns half of Heinz, owns an undisclosed percentage of Mars, Incorporated and has

significant minority holdings in American Express, The Coca-Cola Company, Wells Fargo,

and IBM910

2.2. Code Of Business Conduct & Ethics - Berkshire Hathaway Inc 11

2.2.1. Scope.

This Code of Business Conduct and Ethics applies to all Berkshire Hathaway directors,

officers and employees, as well as to directors, officers and employees of each subsidiary of

Berkshire Hathaway. Such directors, officers and employees are referred to herein

collectively as the Covered Parties. Berkshire Hathaway and its subsidiaries are referred to

herein collectively as the Company.

2.2.2. Purpose.

The Company is proud of the values with which it conducts business. It has and will

continue to uphold the highest levels of business ethics and personal integrity in all types of

transactions and interactions. To this end, this Code of Business Conduct and Ethics serves

to:

7 http://www.investopedia.com/terms/b/berkshire-hathaway.asp 8 http://www.berkshirehathaway.com/ 9 http://en.wikipedia.org/wiki/Berkshire_Hathaway 10 http://en.wikipedia.org/wiki/List_of_assets_owned_by_Berkshire_Hathaway 11 www.berkshirehathaway.com/govern/ethics.pdf


4

Emphasize the Companys commitment to ethics and compliance with the law

Set forth basic standards of ethical and legal behavior

Provide reporting mechanisms for known or suspected ethical or legal violations

Help prevent and detect wrongdoing.

Given the variety and complexity of ethical questions that may arise in the Companys

course of business, this Code of Business Conduct and Ethics serves only as a rough guide.

Confronted with ethically ambiguous situations, the Covered Parties should remember the

Companys commitment to the highest ethical standards and seek advice from supervisors,

managers or other appropriate personnel to ensure that all actions they take on behalf of the

Company honor this commitment. When in doubt, remember Warren Buffettts rule of

thumb:

I want employees to ask themselves whether they are willing to have any contemplated

act appear the next day on the front page of their local paper to be read by their spouses,

children and friends with the reporting done by an informed and critical reporter.

2.2.3. Ethical Standards.

a. Conflicts of Interest.

A conflict of interest exists when a persons private interest interferes in any way with

the interests of the Company. A conflict can arise when a Covered Party takes actions or

has interests that may make it difficult to perform his or her work for the Company

objectively and effectively. Conflicts of interest may also arise when a Covered Party, or

members of his or her family, receive improper personal benefits as a result of his or her

position at the Company. Loans to, or guarantees of obligations of, Covered Parties and

their family members may create conflicts of interest. It is almost always a conflict of

interest for a Covered Party to work simultaneously for a competitor, customer or

supplier.

Conflicts of interest may not always be clear-cut, so if you have a question, you should

consult with your supervisor or manager or, if circumstances warrant, the chief financial

officer or chief legal officer of the Company. Any Covered Party who becomes aware of

a conflict or potential conflict should bring it to the attention of a supervisor, manager or

other appropriate personnel or consult the procedures described in Section 2.2.5 of this

Code.

All directors and executive officers of the Company [and the chief executive officers and

chief financial officers of Berkshire Hathaways subsidiaries] shall disclose any material

transaction or relationship that reasonably could be expected to give rise to such a

conflict to the Chairman of the Companys Audit Committee. No action may be taken


5

with respect to such transaction or party unless and until such action has been approved

by the Audit Committee.

b. Corporate Opportunities.

Covered Parties are prohibited from taking for themselves opportunities that are

discovered through the use of corporate property, information or position without the

consent of the Board of Directors of the Company. No Covered Party may use corporate

property, information or position for improper personal gain, and no employee may

compete with the Company directly or indirectly. Covered Parties owe a duty to the

Company to advance its legitimate interests whenever possible.

c. Fair Dealing.

Covered Parties shall behave honestly and ethically at all times and with all people. They

shall act in good faith, with due care, and shall engage only in fair and open competition,

by treating ethically competitors, suppliers, customers, and colleagues. Stealing

proprietary information, possessing trade secret information that was obtained without

the owners consent, or inducing such disclosures by past or present employees of other

companies is prohibited. No Covered Party should take unfair advantage of anyone

through manipulation, concealment, abuse of privileged information, misrepresentation

of material facts, or any other unfair practice.

The purpose of business entertainment and gifts in a commercial setting is to create good

will and sound working relationships, not to gain unfair advantage with customers. No

gift or entertainment should ever be offered or accepted by a Covered Party or any

family member of a Covered Party unless it:

Is consistent with customary business practices

Is not excessive in value

Cannot be construed as a bribe or payoff

Does not violate any laws or regulations.

The offer or acceptance of cash gifts by any Covered Party is prohibited. Covered Parties

should discuss with their supervisors, managers or other appropriate personnel any gifts

or proposed gifts which they think may be inappropriate.

d. Insider Trading.

Covered Parties who have access to confidential information are not permitted to use or

share that information for securities trading purposes (insider trading) or for any other

purpose except the conduct of the Companys business. All non-public information

about the Company should be considered confidential information. It is always illegal to

trade in Berkshire


6

Hathaway securities while in possession of material, non-public information, and it is

also illegal to communicate or tip such information to others. While all Covered

Parties are prohibited from insider trading, Berkshire has adopted specific Insider

Trading Policies and Procedures applicable to the Companys directors, executive

officers and key employees (Directors and Covered Employees). This document is

posted on Berkshires website and is sent periodically to Directors and Covered

Employees in connection with certification of compliance.

e. Confidentiality.

Covered Parties must maintain the confidentiality of confidential information entrusted

to them, except when disclosure is authorized by an appropriate legal officer of the

Company or required by laws or regulations. Confidential information includes all non-

public information that might be of use to competitors or harmful to the Company or its

customers if disclosed. It also includes information that suppliers and customers have

entrusted to the Company. The obligation to preserve confidential information continues

even after employment ends.

f. Protection and Proper Use of Company Assets.

All Covered Parties should endeavor to protect the Companys assets and ensure their

efficient use. Theft, carelessness, and waste have a direct impact on the Companys

profitability. Any suspected incident of fraud or theft should be immediately reported for

investigation. The Companys equipment should not be used for non-Company business,

though incidental personal use is permitted.

The obligation of Covered Parties to protect the Companys assets includes its

proprietary information. Proprietary information includes intellectual property such as

trade secrets, patents, trademarks, and copyrights, as well as business, marketing and

service plans, engineering and manufacturing ideas, designs, databases, records, salary

information and any unpublished financial data and reports. Unauthorized use or

distribution of this information would violate Company policy. It could also be illegal

and result in civil or criminal penalties.

g. Compliance with Laws, Rules and Regulations.

Obeying the law, both in letter and in spirit, is the foundation on which the Companys

ethical standards are built. In conducting the business of the Company, the Covered

Parties shall comply with applicable governmental laws, rules and regulations at all

levels of government in the United States and in any non-U.S. jurisdiction in which the

Company does business. Although not all Covered Parties are expected to know the

details of these laws, it is important to know enough about the applicable local, state and


7

national laws to determine when to seek advice from supervisors, managers or other

appropriate personnel.

The document Prohibited Business Practices Policy sets forth the Companys policy

on compliance with laws, specifically addressing such topics as prohibited offers or

payments, gifts and entertainment, transactions with certain countries and persons,

accounting controls, and accurate record-keeping. This Policy is furnished to senior

managers and available to all employees.

h. Timely and Truthful Public Disclosure.

In reports and documents filed with or submitted to the Securities and Exchange

Commission and other regulators by the Company, and in other public communications

made by the Company, the Covered Parties involved in the preparation of such reports

and documents (including those who are involved in the preparation of financial or other

reports and the information included in such reports and documents) shall make

disclosures that are full, fair, accurate, timely and understandable. Where applicable,

these Covered Parties shall provide thorough and accurate financial and accounting data

for inclusion in such disclosures. They shall not knowingly conceal or falsify

information, misrepresent material facts or omit material facts necessary to avoid

misleading the Companys independent public auditors or investors.

i. Significant Accounting Deficiencies.

The CEO and each senior financial officer shall promptly bring to the attention of the

Audit Committee any information he or she may have concerning:

Significant deficiencies in the design or operation of internal control over financial

reporting which could adversely affect the Companys ability to record, process,

summarize and report financial data

Any fraud, whether or not material, that involves management or other employees

who have a significant role in the Companys financial reporting, disclosures or

internal control over financial reporting.

2.2.4. Waivers.

Any waiver of this Code for executive officers or directors may be made only by the

Companys Board of Directors or its Audit Committee and will be promptly disclosed

as required by law or stock exchange regulation.


8

2.2.5. Violations of Ethical Standards.

a. Reporting Known or Suspected Violations.

The Companys directors, CEO, senior financial officers and chief legal officer shall

promptly report any known or suspected violations of this Code to the Chairman of the

Companys Audit Committee. All other Covered Parties should talk to supervisors,

managers or other appropriate personnel about known or suspected illegal or unethical

behavior. These Covered Parties may also report questionable behavior in the same

manner as they may report complaints regarding accounting, internal accounting controls

or auditing matters by contacting (anonymously, if desired) a third party organization

called Global Compliance (toll-free number 800-261-8651 or web site at http://brk-

hotline.com). Separate anonymous reporting procedures are available for Company

employees working outside the United States. No retaliatory action of any kind will be

permitted against anyone making such a report in good faith, and the Companys Audit

Committee will strictly enforce this prohibition.

b. Accountability for Violations.

If the Companys Audit Committee or its designee determines that this Code has been

violated, either directly, by failure to report a violation, or by withholding information

related to a violation, the offending Covered Party may be disciplined for non-

compliance with penalties up to and including removal from office or dismissal. Such

penalties may include written notices to the individual involved that a violation has been

determined, censure by the Audit Committee, demotion or re-assignment of the

individual involved and suspension with or without pay or benefits. Violations of this

Code may also constitute violations of law and may result in criminal penalties and civil

liabilities for the offending Covered Party and the Company. All Covered Parties are

expected to cooperate in internal investigations of misconduct.

2.2.6. Compliance Procedures.

We must all work together to ensure prompt and consistent action against violations of this

Code. In some situations, however, it is difficult to know if a violation has occurred. Because

we cannot anticipate every situation that will arise, it is important that we have a way to

approach a new question or problem. These are the steps to keep in mind:

a. Make sure you have all the facts. In order to reach the right solutions, we must be as

informed as possible.

b. Ask yourself: What specifically am I being asked to do? Does it seem unethical or

improper? Use your judgment and common sense. If something seems unethical or

improper, it probably is.


9

c. Clarify your responsibility and role. In most situations, there is shared responsibility. Are

your colleagues informed? It may help to get others involved and discuss the problem.

d. Discuss the problem with your supervisor. This is the basic guidance for all situations. In

many cases, your supervisor will be more knowledgeable about the questions, and he or

she will appreciate being consulted as part of the decision-making process.

e. Seek help from Company resources. In rare cases where it would be inappropriate or

uncomfortable to discuss an issue with your supervisor, or where you believe your

supervisor has given you an inappropriate answer, discuss it locally with your office

manager or your human resources manager.

f. You may report ethical violations in confidence without fear of retaliation. If your

situation requires that your identity be kept secret, your anonymity will be protected to

the maximum extent consistent with the Companys legal obligations. The Company in

all circumstances prohibits retaliation of any kind against those who report ethical

violations in good faith.

g. Ask first, act later. If you are unsure of what to do in any situation, seek guidance before

you act.


10

3. IMPORTANCE OF BERKSHIRE HATHAWAYS ETHIC TO RUN THE

BUSINESS

3.1. Impact of Trust Culture into Berkshire Hathaway Inc.

In 2013, Berkshire Hathaway is known as one of the worlds most admired company. It

ranked 8 out 50 other company. In domain of insurance property and its casualty, its the

best company out there.12

Many people believe that this achievement due to great

leadership by its CEO, Warren Buffett.

Under Warren Buffett govern, Berkshire Hathaway known to demonstrate trust in their

employees and managers, and benefit from these sorts of cost reductions. Berkshire

Hathaway Inc. is renowned for granting considerable autonomy to the operating

managers of its various businesses.

In the 2010 Berkshire Hathaway (BRKA) annual report, Buffettt wrote of his holding

company: "We tend to let our many subsidiaries operate on their own, without our

supervising and monitoring them to any degree. Most managers use the independence

we grant them magnificently, by maintaining an owner-oriented attitude."13

This allows

the company to maintain an extremely modest head count of only 24 staff at

headquarters, despite having 288,000 employees worldwide. 14

12 http://money.cnn.com/magazines/fortune/most-admired/2013/snapshots/980.html 13 http://www.marshallgoldsmithlibrary.com/cim/articles_print.php?aid=897 14 http://en.wikipedia.org/wiki/Berkshire_Hathaway


11

3.2. Further Impact That Trust Culture Can Bring 15

Trust it self, is prominent aspect in business ethic. For starters, trust replaces the need for

written contracts because the two parties commit in advance to abide by a set of actions

and behaviors that are mutually beneficial. Both parties in a trusting relationship

generally understand the limits of acceptable behavior even when these are not fully

specified. And when trust is introduced into the environment, the motivations of each

party are known and their behaviors are predictable. That means managers can spend

less time monitoring employee actions, and employees can focus on their jobs rather

than exerting additional effort simply to demonstrate they are compliant with the firms

standards.

An emphasis on contracts to minimize self-interested behavior creates its own set of

risks. It is impossible, for instance, to write a contract that pecifies all behaviors. And

strict enforcement of the terms of a contract has the unintended consequence of

emphasizing the minimum amount of work required for an employee to satisfy his or her

obligations and avoid punishment. A contract can therefore reduce, rather than increase,

productive effort.

In the extreme caseutopia!there would be a number of additional benefits to

creating a more trust-centered environment.

a. The responsibilities of the board of directors could be significantly narrowed. Rather

than balance advisory and monitoring obligations, the board would focus entirely on

advising management on matters involving strategy, organizational design, and risk

management.

b. The external audit could become largely unnecessary. Rather than sample a large

number of accounts for material misstatement and check internal controls for

deficiencies, the external auditor would serve a much narrower role of clarifying the

application of accounting standards when questions arise.

c. The internal audit function could also become unnecessary. Companies would not

require an independent assessment of their accounts, controls, and procedures

because employees would be trusted not to abuse the system. Instead, the accounting

department would employ a small staff to check accounts for inadvertent errors.

d. Compensation contracts could also be simplified. Most companies today offer an

extremely complicated program of fixed and contingent payments that vest over

short and long-term time horizons to motivate specific employee behaviors. In a

trust-based environment, such an elaborate program becomes unnecessary.

15 http://qz.com/129947/netflix-and-berkshire-hathaway-share-this-management-philosophy-that-

could-save-your-company-millions/


12

Furthermore, companies would no longer have to pay the risk premium associated

with contingent (risk-based) pay. Instead, companies would offer large fixed

salaries, potentially supplemented with cash bonuses for those who achieve critical

performance metrics. Equity programs, which require a larger risk premium relative

to cash programs, might be substantially reduced or even discontinued. And finally,

companies could eliminate many of the bureaucratic checks and controls that are

often implemented to prevent and detect legal or regulatory violations, such as bribes

to win foreign business. Instead, employees would self-monitor, with line managers

responsible for reporting inadvertent legal or regulatory missteps to higher-level

executives.

code of ethics - berkshire hathaway, inc

Documents

corporate ethics

business ethic business

business behavior

philosophy of business

business environment

ethics codes

professional ethics

aspects of business