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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 ethics 2

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.
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"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

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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

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.

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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:

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http://www.investopedia.com/terms/b/berkshire-hathaway.asp 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

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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 Au dit Committee. No action may be taken

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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

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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 nonpublic 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

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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.

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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 Cover ed 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://brkhotline.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 noncompliance 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.

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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.

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

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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.
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http://qz.com/129947/netflix-and-berkshire-hathaway-share-this-management-philosophy-thatcould-save-your-company-millions/

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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.

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