Reference no: EM132613131

Case:

Berkshire Hathaway's Chairman and CEO is Warren Buffett, one of the world's richest men. Buffet founded this conglomerate with a small textile business in the early 1960s. Berkshire Hathaway's businesses now are highly diverse with large insurance businesses, manufacturers of carpets, building products, clothing and footwear, retail companies and private jet service. Since the mid-1960s, Berkshire has averaged 19.7 per cent growth in book value per year. Berkshire Hathaway annual reports explain how Buffet and Deputy Chairman Charlie Munger manage their subsidiary businesses:

'We subcontract (delegate) all of the heavy lifting (operations) to the managers of our subsidiaries. In fact, we delegate almost to the point of abdication (handing over the operations to the subsidiaries' managers): though Berkshire has about 257,000 employees, only 21 of these are at headquarters. Charlie and I mainly attend to capital allocation and the care of our key managers. Most are happiest when they are left alone to run their businesses, and that is just how we leave them. That puts them in charge of all operating decisions and of dispatching the excess cash they generate to headquarters. By sending it to us, they don't get diverted by the various enticements that would come their way were they responsible for deploying the cash their businesses throw off. Furthermore, Charlie and I are exposed to a much wider range of possibilities for investing these funds than any of our managers could find.'

Question: After reading these paragraphs, analyse the various corporate parenting styles and develop a conclusion that what type of corporate parent is Berkshire Hathaway and why?