Corporate Governance According to Charles T. Munger

When analyzing a business as a possible future investment an investor needs to form an opinion about corporate governance, i.e. whether the business is run in the interest of shareholders or not.

In his shareholder letter for fiscal year 2007 Warren Buffett wrote about what kind of businesses that turn him and Charlie, and summarized it as follows.

“Charlie and I look for companies that have a) a business we understand; b) favorable long-term economics; c) able and trustworthy management; and d) a sensible price tag.”

Today I read a paper titled Corporate Governance According to Charles T. Munger. The paper discusses corporate governance and “How […] an organization [should] be structured to encourage ethical behavior among organizational participants and motivate decision-making in the best interest of shareholders?” CM1

A good start to widen your circle of competence in getting a better understanding about the area of corporate governance, is to read the paper and listen carefully to what Charlie has to say.

The paper can be found here.

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