The certainty with which management can be evaluated, both as to its ability to realize the full potential of the business and to wisely employ its cash flows.
The letter helps explain his decision-making, the direction of the business, and the long-term outlook of the company.
Final Rating: 4. The highly structured format and appearance belies the delightful reading content. These sorts of problems generally are not found in the companies Buffett has assembled for Berkshire, companies led by talented managers he admires whom he wishes to leave alone to do their jobs.
For managers of Berkshire companies, Buffett has designed an incentive compensation system that seeks to provide rewards on the basis of results achieved rather than stock price. Managers of most public corporations in making charitable donations, Buffett points out, never solicit the opinion of their owner-shareholders.
Buffett has applied these principles as CEO since of Berkshire Hathaway, a textile business he purchased and transformed into a holding company that came to own completely or to have substantial stock holdings in a number of profitable companies.