This week’s update comes from Elliott Crowson from our advisory investment team in Guernsey
The past week has seen some unusual trends and developments surface, as shown by monthly data released from exchanges and public filings; day traders and institutional investors alike have shifted their attention towards more speculative assets as crypto trading volumes boom and activity on stock markets cools. The Biden administration has also thrown its weight behind a plan to temporarily waive intellectual property rights for Covid-19 vaccines in an effort to boost supply to developing countries. On the macroeconomic side of things, and hitting a bit closer to home for our offices in the Channel Islands, two Royal Navy ships were sent to protect Jersey from a blockade created by French fishing vessels in an escalation of tensions over post-Brexit access to waters around the Bailiwicks…. Interesting times indeed.
Berkshire Hathaway, the multinational conglomerate chaired by one of the world’s most successful investors Warren Buffet, recently held its renowned Annual Shareholder Meeting, in which vice-chairman Charlie Munger accidentally tipped that the successor to Mr Buffett would be Greg Abel by stating that “Greg will keep the culture" when asked about its business model. Mr Buffett later confirmed this to be true, putting an end to decades of speculation. There has always been a serious emphasis on culture at Berkshire and it seems increasingly apparent that those companies taking market share and outpacing competition generate shareholder value through a focus on culture.
Considering this, it could well be beneficial to define what is meant by corporate culture – a reference to the tacit social order of an organisation which shapes attitudes and behaviours in wide-ranging and durable ways. It is a topic that has been heavily debated, and academic literature on the subject is vast. Never has there been such emphasis on its importance as highlighted by the exponential growth in ESG (Environmental, Social & Corporate Governance) investing where ‘governance’ is clearly core. Corporate governance, upheld by a robust company culture, can help firms prosper and can become a formidable differentiator. Strong culture usually leads to attracting and retaining impressive employees, whilst improving brand and reputation, whereas the alternative can be very costly to any business.
On the Ravenscroft Advisory Investment desk, when assessing potential additions or reviewing existing securities on our recommended list, we keep ‘culture’ in high regard as a fundamental determinant during the analysis process. The attitudes of management are usually indicative of the overall nature of company character, as the ‘tone from the top’ is often infectious and spans across the firm. We aim to ensure that appropriate deliberation is given to this matter when considering investments, as we recognise the significant potential benefit to shareholder return over the long-term.
According to ‘The Leader’s Guide to Corporate Culture,’ a 2018 study published in the Harvard Business Review, strategy and culture are key levers at top leaders’ disposal in their quest to maintain and expand organisational effectiveness. The narrative is clear, and is a philosophy that is shared by some of the most distinguished business leaders:
“Make sure everybody in the company has great opportunities, has a meaningful impact and is contributing to the good of society.”
Larry Page, CEO, Google
“In this ever-changing society, the most powerful and enduring brands are built from the heart. They are real and sustainable. Their foundations are stronger because they are built with the strength of the human spirit, not an ad campaign. The companies that are lasting are those that are authentic.”
Howard Schultz, CEO, Starbucks
“Performance more often comes down to a cultural challenge, rather than simply a technical one.”
Lara Hogan, Senior Engineering Manager of Performance, Etsy
As a final comment, I feel it is important to highlight that Ravenscroft’s culture emphasises integrity, ethical behaviour, charitable contribution, and a focus on client’s needs. These are qualities that have been maintained since inception and will continue to act as a foundation for further growth.