Warren Buffet’s vs. Bernard Madoff’s Leadership Styles

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Table of Contents

Introduction
Warren Buffet
Bernard Madoff
The Comparison
Conclusion
References

Introduction

Ethical leadership is when one shows respect for ethical beliefs and values with the dignity and rights of others. In contrast, moral leadership is associated with leadership, where one has a clear sense of what is right and wrong. Legal guidance refers to one performing their roles of leadership according to their profession and acting according to the rule of law. Leaders need to have an understanding of the importance of ethics in their profession and the strategies they can use to solve the crisis. A good leader is defined according to what they have achieved in life, in their profession, whereas one who lacks ethics and moral values is defined as a weak leader. Therefore, these values are always what define leadership.

It is important to learn about the most influential figures in the financial market to study their style of leadership. Hence, the paper investigates the leadership style of one of the most successful investors in the world Warren Buffet. His leadership style and adherence to business ethics will be compared to Bernard Madoff, who is known to have started one of the most famous Ponzi Schemes on Wall Street. As Madoff and Buffet can be considered opposites, it is important to identify the key differences in their leadership approaches.

Warren Buffet

Warren Buffet is the man behind Berkshire Hathaway Investment Company. Over its history, the company has never been accused of some ethical misconduct. Warren Buffet prioritizes fair conduct as his company earns its profit through successful acquisition and trading activities. In an interview with PBS News Hour, he claimed that “America needs to stand for more than just wealth” (PBS, 2017). Therefore, the vision that Buffet has represents a leadership style that is not only aimed at making a profit fairly but involves corporate social responsibility as well.

Warren Buffet is actively invested in the idea of charity donations. Buffett stated in June 2006 that he intended to contribute more than 80% of his money to philanthropic foundations; in 2020, he increased that percentage to 99% (Omilion-Hodges & Ptacek, 2021). The primary beneficiary was the Bill & Melinda Gates Foundation, which was established by Bill Gates, the co-founder of Microsoft, and Melinda Gates, who was then his wife. Gates and Buffett had been close friends since the early 1990s (Omilion-Hodges & Ptacek, 2021). The Susan Thompson Buffett Foundation, which focused on women’s reproductive rights and financed college scholarship programs, as well as the organizations operated by Buffett’s three children, were among the other groups that received gifts (Omilion-Hodges & Ptacek, 2021). The Giving Pledge was established by Buffett and the Gateses in 2010 as a call for other affluent people to donate the bulk of their wealth to charitable foundations and non-profit organizations.

Bernard Madoff

On the contrary, Bernard Madoff is one of the investors that is known for his misconduct. Upon investigation by Harry Markopolos, it was identified that the revenue made by the company looks suspiciously stable and does not respond to market fluctuations (Grattagliano et al., 2018). Later, it was established that Madoff used a Ponzi scheme as his business model (Grattagliano et al., 2018). His clients gave him their investments, waiting for returns, which they received, but their money was not profit returns from their investments but parts of the initial capital that they had invested.

While conducting his business, Madoff used his personal charm and persuasion skills to lure new clients in. Madoff refused those investors who asked too many questions or were hesitant – showing a lack of integrity in the business. In addition, the investment strategy that was offered by Madoff was not elaborated on much (Grattagliano et al., 2018). Instead, people had to trust his resume and the conclusions that they had made during the negotiation. The black-box strategy was successful enough to keep the business running for several decades.

The Comparison

The lack of integrity that is seen in Madoff’s case is an example of how to conduct business unethically. The table below provides a visualized comparison between the business ethics of Warren Buffet and Bernard Madoff.

	Warren Buffet	Bernard Madoff
Process Integrity	Has a broad investment portfolio that is easy to track throughout company’s history.	Black-box strategy.
Mission and Vision	Buffet’s company seeks to exceed the internal and external customer requirements through continuous improvement, and provide a place for hard-working, dedicated, knowledgeable and ethical people who believe in the company. (Arnold, 2019)	No vision, as when exposed, Madoff wanted to give Madoff’s Investment Security’s money to his sons’ company.
Long-Term Perspective	Has a chosen successor, plans for succession were made since 2010.	The company did not have long-term strategy besides keeping the misconduct secret as long as possible.
Donations/Charity/CSR	Buffet aims at donating 99% of his wealth to charity (Arnold, 2019).	No charities or corporate social responsibility programs

Warren Buffet is the example of a transformational leader. Transformational leadership has four facets: inspirational motivation, idealized influence, individualized consideration, and intellectual stimulation. Inspirational motivation refers to how well and clearly a leader articulates a vision to his or her followers so that it is appealing and inspiring. By being called the Omaha Oracle, Warren Buffet is an inspiration and a role model for numerous investors across the world and to the employees of Berkshire Hathaway. Bernard Madoff could be considered an example of the authoritarian leadership style. Despite his ethical misconduct, his company did not have any wistleblowers for decades. This could be a sign of the authoritarian leadership with strict control over the employees.

Conclusion

In conclusion, the world of finance is a challenging environment, where it is hard or even impossible to predict the external factors. Therefore, it is essential for leaders of the financial market to maintain integrity and adhere to ethical standards. The misconduct associated with the violation of ethical code of conduct harms hundreds of investors who expect an honest return on their capital.

References

Arnold, G. (2019). The Deals of Warren Buffett: Volume 2: The Making of a Billionaire. Harriman House Limited.

Grattagliano, I., Alessio, O., Maricla, M., Cassano, A., Fulvia, C., Di Marcantonio, M., & Graziamaria, C. (2018). Financial-Psychological Crime: The Madoff Case. In 70th Annual Scientific Meeting (Vol. 70, No. I2, pp. 801-801). AAFS.

Omilion-Hodges, L. M., & Ptacek, J. K. (2021). When Good People Are Bad Leaders: When and Why Leadership Fails. In Leader-Member Exchange and Organizational Communication (pp. 159-174). Palgrave Macmillan, Cham.

PBS NewsHour. (2017). America should stand for more than just wealth, says Warren Buffett. PBS NewsHour. Web.

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Warren Buffet’s vs. Bernard Madoff’s Leadership Styles

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