Warren Buffet and Bernie Madoff’s Business Approach
Warren Buffett’s approach to business dealings
Warren Buffet is a renowned investor with wealth valued at more than $75 billion. Buffet prioritizes value in his investments (CBS Sunday Morning, 2017). He considers the long-term profitability of organizations that he plans to invest in. Instead of purchasing stocks from trending companies, Warren Buffet evaluates the company’s business plans and strategies. The company’s competitive advantage should be sustainable enough to keep the business profitable. Regarding ethics, Buffett has a balanced approach (Warm, 2019). He seeks to invest in companies that are profitable and sustainable in the future. The companies may be monopolies or duopolies, which may be regarded as unethical.
At the same time, Warren Buffet values a good reputation and integrity in his business dealings. For these soft skills, Warren Buffet pays a premium for organizations that meet the basic business aspects and possess greater integrity or ethics. For instance, in 1972, Warren Buffet intended to acquire Wesco, which wanted to form a merger with another entity. Therefore, Warren advised Wesco’s CEO that the other entity was overpriced, and the CEO pulled out from the merger arrangements. This caused the stock price to drop from $18 to $11. Warren ordered the brokers to pay $17 and made an offer of $15. This instance surprised all, including the Securities Exchange Commission, which started its investigations. Eventually, the SEC also accepted Warren Buffet’s reason for paying a higher price for each share, which was fairness (Weverbergh, n.d). This instance demonstrates Warren Buffet’s ethical perspective. He would have acquired Wesco at the low share price but wanted to forge a better relationship between the two entities and a good reputation.
Bernie Madoff’s Business Approach
Warren Buffet’s approach cannot be attested to Bernie Madoff’s business activities. The investor started out honestly and observed ethical practices. However, the business approach changed when Bernie began to convince clients to invest using ‘complicated’ investment ideas. The new investors’ money was used to pay off the other clients. The ability to market blue-chip and derivatives to clients set him apart. Those who invested felt exclusive and feared to exit because they were not sure if they would get back. This business concept was later identified as a Ponzi scheme. The SEC conducted an investigation but lacked evidence to present against Madoff. This turn of events shows that Madoff used unethical practices to lure investors and make money off them (Volker, 2011).
Ethical Philosophies
Utilitarianism is an ethical philosophy that emphasizes the maximization of good and pleasure for all parties. This philosophy applies to Warren Buffet due to his mode of doing business. Based on the instance that involved Wesco, Warren Buffet paid a higher price to maximize the benefits for his company and the acquired entity. He began the process when he advised Wesco’s CEO to pull out of an intended merger due to an overvalued potential partner. This advice saved Wesco from disappointment and failure that would have been exhibited after the merger had actualized. The actions that Warren Buffet chose demonstrated ultimate consideration for other individuals who were involved. Warren also highlights that he values the relationships that he has with other people because that matters more than just making money. Thus, this perspective guides the investment and business decisions that Warren Buffet makes, ensuring that he upholds utilitarianism.
Mr. Madoff’s approach utilized the deontological ethical philosophy. The philosophy emphasizes that all human beings should be treated with respect and dignity. However, this assumption does not guard individuals against making choices that have negative consequences (The Arthur W. Page Center, n.d). As seen in Madoff’s business dealings, the investment expert created packages that attracted clients who did not withdraw their financial resources. The willingness to make these investments was not forced upon any of the clients. Due to the lack of coercion, one could not blame Madoff for failing to show respect to the investors. However, the decision-making aspect introduced the negative elements. The clients should have conducted sufficient research to avoid fraud. The lack of sufficient information to weigh the legitimacy of the hedge funds led to a loss of money. The decision to invest led to an interest by the SEC after many individuals lost their money, especially new investors.
However, this ethical philosophy does not apply to Madoff’s entire career. At some point, Mr. Madoff did not uphold any ethical philosophy. This happened when the new investors’ money was used to pay dividends to the old investors. This was dishonest and unethical because all investors were made to believe that their investments were thriving. In addition, Mr. Madoff pocketed part of the money, causing trouble because investors did not receive their dividends consistently (Volker, 2011). The lack of transparency on Madoff’s part demonstrated greed, an aspect that Warren Buffet warns about when talking about making investments (PBS NewsHour, 2017).
References
CBS Sunday Morning. (2017). Sunday Profile: Warren Buffett. Retrieved from https://www.youtube.com/watch?v=O665cNwMVGw
PBS NewsHour. (2017). America should stand for more than just wealth, says Warren Buffett. Retrieved from https://www.youtube.com/watch?v=S6irBmOnQEc
The Arthur W. Page Center. (n.d). Ethical Theories. Retrieved from https://pagecentertraining.psu.edu/public-relations-ethics/introduction-to-public-relations-ethics/lesson-1/ethical-theories/
Volker, P. (2011). Disclosure: The Bernie Madoff Case. Retrieved from https://sevenpillarsinstitute.org/case-studies/disclosure-the-bernie-madoff-case/
Warm, R. (2019). Is Warren Buffett an Ethical Investor?
Weverbergh, R. (n.d). Warren Buffett on reputation: the economic value of values, integrity, and corporate culture. Retrieved from https://www.finn.agency/warren-buffett-reputation-berkshire-hathaway
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Question 
Warren Buffet and Bernie Madoff’s Business Approach
Module 1 – Case
FOR A SUCCESSFUL START—BUSINESS ETHICS
Assignment Overview
This assignment provides you with the opportunity to learn about ethical business behavior all around us.
Read Cases from the Real World: Competition and the Markers of Business Success, found in the following:
Byars, S., & Stanberry, K. (2018). Why ethics matter, chapter 1. Business Ethics. Rice University, OpenStax. Retrieved from http://cnx.org/content/col25722/1.3 pg. 15. CC BY 4.0 license
Also, view the following interviews with Warren Buffett:
CBS Sunday Morning. (2017, December 3). Sunday profile: Warren Buffett [Video file]. Retrieved from https://www.youtube.com/watch?time_continue=168&v=O665cNwMVGw
PBS NewsHour. (2017, June 26). America should stand for more than just wealth, says Warren Buffett [Video file]. Retrieved from https://www.youtube.com/watch?v=S6irBmOnQEc.
“It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” Warren Buffett
What is an ethical leader? They lead by example and exemplify ethical decision-making and conduct focused on the common good. They are known to act with integrity and inspire respect among peers, constituents, and subordinates. Successful ethical leaders of their beliefs and communicate them throughout an organization to develop a supportive culture.
Keep in mind that all people possess virtues and vices, and while they may strive to support ethical tenets, they may fail at times.
In this assignment, you also have the opportunity to learn about Bernie Madoff.
Carlson, R. (2019). What Bernie Madoff did and who he defrauded. Retrieved from https://www.thebalancesmb.com/bernard-madoff-and-his-ponzi-scheme-393095
Cold Fusion (2019). The Man Who Stole $65 Billion (Bernie Madoff). Retrieved from https://www.youtube.com/watch?v=gDqGSmTPtOQ
Crippen, A. (2008). Warren Buffett: People thought, “I was doing some sort of Ponzi scheme.” Retrieved from https://www.cnbc.com/2008/12/16/warren-buffett-people-thought-i-was-doing-some-sort-of-ponzi-scheme.html
Maranjian, S. (2017). What Buffett and Madoff Have in Common. The Motley Fool. Retrieved from https://www.fool.com/investing/general/2009/01/07/what-buffett-and-madoff-have-in-common.aspx.
Case Assignment
Address the following in a 3page essay, demonstrating your critical-thinking skills:
Discuss Warren Buffett’s approach to business dealings, especially as they relate to business ethics.
Compare that approach to Bernie Madoff’s.
Apply the ethical philosophy learned in this module and state what you think applies to Mr Buffett.
Which ethical philosophies apply to Mr. Madoff? Why?
Create a comparison and contrast of these two investors from an ethical standpoint. Be sure to discuss your table in your paper.
Write a well-integrated paper with a strong introduction and conclusion. Usend use a few section headings (i.e., do not simply folQ&A Q & A format).
Use your module background information and any other reliable sources you wish to find. The sources do not need to come from Trident Online. However, provide an in-text citation and reference list for all sources.