What is the most important job of a CEO: capital allocation, daily operations, or building corporate culture?

What is the Most Important Job of a CEO: Capital Allocation, Daily Operations, or Corporate Culture Building?

According to Warren Buffett’s letters to shareholders, the most important job of a CEO is capital allocation. Buffett has repeatedly emphasized that the CEO’s role is analogous to the company’s chief investment officer, requiring them to think and act like an investor to ensure capital is deployed efficiently for maximizing long-term shareholder value. Below, I analyze the three options from Buffett’s perspective and explain why capital allocation takes precedence.

1. Capital Allocation: The Core Responsibility

Buffett believes CEOs must excel at allocating the company’s cash flows, including investing in new projects, acquiring businesses, repurchasing stock, paying dividends, or reducing debt.
At Berkshire Hathaway, Buffett himself transformed the company from a textile manufacturer into a diversified investment empire through exceptional capital allocation.
Why is it paramount? Poor capital allocation wastes resources and can destroy value. As Buffett wrote: "Capital allocation is the CEO’s most important job because it determines the company’s future."
Unlike other duties, capital allocation demands strategic vision and a long-term perspective, making it non-delegable.

2. Daily Operations: Delegateable, but Not Primary

While daily operations (e.g., production, sales, team management) matter, Buffett argues CEOs should avoid excessive involvement. He advocates delegating authority to capable managers for operational details.
Example: Subsidiary CEOs at Berkshire enjoy high autonomy, with Buffett focusing only on the big picture. This embodies leadership: selecting the right people and setting direction, not micromanaging.
Over-immersion in operations may cause CEOs to overlook strategic opportunities, leading to stagnation.

3. Corporate Culture Building: Foundational Support, but Not Paramount

Buffett values corporate culture—integrity, long-term thinking, and frugality—as pillars of Berkshire’s success. His letters stress that culture attracts talent and sustains reputation.
However, culture-building plays a supporting role. It enables capital allocation and operations but isn’t the CEO’s "primary job." Buffett views culture as a "moat," while capital decisions drive growth.
A company with strong culture but flawed capital allocation can still fail.

Conclusion: Buffett’s Leadership Insight

Buffett likens the CEO to a "steward of capital," underscoring that capital allocation is the essence of leadership due to its direct impact on shareholder returns. Daily operations can be delegated to strong teams, and culture requires long-term nurturing—yet neither matches the criticality of capital allocation. In uncertain environments, CEOs who master this skill, like Buffett, can steer their companies toward sustainable growth. For deeper insights, reading Buffett’s shareholder letters (e.g., 1965–2023 editions) is highly recommended.