Friday, April 1, 2011

The Resignation of David Sokol

The news that David Sokol was resigning from Berkshire Hathaway (BRKa) came as a surprise to many.

Personally, I find his explanation for buying Lubrizol to be weak.

In this letter, Buffett said the following about the matter:

Neither Dave nor I feel his Lubrizol purchases were in any way unlawful. He has told me that they were not a factor in his decision to resign.

Dave’s letter was a total surprise to me, despite the two earlier resignation talks. I had spoken with him the previous day about various operating matters and received no hint of his intention to resign. This time, however, I did not attempt to talk him out of his decision and accepted his resignation.

It may not be unlawful but it is disappointing.

I'm pretty sure Buffett likes Berkshire Hathaway to be seen as a role model for corporate america. Sokol's behavior is at least a minor setback in that regard. As a visible senior executive and representative, what Sokol did certainly does not reinforce the idea of Berkshire Hathaway as corporate role model.

Buffett has set a simple but high standard over the years:

"Never do anything that you don't want to see on the front page of tommorow's newspaper." - Warren Buffett

This episode seems a case of an important executive operating below Berkshire Hathaway's generally high standards of conduct.

Adam

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