Revisiting the David Sokol/Berkshire Hathaway "Insider Trading" Debate: Part III
Sokol tarnished Saint Warren's halo
In two prior posts, responding to a request from Francine McKenna of The Dig Substack (which I recommend highly), I discussed the legal aspects of the David Sokol insider trading saga.
For the benefit of those who missed that post, herewith a brief recap: About fifteen years ago, David Sokol was widely considered the most likely successor to Warren Buffett as chief executive of Berkshire Hathaway Inc. In March 2011, however, Sokol suddenly resigned. In the wake of that action, Buffett released a statement announcing that Sokol’s departure came after it was discovered that Sokol had purchased stock in a petrochemical company called Lubrizol shortly before Stokol proposed that a Berkshire energy subsidiary, of which he CEO, acquire Lubrizol.
In this post, I turn to the corporate governance aspect of the case. Specifically, the way in which Berkshire went out of its way to protect the image of the man known as “Saint Warren of Omaha.”
It’s been said of Buffett that:
Over the course of his long and extremely lucrative career, Buffett has built a reputation for himself as a paragon of integrity and virtue, and the annual meeting of his company’s shareholders has come to resemble a sort of beatification ceremony, if you can imagine a religion in which the same person is beatified year after year.
The way Buffett handled the Sokol matter was not very saintly. Indeed, back in the day, Andrew Frye quoted yours truly about the Sokol drama:
“They’re throwing Sokol under the bus,” said Stephen Bainbridge, a professor at the UCLA School of Law who has written and taught about corporate governance.
Why did I say that? Keep reading.
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