If You Knew David Like I Knew David
Buffett's comments about investing and the economy were, as always, interesting, and were the main value from the meeting.
Regarding the Sokol affair, clearly it's good that Buffett acknowledged some responsibility for missing the problems. I was glad Berkshire put more color around the storyline that there was new information to show that Sokol misled them between the first and second press releases. Understandably, Berkshire's view of Sokol's actions evolved in the month following their revelation, although, as Munger acknowledged, a lot of that evolving had to do with the public's reaction to events. Nothing new of significance was learned between March 30 and April 26th, when the audit committee report was issued. I will grant that perhaps the audit committee was not fully informed when the first press release was issued, which if true would be unfortunate because that press release drew sweeping legal and ethical conclusions. Anyway, Buffett's defense of the first press release more or less boiled down to all the good things about David that the audience didn't know. Buffett is a big Al Jolson fan. Adapted from what Jolson sang in 1925:
"I have got a sweetie known as David,
In the words of Shakespeare he's a 'wow,'
Though all of you may know him too,
I'd like to shout right now,
David has a perfect reputation,
No one ever saw him on a spree,
Nobody knows where David goes,
Nobody knows but me.
if you knew David like I knew David,
Oh! Oh! Oh! what a guy!
There's none so classy,
As this fair laddie,
Oh! Oh! Oh! what a guy."
> I suspect events will tell whether Buffett severely overestimated Sokol's capabilities and ethics -- or not.
> Regarding the rest of the meeting -- No word on the successor. He's "straight as an arrow." Seriously? After Sokol, we're supposed to simply take Buffett's word on this? Hints that the person is Ajit Jain are no more than that -- back to coyness and hinting again. I'm in a musical mood today, so time for Tom Lehrer.
"Warren, tell us.
All your shareholders are nervous.
Who will you tap with your wand,
Will it be Abel or Rose or Jain?"
> Howie Buffett to be chairman. Look, I like Howie. He's extremely honest. He's got good intentions. He's an excellent photographer. He knows, probably, as much about ethanol as anyone on earth. But he doesn't have the business experience to be chairman of Berkshire.
> No indication of changes in governance. Perhaps there will be some. Will Walter Scott, sponsor of David Sokol, chairman of Berkshire's nominating committee, and subject of torturous language regarding independence in Berkshire's proxy, remain on the board or remain in his current role? People who have embarrassed Buffett have a habit of disappearing from the scene. By the way, I like Walter Scott a LOT and think he's one of the better influences on Buffett ... except in the case of David Sokol.
RSS Feeds
Featured Comments
- by Anonymous
- by Anonymous
- by bingolittle
- by Kempton
- by Carlos de Souza
- by Anonymous
- by Daniel Cabral
- by Anonymous
- by Parker Bohn
- by Hugh
Most Popular
User login
Find Alice
Blog Archives
- March 2012 (1)
- February 2012 (1)
- January 2012 (2)
- October 2011 (2)
- September 2011 (8)
- August 2011 (3)
- July 2011 (1)
- June 2011 (6)
- May 2011 (3)
- April 2011 (12)
Mailing List
The Snowball
Buy The Snowball
Also available in Large Print and Audio.
Sokol Affair
My view of this whole thing is that Sokol had/has a large ego that needs to be constantly stoked. He made a major mistake investing in a company shortly before presenting it to Buffet as a possible acquisition. He apparently told Buffet that he owned the stock but did not tell him that he just purchased it. Yes, Buffet should have dug a little deeper but probably didn't think he needed to. He has learned a lesson now.
There are many people out there capable of being smart investors who could replace Buffet. Surely his shoes are difficult to step in to, however.
What a Weekend
A Royal Wedding.
John Paul takes another step towards Sainthood.
Osama Bin Laden killed.
Everyone associated with the Sokol deal is still pretty much on board with the same story if a different spin.
Sokol broke Berkshire's rules. Since he's gone and since he quit without a severance package (per the meeting), then it is really a non issue.
Buffett reiterated (and I agree) that this was inexplicable -- very unlike typical insider trading. Buffett said people usually trade through a 'third cousin' -- or the Caymans or whatever. Sokol made no real effort to cover it up. Ron Olson got on stage to say that LZ WASN'T on the restricted list. Buffett emphasized that Sokol didn't need the money -- Got paid $26 million in 2010 and actually shared a bonus payout at a personal cost of $12 million with Greg Able.
Berkshire also 'dropped a dime' on Sokol the day of the resignation -- notifying the SEC.
But, Sokol has pretty decent defenses against criminal charges in my opinion.
A civil SEC consent agreement would leave Sokol in a not much different position than he is in today.
Sokol may have a better story that what we have currently heard, especially in regard to his dealings with Citi. All this is between Citi and Sokol -- Berkshire wasn't involved at that point other than Sokol.
As far as Berkshire compliance, it's probably as good as or better than most non financial companies.
More important in my opinion is the fact that this occurred in the area of capital allocation, the single area where Buffett delegates very, very little. His radical delegation to the operating companies excludes this one item.
Susan Decker made some good comments of Fox Business.
As far as the succession issue is concerned, it is much more about whether Berkshire has a process than who the person is. The fact that they have envelopes with the name -- which can and should change depending on circumstances, has been done.
I wouldn't mind having Buffett bring in an operating guy at home office simply to insure that his unique and effective style is maintained. That individual could handle the executive compensation process at the subs, which can't really be maintained without Buffett. The individual could also reinforce the practice of being available without being intrusive. In addition, find potential serious issues like perhaps the Hertzberg guy who was obviously fired. With all the Berkshire subs, some CEO is no doubt sleeping with an employee. Or given the ages, maybe not.
Agree 100% with the Howie comments. He simply doesn't have the stature for even a non executive chairman role, regardless of how limited. However, the principle of having a non executive chairman with very substantial holdings sounds good. I'd go for Gates in that position in a second.
The big lessons:
1. No one cares about the relative nuanced distinctions Buffett draws between his 'good' wall street guys and the sleaze that almost blew up the world economy.
2. Buffett is too rich to be anything remotely like a 'populist'.
3. He is considered a traitor to his class and has been wounded enough that people aren't afraid to call him out.
4. I rather like the Lubrozol acquisition, but some of the others are inexplicable -- especially Kraft which is simply not in the same class as his better picks. The Buffett reputation is really going to rest on how well he handles capital allocation. It is truly a Snowball and he has to allocate much more cash than ever before from an increasingly smaller list of candidates. If BNI and LZ prove out better than expected -- and he finds some more, Buffett's reputation will recover nicely. If his future capital allocation decisions aren't much better than average, then he will go down as someone who overreached.
Tomorrow, Tomorrow, There's Always Tomorrow
Please bear with me while I fantasize:
Mr. Buffett wakes up tomorrow morning with an epiphany: He realizes he needs to spend time and effort to teach (much like, shall we say, Mr. Graham?) his philosophies, methods, and ways of thinking to that next generation of leaders of Berkshire Hathaway. He brings those young padawans to Omaha, installs them in close proximity, announces them to the world, and spends the next ?? years teaching and handing over the reins of BRK. This just sounds so Buffett. Well, the teaching part, anyway.
The results: Buffett sees what his people-judgment skills have brought to BRK and its future management. Changes can be made if necessary; decisions undone while there is still time. Shareholders gain a view of the future of BRK. They get to see what Buffett’s people-judgment skills have brought to BRK’s future and gain even more respect for Mr. Buffett. The future management of BRK gains untold volumes of investing skills taught by the master.
What a wonderful opportunity is being lost with the current secret plan. What could possibly be wrong with this scenario in the context of fiduciary responsibility and the future of BRK? Why Mr. Buffett’s adversity to commitment? It’s not all about him, after all. Or is it?
sokol was a quitter?
Do you think Sokol was a serious contender for CEO, esp. after trying to resign on 2 earlier occasions. Would WEB/board really have that much faith that the guy would stick around? In other words, we are just finding out that Sokol is obviously not a contender for CEO...but maybe that has been the case for a few years now?
long brk
REPLY One telling sign is Buffett wanting to put something in the press release saying that David was leaving because he wasn't going to become CEO. And Sokol wanting that taken out saying it wasn't true. If Buffett thought Sokol wanted to become CEO, it seems unlikely he got the wrong impression. In senior corporate circles, when you go to your boss and say, "I want to leave," it means, you don't really want to leave, but you are threatening to if you don't get more money and responsibility. (And each time Sokol made the threat it appears he did indeed get more responsibility as well as paychecks from new parts of Berkshire empire.)
If David had seriously wanted to leave earlier, he would have left.
Post new comment