I’m sure if you are reading this you are very aware of the “front-running” that now former Berkshire Hathaway (NYSE:BRK.A) executive David Sokol engaged in with respect to the Berkshire acquisition of Lubrizol (LZ).
I’ve read all of the items that have been published on the events and watched Mr. Sokol on CNBC this morning. I think that what Mr. Sokol did was fairly ridiculous. If he even had the slightest idea that Berkshire would eventually buy Lubrizol, Sokol had no business whatsoever buying shares personally.
Buffett suggests that if a Berkshire employee has to think about whether something is close to crossing the line of what is inappropriate then the obvious decision is don’t do it. For someone as high profile as David Sokol the line of what is inappropriate should not even be visible should he take action on something.
Over the past couple of years since the Warren Buffett biography came out it has become very apparent that Mr. Buffett was not happy with some of the content in the book. His relationship with author Alice Schroeder has shall we say cooled. Prior to the book they were apparently thick as thieves. After the book Buffett has given her the cold shoulder.
I can’t say I’m surprised at Buffett’s response given that parts of the book portrayed Buffett somewhat unkindly. The book makes Buffett out to be someone who uses his friends to fit his needs and has the ability of a child when it comes to handling difficult emotional situations.
I’m sure Ms. Schroeder did a fine job of accurately capturing Mr. Buffett. And I expect that she is likely genuinely surprised by how angry Mr. Buffett has been about the contents of the book. It can’t be a comfortable position for her to be in.
But I’d like to suggest that she stop taking swipes at Mr. Buffett publicly. Not because she doesn’t have a right to be upset by how he has reacted. But simply because I think she needs to get some perspective.
In the book Schroeder captures how Buffett has a difficult time dealing with conflict and is highly sensitive about some personal issues surrounding close friends and family. So I have to ask. When you write about a man who is highly sensitive, then lay out his inadequacies for the world to see, why are you surprised when his feelings are hurt? Isn’t that exactly what you would have expected?
Over the past couple of years every time there is a whiff of controversy surrounding Buffett you can bet Ms. Schroeder will be out with a highly critical article immediately. Of course the Sokol situation is no different. Within hours of the Sokol news Bloomberg ran a column from Schroeder that ended with:
“It would be inexcusable for the chief executive officer of Berkshire Hathaway to front-run a potential acquisition this way. Why then, couldn’t the CEO of Berkshire admit it is inexcusable for one of his own senior managers to do so? Instead of condemning Sokol, Buffett gave him a pat on the back on the way out the door. Since when is it enough to merely uphold the letter of the law, especially at Berkshire? Whatever happened to Buffett’s famous saying, “Lose money and I will forgive you, but lose even a shred of reputation and I will be ruthless?
It’s too bad that Buffett missed an opportunity to show moral courage, stand up for principle, reinforce to his employees what he expects from them, and, not least of all, to live up to his own public reputation."
The opportunity to show morale courage? Give me a break. I think Buffett’s morality is pretty clear for those of us who don’t have a vindictive axe to grind.
The last time I checked Warren was leaving about $50 billion for the benefit of society. And a prime objective of his currently is to get the rest of the world’s wealthy to follow in his footsteps. In the end he could be personally responsible for hundreds of billions of dollars going to better the world.
And the man needs to prove his morality?
I have a suggestion for Ms. Schroeder. Rather than use your pen to alert us that Warren Buffett isn’t perfect every chance you get, use your pen to try and get the world to be as close to perfect as Buffett actually is. Maybe by writing about Buffett’s philanthropy others will stoop to Buffett’s morals and give everything they have back to help others.
And I have to say, when you make millions of dollars off of someone like you have with Buffett, it really does not come across well when you subsequently spend as much time as you do pointing out their imperfections at every opportunity.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.