The David Sokol Affair: Shareholders Should Be Glad

Berkshire Hathaway, in surprisingly plodding fashion, has 'fessed up on L'Affaire Sokol.

Any executive officer of a public corporation with any sense would just feel in their gut, without recourse to a statute, or Code of Conduct, how to evaluate the following scenario.

December 13th, you direct Citi investment bankers to ask their client Lubrizol, if they would like to have a conversation with you, a senior executive of Berkshire Hathaway, about a possible fit for Lubrizol within the Berkshire Hathaway portfolio. The bankers would assure Lubrizol that Berkshire does not do hostile deals, and that a conversation that went nowhere would remain confidential.  The following day, the executive places a LIMIT ORDER (!) to buy 50,000 shares of Lubrizol.

Question: Doesn't everything in your business experience tell you that this is probably not a good idea? Does that little green cricket on your shoulder tell you anything? Even if it passed some legal test, isn't the question, "How would it be seen by the market?" Even better, "Wouldn't it put my boss (Mr. Buffett) in an awkward position?" If you were especially dense, you might just call your legal counsel.

It's impossible to comprehend. But a friend who's a lawyer and a corporate governance guru put it best when he drew this insight. Berkshire shareholders were fortuitously spared the terrible burden of having Mr. Sokol being appointed successor to Mr. Buffett. They should spin the track from Cream's first album, "I'm So Glad."