Questions for Warren Buffett

David Sokol of Berkshire Hathaway has resigned amidst a cloud of controversy. Folks might want to ask some questions at the upcoming annual meeting. Here are some suggestions:

  1. Years ago, a former SEC Chairman famously noted, “It is not an adequate ethical standard to aspire to get through the day without being indicted.” Why then do you begin and end your discussion with technical legal issues.
  2. People who sold Mr. Sokol their shares at $100 didn’t know that Warren Buffett’s senior manager was interested in the company. Did he harm those shareholders?
  3. Mr. Sokol bought his shares at $100. Berkshire shareholders had to pay $130. Doesn’t Mr. Sokol owe something to Berkshire’s shareholders?
  4. When Mr. Sokol told you that he owned Lubrizol shares, why didn’t you ask how much? If you had known he owned $10 million, would you consider that material?
  5. Mr. Sokol bought his $10 million stake before he suggested Berkshire acquire the company. Have other Berkshire executives done this? Doesn’t it seem like front-running? If it isn’t front-running, what is it?
  6. Legal experts say that whether this is insider trading is a close call. But your internal memos exhort all Berkshire employees to stay well away from any close calls. Why didn’t you ask for Mr. Sokol’s resignation?
  7. Under any construction, do you think Mr. Sokol’s actions are consistent with corporate best practices? Has Berkshire’s reputation suffered as a result of this scandal? What do you intend to do to make sure it doesn’t happen again?

I don’t know if Mr. Sokol broke any laws. I do know that his actions reflect poorly on my industry. I’d like some answers.

Douglas R. Tengdin, CFA
Chief Investment Officer
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