David Sokol was treated like a rock star at last year?s annual meeting of Berkshire Hathaway, the conglomerate run by Warren Buffett. Shareholders lined up for autographs and snapshots of the executive considered by many to be Buffett?s successor.
Sokol will not attend Berkshire?s meeting this weekend. He announced his resignation last month after reports emerged that he had made a profit by buying the stock of a company shortly before Buffett announced he was buying the company.
The sudden downfall came as a surprise to outsiders who had watched Sokol rise in the business world. He helped build a small Omaha energy business into a multibillion-dollar corporation, sold it to Berkshire Hathaway and by all appearances became one of his boss?s favourite executives. Sokol served as Buffett?s Mr Fix-it, a turnaround artist trusted to tackle difficult jobs.
But people who worked for Sokol saw a side of him that Buffett perhaps did not. His brass-knuckled approach alienated some Berkshire employees, as when he suggested that people with an illness or other personal problems were problematic and when he unceremoniously fired a top executive and made him leave the office that day.
Flashes of his management style can be found in some earlier litigation as well. In one civil case, a judge rebuked Sokol for tampering with his company?s numbers so that a JV partner would get a smaller payout. In another case, Sokol sued to find out which employees at a Berkshire unit were disparaging him.
And he irritated colleagues at two of Berkshire?s subsidiaries, Johns Manville and NetJets, by frequently invoking Buffett?s name to burnish his own image inside the company.
Some people at Berkshire were puzzled over why Buffett favoured him so much, as when he credited Sokol for a turnaround of Johns Manville even though the unit?s profits fell sharply after he took over.
Now, Sokol?s trading is under investigation by the Securities and Exchange Commission. So the question of just what Buffett saw in Sokol ? and why he has supported him publicly ? will surely be a persistent topic of conversation this weekend in Omaha, at the usually jubilant occasion known as the Woodstock of Capitalism.
Shareholders? questions may cast a pall over the peppy affair as they consider the conduct of Sokol, who was already wealthy and was on the cusp of running one of America?s most respected companies. ?The reasons behind Sokol?s actions are a mystery,? said Whitney Tilson, a fund manager and longtime Berkshire shareholder. ?At the very least, he exercised very poor judgement.? Sokol has said that he resigned to focus on family investments and that the stocks were a good investment for his family that he would do again.
In his book, Pleased, But Not Satisfied, Sokol includes integrity as one of his business commandments. ?If you are uncertain about an issue,? wrote Sokol, quoting Buffett, ?it?s useful to ask yourself, ?Would I be absolutely comfortable for my actions to be disclosed on the front page of my hometown newspaper?? ?