A Berkshire board report finding Sokol in violation of ethics will not quiet the clamor over succession planning and other concerns at the firm.
In a surprise move, the board of directors at Berkshire Hathaway
The board found that Sokol not only violated the company's trading policies (and its code of conduct) by purchasing shares of Lubrizol "while serving as a representative of Berkshire Hathaway in connection with a possible business combination," but that his "misleadingly incomplete disclosures to Berkshire Hathaway senior management concerning those purchases violated the duty of candor" that he owed to the firm.
While this is in line with our view of the trading activity, and could put to rest some of the criticism that has been laid at Warren Buffett's feet in the aftermath of his oddly structured press release at the end of last month (which announced Sokol's departure and walked through the former employee's stock trades), it will not put a lid on the can of worms that has been opened as a result of this incident.
Even if Buffett is able to deflect a handful of questions about the Sokol affair at the annual meeting later this week, he (and the board) will not be able to ignore the clamor that has arisen about succession planning at Berkshire, nor the concerns that have emerged about the limitations of the decentralized nature of the company's business model.