Sokol's resignation clouds Berkshire's succession plan, while his Lubrizol trades tarnish to some extent the firm's legacy of strong ethical behavior.
In a surprising announcement, Berkshire Hathaway BRK.A BRK.B said Wednesday that David Sokol, chairman of MidAmerican Energy, chairman and CEO of NetJets, and the presumed heir apparent to Warren Buffett's CEO position, has resigned. Considering the concern for some time about the longevity of Buffett and managing partner Charlie Munger, both octogenarians, as well as the lack of full disclosure about Berkshire's succession planning, Sokol's resignation creates even more uncertainty for the firm.
If that weren't enough, Buffett's disclosure that Sokol had purchased upward of $10 million worth of Lubrizol LZ common stock before pitching an acquisition of the firm to Buffett raises serious questions about Berkshire's internal controls and tarnishes to some extent the firm's legacy of strong ethical behavior.
It wasn't even nine months ago that Buffett was calling on his managers to "zealously guard Berkshire's reputation." In his biennial letter to Berkshire's managers, Buffett said, "We can afford to lose money--even a lot of money. But we can't afford to lose reputation--even a shred of reputation."