Warren Buffett Accepts Mistake on Sokol

Warren Buffett
Warren Buffett in his plain and simple way dived straight to the topic that everyone wanted question him on, the recent controversy regarding David Sokol. Buffett stated that Sokol's action were "inexplicable and inexcusable", just as the scandal that damaged the reputation of Saloman Brothers. He further added that this incident will not have a lasting effect on his reputation. Buffett reportedly said in a press conference, "I don't think it will change a record of 80 years."

Though, Buffett seemed unwilling or unable to talk in detail on his own failings in the failure of oversight, when addressing Berkshire shareholders. He pleaded guilty to not express any outrage. "I obviously made a big mistake not saying, 'Well, when did you buy it?'" Mr. Buffett said. Later he joked that Charlie Munger, his longtime investing partner would be taking care of future news releases.

Some experts have rather asked, did Buffett learn from Salamon incident? Their point is that the crude trading had exposed poor controls of the management.

There are Treasury trading rules, and Violation of these by Paul W. Mozer was only a major symptom of a bigger internal ailment. Even senior management including John H. Gutfreund, who was the chairman and chief executive officer of Salomon Brothers, had neglected to inform the board of the company and also the regulators about the full extent of the trading misdeeds.

Sokol"s actions at Berkshire may not be comparable to that of Mozer at Salmon but it does show a lack of oversight. The company was admired by many investors around the world for strong focus on ethics. This blind spot came in picture after the audit committee report. Nonetheless, it shows a lack of appropriate governance and control.

Sokol, who has resigned from Berkshire, said his decision to leave the company was unrelated to his purchase of the shares and that he believes he did nothing wrong. After the shareholders meeting, Sokol through his lawyer accused of making him a scapegoat.

In a statement on March 30, Mr. Buffett had said he and Mr. Sokol didn't regard the Lubrizol trades as being unlawful.

OneIndia News

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