by by Baz Hiralal | Published March 31, 2011 at 12:18 PM
Surprisingly, Berkshire Hathaway Inc. CEO Warren Buffett announced the resignation of David Sokol, who has been speculated to succeed the Oracle of Omaha. Sokol was chairman of MidAmerican Energy Holdings Co. and previously chairman, president and CEO of NetJets.
The gist of it: Sokol resigned because questions arose about his buying shares in Lubrizol Corp. and then suggesting that Buffett invest in the specialty chemicals company. Berkshire ended up acquiring Lubrizol on March 14 for $9.7 billion. Lubrizol shares went up and so did Sokol's return. None admit any wrongdoing, and Sokol says he didn't know Buffett would buy the company. Buffett wrote: "Dave brought the idea for purchasing Lubrizol to me on either January 14 or 15. Initially, I was unimpressed, but after his report of a January 25 talk with its CEO, James Hambrick, I quickly warmed to the idea. Though the offer to purchase was entirely my decision, supported by Berkshire's Board on March 13, it would not have occurred without Dave's early efforts."
If Sokol truly didn't know Berkshire would acquire Lubrizol, he would likely be in the clear from any possible investigation by the Securities and Exchange Commission for insider trading. Also, while the resignation was a surprise to many, Sokol has wanted it for some time. Buffett continued in his announcement: "I had not asked for his resignation, and it came as a surprise to me. Twice before, most recently two or so years ago, Dave had talked to me of resigning. In each case he had given me the same reasons that he laid out in his Monday letter. Both times, I and other Board members persuaded him to stay."
In a CNBC interview, Sokol said, "Looking back, I would not have mentioned the company to Buffett, but would still have bought the Lubrizol stock."
With Sokol out, Greg Abel, presently president and CEO of MidAmerican Holding Co., will become its chairman; Todd Raba, president and CEO of Johns Manville, will become its chairman; and Jordan Hansell, president of NetJets, will become its chairman and CEO.
But of course, there's still one position that will need filling: Who will replace Buffett when he decides to leave? Todd Combs joined Berkshire as an investment manager in October. I speculated that Combs could have been part of a management team, which could include the CEO's son, Howard Buffett, and Sokol, that could eventually succeed Buffett. With Sokol out, it's anybody's guess.
Perhaps there's another fund manager out there Buffett has his eyes on. One thing is for sure; the Oracle knows how to pick 'em.
Goldman, Sachs & Co. veteran Tracy Caliendo will join Bank of America Merrill Lynch in September as a managing director and head of Americas equity hedge fund services. For other updates launch today's Movers & shakers slideshow.
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