David Sokol knows how Buffett and Munger think. He knows what would be attractive to them.
So, even if the initial comments from Buffett were negative on the purchase of Lubrizol, Sokol, having more data, could be confident, because once the full data were available to Buffett and Munger, the deal would likely be done.
Sokol has been one of Buffett’s CEOs for awhile. You think he can’t recognize another man who would be a good fit for Buffett? I suspect he knows the pattern intuitively. Buffett likes managers who think as he does; Sokol knows what sort of manager that is; once Buffett talked to the CEO of Lubrizol, the deal would be done.
With that as background, I fault Sokol for buying a lot of shares of Lubrizol, knowing that he would recommend the purchase to Warren, where the odds were in his favor that Warren would buy. This also takes into account the goodwill that Sokol has with Buffett and Munger, given his management of MidAmerican, and his turnaround of NetJets. Don’t think that that means nothing, even if Buffett says otherwise.
My view is that it was unethical, but not illegal, for Sokol to recommend the purchase of Lubrizol without disclosure of the size of his position in Lubrizol. Mere mention of a position is not enough, unless it was a small position.
Yes, Sokol could not force the purchase, but he could have not brought it to Warren, in which case he would have made or lost money off of operations. By buying, and then recommending the stock to Buffett, he raised his odds of a successful outcome. That is a way of misusing your influence within the organization that you serve, which is unethical.
