OMAHA, Neb. (AP) - A top executive of Berkshire Hathaway who was believed to be on the inside track to one day succeed billionaire Warren Buffett as CEO has resigned suddenly.
Buffett said Wednesday that David Sokol's resignation letter, delivered by his assistant late Monday, came as a "total surprise." But the resignation letter arrived less than two weeks after Buffett learned about stock trades that Sokol made before Berkshire announced its $9 billion acquisition of chemical company Lubrizol.
Buffett said Sokol, who had been serving as chairman of Berkshire's MidAmerican Energy, NetJets and Johns Manville units, indicated that he wants to spend more time on philanthropy.
"As I have mentioned to you in the past, it is my goal to utilize the time remaining in my career to invest my family's resources in such a way as to create enduring equity value and hopefully an enterprise which will provide opportunity for my descendents and funding for my philanthropic interests," Sokol wrote.
Buffett said twice before, most recently about two years ago, Sokol had spoken to him of resigning for similar reasons but Buffett and other board members convinced him to stay with the company. He accepted Sokol's resignation this time.
"I'm just totally shocked," said Andy Kilpatrick, the stockbroker-author of "Of Permanent Value, the Story of Warren Buffett." "It looked until a few minutes ago as if he (Sokol) was the guy."
Buffett said he learned March 19 that Sokol bought 2,300 shares of Lubrizol in December one day after he asked an investment banker to contact the specialty chemical maker about possible deal talks. Sokol sold those initial shares a week later, but then bought nearly 100,000 Lubrizol shares in early January about a week before recommending that Berkshire make a bid.
Buffett said the decision, announced March 14, to offer $135 in cash for each share of Lubrizol was entirely his, but that the deal wouldn't have happened without Sokol's early efforts.
Buffett said he doesn't believe those stock purchases were illegal because Sokol made them before he'd even suggested the Lubrizol deal, and said Sokol did mention in passing that he owned stock in the company when first bringing the deal up for discussion. Buffett also said that he didn't ask Sokol to resign and noted that Sokol told him that the stock purchases weren't a factor in his decision to leave the company.
"Dave's contributions have been extraordinary," Buffett said.
Buffett declined to comment beyond his statement. Sokol did not immediately respond to a message left Wednesday.
Glenn Tongue, a managing partner at the T2Partners investment firm, said it looks like Buffett believed he needed to disclose Sokol's Lubrizol purchases to investors.
"It appears as though it's something that would have made Mr. Buffett uncomfortable," Tongue said.
Buffett has regularly praised Sokol's work - especially the turnaround at NetJets he oversaw - and many investors have speculated that Sokol was on the short list to succeed Buffett at the Omaha, Neb.-based company. Besides Sokol, the other Berkshire managers who are believed to be possible successors are Ajit Jain, who runs Berkshire's reinsurance division; Greg Abel, president and CEO of MidAmerican; Tony Nicely, chief executive of Geico; and Burlington Northern Santa Fe CEO Matt Rose.
Tongue said Sokol's resignation shows why Buffett was smart not to name the candidates for Berkshire's next CEO.
"To have named Sokol a successor at this point and have him resign would be bad," Tongue said.
Eventually, Berkshire plans to split 80-year-old Buffett's job into three parts - chief executive officer, chairman and several investment managers. Buffett remains in good health and has no plans to retire, but he says Berkshire's board regularly discusses succession and knows who it would pick as CEO if an immediate need arises.
Due to Sokol's departure, Buffett said Abel will become MidAmerican's chairman; Todd Raba, president and CEO of Johns Manville, will become its chairman; and Jordan Hansell, President of NetJets, will become that unit's chairman and CEO.
Berkshire owns roughly 80 subsidiaries, including clothing, furniture and jewelry firms, but its insurance and utility businesses typically account for more than half of the company's net income. It also has major investments in such companies as Coca-Cola Co. and Wells Fargo & Co. Berkshire has more than 260,000 employees worldwide but only 21 at its headquarters in Omaha.
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Online:
Berkshire Hathaway Inc.: www.berkshirehathaway.com
Warren Buffett's statement: http://bit.ly/h05Udr
Proxy filing describing Berkshire's Lubrizol acquisition: http://1.usa.gov/e91Aaa