An informal poll of a members of a New York-based business networking group found many of them questioning the ethics and legality of the stock purchases by Omahan David Sokol that preceded his resignation from Berkshire Hathaway Inc.
“I think we hit an emotional chord with folks,” said Jason Redlus, managing member of the Argyle Executive Forum.
Sokol resigned March 28 from three subsidiaries of Berkshire, the Omaha investment company headed by Warren Buffett. He purchased shares of Lubrizol Inc. and then recommended it to Buffett as an acquisition. Sokol's shares of Lubrizol gained $2.8 million in value after Buffett announced the still-pending $9 billion acquisition. He later said the share purchases were not a factor in his decision to resign.
The issue sparked debate nationally, which prompted Redlus to draw up three questions and e-mail them to about 5,000 of the forum's members about 10 a.m. EST Monday. Five hours later, he had 800 responses and sent out a press release listing the results.
Redlus said he wasn't surprised at the rapid reaction from forum members, given the intensity of the debate about Sokol. “It's a pretty tuned-in audience, for sure. It's not the general public. It's a community of senior business people.”
The forum takes half a dozen such polls of its members each year, choosing business-related topics that are in the news and subject to debate or split opinions.
Of those polled, 25.1 percent said Sokol's stock purchases were illegal, 77.5 percent said they were unethical and 47.7 percent thought the law should be changed to make them illegal. But 36.1 percent said his purchases weren't illegal, 12.2 percent said they weren't unethical and 31.6 percent opposed changing the law.
“It was interesting,” Redlus said. “Either people don't know or don't care it's illegal or not, but they do think it's unethical.”
Separately, 23 of the 25 investment bankers polled at a Global Mergers and Acquisitions Summit, held in New York last week by Reuters, said Sokol should not have bought Lubrizol shares while pitching the company to Buffett, according to HedgeWorld Daily News. And about one out of five of them said they thought Sokol would face insider trading charges.
The U.S. Securities and Exchange Commission reportedly is investigating the transactions.
Sizing up BYD
While BYD's all-electric auto, known as the e6, will make an appearance at Berkshire's April 30 shareholders meeting in Omaha, the Chinese auto and battery power company is getting mixed reactions.
An Economist newspaper report from Shanghai said BYD, which is 10 percent owned by Berkshire, has missed several planned introductions of its cars to the United States, and domestic sales have fallen as customers in China switch to other, “nicer” brands.
“In theory, BYD's battery and car operations added up to an expertise in electrical cars,” the paper said. “In reality, the technology of low-powered phone batteries is quite different from that of high-capacity car ones. The firm may be having similar difficulties in achieving synergies between its solar-panel division and a rumored project to make energy-efficient appliances.
“Two years ago BYD symbolized China's glorious prospects. These still exist, but today the firm may reflect how hard they are to realize.”
But last week BYD's share price jumped 5.78 percent after the company reported its March sales were up 51 percent from February, to 40,027 vehicles, MarketWatch reported.
Philanthropy apathy
The Economic Times reported that “barely a dozen” of India's 55 or so billionaires attended last month's dinner with Buffett and Bill and Melinda Gates to discuss philanthropy. The richest, Mukesh Ambani, went to a soccer match instead.
“Does it mean Indian billionaires are indifferent to the cause of giving and only interested in creating wealth?” the newspaper said. “That may be an unfair conclusion.”
India's super-rich may make donations, even if they don't want to sign their names to the “giving pledge” that Buffett and the Gateses started in the United States last year. So far 59 individuals or couples have signed, pledging to donate at least half their wealth to charity.
Yusuf Hamied, chairman and managing director of the pharmaceutical company Cipla Ltd., said:
“Philanthropy in the first world and in the third world are two different things. In the first world, people donate to build a baseball stadium. In India, we have to decide for ourselves what we want out of philanthropy. It is not for the Americans to tell us.”
Harsh Goenka, chairman of industrial manufacturer RPG Enterprises, said, “Our group's charity is not about writing fat checks. It hinges on education, employability and environment.”
“When people like Azim Premji, Narayana Murthy, Vineet Nayar, Kalpana Morparia and Hemendra Kothari do charity, they never ask for publicity,” Goenka said. “Now that the real growth has started taking place over the past decade, we expect to see Indian businesses doing a lot more charity. It's already evident.”
Anu Aga, director of Thermax India, said, “We have come from a closed economy with crippling taxes, not too long ago, where profit was considered a dirty word.”
Meeting with students
The Hindustan Times published excerpts from a discussion with Indian business students by Buffett and Ajit Jain, head of Berkshire's property-casualty insurance operations, with Prannoy Roy as the moderator.
Among their comments:
Jain said Buffett “advises me a lot. We have conversations every evening, and almost all I do, I have the chance to run it by him and get the benefit of his wisdom and advice. That is the biggest perk of my job.”
He said Buffett is “very disciplined, no question. He is the most rational, disciplined human being you can come across. . . . He is emotional, but it doesn't come in the way of his rationality. I don't think one needs to come at the expense of the other.”
Buffett said he made a mistake in not trying to invest in India sooner, but he has never gotten a telephone call from India offering to sell him a business.
Added Jain, “I think the truth is that India's stayed away from him. His investment style is not so much to identify a product segment and then zero in on that, it's more like people serve him up with opportunities and he evaluates his opportunities and then says yes or no. Unfortunately we haven't had that kind of opportunity from here.”
Said Buffett: “Now I'm leaving my phone number all over.”
Jain also told the Economic Times that his job is more fun and easier because he doesn't have to worry about what to do with the cash that Berkshire's insurance business generates because Buffett takes care of that duty.
“We have a boss, we have a board and we have a company that can withstand a multi-billion dollar loss without affecting how we do our business and without blaming any individual for a wrong decision,” Jain said. “We have zero pressure to deploy the capital, which is a huge tailwind.
“If I compare my job with CEOs of other reinsurance companies, they are under pressure to deploy capital; I can focus on the insurance business without having to worry about going into the capital issues.”
In any language
“Buffett's Bites,” a book that breaks down Buffett's annual letters by topic and adds commentary, has been translated into Russian and is a best-seller in that country, author Laura Rittenhouse said.
Buffett's concepts of capitalism apparently appeal to Russians interested in developing their country's economy, she said. The book also has editions in Portuguese, Chinese (two versions), Norwegian and Korean, with Spanish and Hindi coming up, Rittenhouse said.
Contact the writer:
402-444-1080, steve.jordon@owh.com
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