OMAHA — Warren Buffett is sure to face tough questions about former Berkshire Hathaway executive David Sokol at this weekend’s shareholders meeting. The company issued a report this week that said the former top executive violated the company’s ethics policies.
Some shareholders say the incident — stemming from Sokol’s purchase of Lubrizol stock shortly before he recommended Berkshire buy the chemical company — demonstrates a weakness of Berkshire’s highly decentralized business model.
Berkshire’s model relies on a strong culture of responsibility and trust with little oversight of its managers. Berkshire has just 21 employees at its Omaha headquarters to oversee about 260,000 worldwide, and Buffett tells shareholders that he and Vice Chairman Charlie Munger “delegate almost to the point of abdication.”
By contrast, General Electric has about 500 executives at its Fairfield, Conn., headquarters.
