RENEE MONTAGNE, host:
This weekend, one of the biggest financial gatherings of the year is taking place in Omaha, Nebraska. It's been called the Woodstock of capitalism, and it's the annual shareholders meeting of Berkshire Hathaway, the company run by Warren Buffett.
To find out more about what's happening there this year, we've reached financial reporter Roger Lowenstein.
Good morning.
Mr. ROGER LOWENSTEIN (Reporter): Good morning.
INSKEEP: Let's start with who is attending this meeting - that is, what is it about them and this meeting that makes it, you know, that makes them Buffet-heads?
Mr. LOWENSTEIN: Well, Renee, every company in America has annual meetings, but most of them are, you know, really considered dead as doornails and nobody goes. To this one, simply the shareholders of Berkshire Hathaway, some 40,000 people or so, are expected to go. They used to do it in the basement of a hotel and now they take over a convention center. And as you said, it's the Woodstock of capitalism.
MONTAGNE: And as the oracle of Omaha, people have long adored Warren Buffet. You've referred to him as the Prairie Sage. But some recent events at that company threaten his reputation. Remind us of what happened.
Mr. LOWENSTEIN: Yes. What happened recently, Berkshire acquired a company called Lubrizol, a chemical products company. And it came out in March, just as Berkshire was agreeing to acquire that company, that a senior executive of Buffet's, a man named David Sokol, had invested for himself $10 million in the stock before Berkshire acquired this company and actually made a personal profit for himself, Mr. Sokol did, of $3 million. And you know, this seemed to violate and did violate Berkshire's conflict of interest policy that executives should be working towards the furtherance of Berkshire, the company's interest, not to his personal interest.
MONTAGNE: Did it qualify as something illegal, like insider trading?
Mr. LOWENSTEIN: Well, you know, insider trading is a very murky issue and the only answer to that right now is nobody knows. But the really important thing is that Buffet has always been famous for enforcing a higher standard. He said once quite memorably to Congress that he would make sure that investment bankers under him at the time would have to operate way, way away from the line. Meaning it wasn't just good enough to be a millimeter on the right side of lawfulness. You had to be way, way from the line.
MONTAGNE: So then, of course, this was compounded by how Warren Buffet reacted. Tell us about that.
Mr. LOWENSTEIN: Well, initially his reaction was very disappointing. He issued a press release which said that he and Sokol had concluded that Sokol had not violated the law, which seemed really to duck the ethical point, the point that Buffet has always stressed that you have to be way, way away from the line. But just this week Berkshire and Buffet came out with a much stronger statement in which they said that Sokol's behavior had clearly violated the conflict of interest policy at Berkshire. It says that further, that Sokol hadn't been candid with Buffet. So having disappointed his fans initially by not condemning Sokol, Buffet has gone a long way towards defusing their concern.
MONTAGNE: So what is expected to happen at the meeting on the weekend?
Mr. LOWENSTEIN: Well, I think they'll be a ton of questions. There will be shareholders as always from all over the world, most of the 50 states, India, China, and they're all going to be wanting to hear more about the David Sokol affair. Given Berkshire's recent press release, I'm not sure that there's much more that they're going to learn.
MONTAGNE: Although do you think there will be a long-term fallout of the Sokol situation?
Mr. LOWENSTEIN: That's a very good question. You know, Buffet is 80. There's intense focus on who his successor might be, and I think his at least momentary slip in this case - David Sokol, after all, was rumored to be his chosen successor - is going to put added pressure on the board of Berkshire Hathaway to say, yes, we have an American icon running this company, but he needs supervision just as every other CEO does.
MONTAGNE: Roger Lowenstein is the author of "Buffet: The Making of an American Capitalist." Thanks very much.
Mr. LOWENSTEIN: Thank you. Transcript provided by NPR, Copyright NPR.
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