Sokol Exit Makes Hansell NetJets CEO Two Years After Leaving Iowa Law Firm
Jordan Hansell, who was working with his father at an Iowa law firm two years ago, now reports to Warren Buffett after David Sokol’s departure created a vacancy at Berkshire Hathaway Inc. (BRK/A)’s NetJets business.
Hansell was president at the luxury-aviation unit under Sokol, who was considered a possible successor to Buffett, 80, as chief executive officer of Berkshire. Hansell, whose resume includes a clerkship with Supreme Court Justice Antonin Scalia, distinguished himself in Iowa with legal discipline and an involvement in government, according to his father Ed Hansell, who practices business law.
“There’s probably bench strength in a lot of these Berkshire subsidiaries,” Paul Howard, director of research at Solstice Investment Research, said yesterday in a telephone interview. Hansell has been “under Sokol’s wing and got enough of a flavor of the job to be able to take it over.”
Hansell, 40, will need to recruit millionaires willing to purchase time on the aviation unit’s expanding fleet. Under Sokol, who took over at Columbus, Ohio-based NetJets in 2009 and resigned last week, the business returned to profit and struck a deal to order as many as 120 jets from Bombardier Inc. (BBD/B) in anticipation of a rebound in corporate aviation.
Gregory Abel, who heads Berkshire’s MidAmerican Energy Holdings Co., recruited Hansell for NetJets in 2009, according Ed Hansell. The unit was a pioneer in so-called fractional- ownership programs, which allow customers to acquire a percentage of an aircraft and flight hours.
NetJets reported a $207 million pretax profit in 2010, helped by a 7 percent increase in sales, compared with a loss of $711 million a year earlier, according to Berkshire’s 2010 annual report. It posted an aggregate pretax loss of $157 million in the 11 years through 2009.
“NetJets’ problem was they weren’t making money in the good times,” said Richard Aboulafia, an aircraft consultant and analyst at Teal Group, based in Fairfax, Virginia. “They were focusing on market share and growth to the exclusion of profits. And what Sokol was doing and what I suspect his successor will continue to do is focus on pricing and profit, rather than volume and market share.”
The aviation unit said in November that it will make loans to clients after sales declined during the financial crisis. The financing minimum is $100,000 and the loans are available only to commercial customers, according to a statement.
Jordan Hansell declined to comment, Lynn Wombacher, a NetJets spokeswoman, said in an e-mail. Buffett didn’t respond to a message left with an assistant. Scalia declined to comment, Kathy Arberg, a court spokeswoman, said in an e-mail.
Sokol, 54, bought 96,060 Lubrizol Corp. shares in January, less than two weeks before recommending the firm as a Berkshire takeover target, Buffett said in a March 30 statement announcing the resignation. Buffett said he believes Sokol’s trades were legal. Berkshire’s $9 billion agreement to acquire Lubrizol, a maker of engine additives, was announced March 14.
Sokol also stepped down from the board of BYD Co., the Chinese automaker in which MidAmerican has a stake, according to a Hong Kong stock exchange filing. He also resigned as chairman of MidAmerican, and that post was given to Abel.
Hansell attended Duke University, then received a law degree and a master’s in public policy from the University of Michigan. He clerked for U.S. Court of Appeals Judge Harvie Wilkinson as well as Scalia. He spent about 10 years at Nyemaster, Goode, West, Hansell & O’Brien PC, a Des Moines, Iowa-based law firm.
“I thought someday he might very well end up at a company,” Ed Hansell said in a interview. “He’s always been a good thinker. He can step back and see the big picture and see ways things can be resolved and solved. Sometimes it’s difficult for lawyers. We’re not trained to do that.”
In August 2009, MidAmerican Energy’s Abel, who lives in the Des Moines area, recruited Jordan Hansell to become general counsel of NetJets, Ed Hansell said.
In November, Hansell was promoted to president, about the time NetJets bought private-jet-card firm Marquis Jet. He learned the NetJets business from Sokol, and that should help him make a transition to CEO, his father said.
“He had the benefit of David Sokol’s guidance, because David is a very astute businessman,” Ed Hansell said.
Berkshire, based in Omaha, Nebraska, has a track record of hiring and promoting little-known managers, said Solstice Investment Research’s Howard. Buffett, also the company’s chairman and biggest shareholder, prepares for sudden departures by asking unit CEOs to name candidates to replace them.
Letters to Buffett
“Please send me a letter (at home if you wish) giving your recommendation as who should take over tomorrow if you should become incapacitated overnight,” Buffett said in a memo to managers dated July 26 and included in his most recent annual report. “Please summarize the strengths and weaknesses of your primary candidate as well as any possible alternates you may wish to include.”
NetJets had to be ready for a leadership transition, Hansell told the Columbus Dispatch.
“We knew this was coming in a general sense,” Hansell said of Sokol, according to the newspaper. Sokol had “been saying he was going to step back for a long time.”