Buffett Delayed Sokol Plan for Career Wind-Down With More Work
David Sokol, the Berkshire Hathaway Inc. manager and dealmaker, made some of his biggest contributions to the firm after telling Chairman Warren Buffett about three years ago that he planned to reduce his role.
“I told Warren I thought I would kind of step back,” Sokol said this week in an interview at Bloomberg headquarters in New York. “We had just had our first granddaughter, and he said, ‘Well, wait a minute, I’m not sure you’re ready to do that.’”
Sokol, 53, gave up the chief executive officer’s job at Berkshire’s MidAmerican Energy Holdings Co. in early 2008. Since then, he’s been enlisted by Buffett, 79, to restore profits at luxury-flight unit NetJets Inc., lobby Congress for protection against new derivatives rules and guide what’s become a $1.4 billion investment in China’s BYD Co.
Sokol has emerged as a top lieutenant as Buffett, CEO of Berkshire for the last 40 years, positions the company for his eventual departure. The billionaire approached Sokol with the first of his new assignments, bolstering Berkshire’s Johns Manville building-materials unit, about a month after the two men spoke about the MidAmerican transition. Sokol said he was thinking that he might “just get out of the way.”
“Warren has a tendency to not let you do that very well,” Sokol said of his attempt to step aside. “And so it’s just kind of grown from there.”
Sokol remained chairman of MidAmerican and focused on making deals after handing operational duties to longtime business associate Gregory Abel. One transaction, a rescue package for Constellation Energy Group Inc. signed at the depths of the financial crisis, gave Berkshire a $917 million profit after the power company backed out and took another deal.
Sokol went to China to review carmaker BYD at the request of Berkshire Vice Chairman Charles Munger and was appointed to the board of the Shenzhen-based firm in 2008. Last year, Buffett installed Sokol as chairman and CEO of NetJets after the unit slipped into losses under its founder Richard Santulli. Sokol restored earnings in part by firing pilots.
“I owe David Sokol enormous credit,” Buffett told shareholders at Berkshire’s annual meeting in May. “He turned that thing around like no one could have.”
Sokol said his oversight of NetJets now takes up less of his workday than it did last year and he expects a new CEO at the unit will probably be named by the end of December. In April, he lobbied Congress on the financial-services overhaul, speaking out against regulatory proposals which he said threatened to trigger billions of dollars of new collateral requirements on Berkshire’s derivatives. This month, the firm said it doesn’t expect any material impact from the overhaul.
Sokol is considered by some, including Buffett biographer Andrew Kilpatrick, as the frontrunner to take over as Berkshire CEO when the billionaire retires. Sokol said he’ll continue working at Berkshire after Buffett steps down and won’t consider joining another company. Buffett has refrained from naming a successor or publicly discussing potential candidates, an approach that Sokol said spares the eventual replacement from the job’s pressure until the change is made.
“I absolutely applaud him for not saying who it is in advance,” Sokol said. “I certainly wouldn’t want him to say me, if that were the case, because you’re going to destroy that person.”
Buffett has said his responsibilities will be split, upon his death or retirement, among at least three people. A CEO will oversee the collection of more than 70 operating units assembled by Buffett, and one or more investment chiefs will be appointed to allocate capital and manage Berkshire’s portfolio. Buffett’s son Howard will probably assume the position of non-executive chairman to preserve the firm’s culture.
Sokol joined Berkshire in 2000 when he sold MidAmerican to Buffett for more than $8 billion. He remained at the helm of the power producer under Berkshire and expanded the business through acquisitions. MidAmerican contributed income of more than $1 billion to Berkshire’s profit in 2009.
“He was capable of deploying a considerable amount of money for Berkshire with the rollout and expansion of MidAmerican,” said Thomas Russo, a partner at Gardner Russo & Gardner in Lancaster, Pennsylvania. “That’s one of the most prized skill sets at Berkshire: How do you put investments to work profitably. And I think he’s showed an enormous ability to get that job done.”