OMAHA — In Warren E. Buffett’s view, he was as ruthless as ever.

The chairman of Berkshire Hathaway — who has faced scrutiny for weeks after revelations that a top lieutenant, David L. Sokol, bought $10 million of shares of Lubrizol while orchestrating an acquisition of the company — has been criticized for his initial response to the situation. In a press release, Mr. Buffett provided a detailed account of the questionable trades and declared that he did not believe the purchases “were in any way unlawful.”

But the public was vocal. Admittedly, I’ve been among those scratching my head about his reaction. After all, this is a guy whose mantra is, “Lose money for the firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless.”

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Responding to the criticism, Mr. Buffett said, “What I think bothers some people is that there wasn’t some big sense of outrage.” He added, “I plead guilty to that.”

Over the weekend at Berkshire Hathaway’s annual shareholder meeting, where I was one of the three journalists posing questions to Mr. Buffett and his partner Charlie Munger, I think I have finally come to understand Mr. Buffett’s thinking.

While Mr. Buffett praised Mr. Sokol in the statement announcing the resignation, he left out one big “ruthless” fact that would change the narrative completely. The day he issued the release, Berkshire called the Securities and Exchange Commission and briefed them on Mr. Sokol’s trades, which Mr. Buffett described to me as “pretty damning evidence.”

“Calling the head of the enforcement division of the S.E.C. and laying out a pattern of trading that you know is going to result in something — Dave probably thought it was pretty harsh,” Mr. Buffett told me.

The S.E.C. is now investigating the matter, people briefed on the inquiry said. In a statement after the Berkshire meeting, a lawyer for Mr. Sokol issued a statement, saying the stock trades did not violate the law or Berkshire policy.

A close friend of Mr. Buffett’s explained his thinking this way. “Warren knew that the second that press release hit the wires, Sokol’s professional career was over. Done. Forever. Sokol was finished. He didn’t need to brag about being ‘ruthless.’ ”

“The media wanted more — a nasty quote about how upset Warren was with Dave. But what’s the point? Just laying out the facts so publicly was the most ruthless thing he could have done. If you worked at Berkshire, you got the message loud and clear.”

Mr. Buffett, who was clearly overcome with emotion at the time he drafted the original press release and is said not to have slept well for several days that week, said he praised Mr. Sokol out a sense of fairness.

“I felt that if I’m laying out a whole bunch of facts that are going to create lots of problems for him for years to come, that I also list his side of the equation in terms of what he’d done for Berkshire,” Mr. Buffett said.

That’s not to say Mr. Buffett or Mr. Munger believed they handled the situation perfectly.

“I think we can concede that that press release was not the cleverest press release in the history of the world,” Mr. Munger said. “The facts were complicated, and we didn’t foresee appropriately the natural reaction.”

“But I would argue that you don’t want to make important decisions in anger,” he continued. “You want to display as much ruthlessness as your duty requires, and you do not want to add one single iota because you’re angry.”

“You can always tell a man to go to hell tomorrow.”

Upon reflection, however, there may be virtue in Berkshire’s measured approach.

Despite all the blaring headlines and questions about whether Mr. Buffett’s reputation has been forever tarnished, Berkshire’s shareholders, the ones who actually have money on the line, seemed to be fine with the way the matter was handled.

At the shareholders’ meeting, I could not find any who were overly worked up about the matter or were raising larger questions about Berkshire’s compliance programs. Mario Gabelli, a big investor with shares of Berkshire, called the Sokol episode “irrelevant” and derided it as “a good story for the media.”

Nor did they seem worried about succession. Mr. Buffett made a passing remark that actually may have been the most telling of the entire weekend. After a query about whether Mr. Sokol had been his heir apparent, Mr. Buffett replied that the question “made an assumption there about Sokol being the next in line, which I’m not sure was warranted.”

From an investment perspective, Mr. Gabelli said the Sokol matter would not impact his thinking on the company, succession or anything else. He, like Mr. Buffett, simply cares about the company’s cold, hard numbers.

As for Berkshire’s compliance programs, which are not nearly as tough as those at most investment firms, Mr. Buffett clearly believes that he must run his company based on a modicum of trust.

“We can have all the records in the world and if somebody wants to trade outside them or something, you know, they’re not going to tell us they’re trading in their cousin’s name,” Mr. Buffett said. Mr. Munger added. “I think your best compliance cultures are the ones which have this attitude of trust and some of the ones with the biggest compliance departments, like Wall Street, have the most scandals.”

By the end of the weekend I still got the sense that Mr. Buffett, while furious with Mr. Sokol, struggled to publicly criticize him.

When asked why he thought Mr. Sokol did it, he repeatedly said it was “inexplicable.”

Mr. Munger, who often acts as the unfiltered version of Mr. Buffett, put it more bluntly, with a simple, one-word reply: “hubris.”

Article source: http://feeds.nytimes.com/click.phdo?i=3f493291bcc808f268b7822eef4a4b4b