Tag Archives: Warren Buffett
The Oracle of Omaha Redux
May 2, 2011
What a difference a month makes. Last month Warren Buffett was praising David Sokol, his erstwhile successor who made a hasty departure amid the scent of an insider trading scandal, as a great guy whose purchase of Lubrizol shares prior to the Oracle of Omaha buying the Company “were not in any way unlawful.” At this weekend’s Berkshire Hathaway annual meeting, normally a lovefest for 40,000 Buffett shareholders and devotees, the Oracle used words like “inexplicable”, “inexcusable” and “very damning evidence” to describe Sokol and what now looks like share purchases that will end with a perp walk.
Buffett is legendary for his investment acumen and vigilance regarding his and his firm’s reputation. After a month in the media spotlight regarding the Sokol/Lubrizol affair where questions swirled about what the Oracle knew and when he knew it, whether he was just getting too old and was off his game, or whether he was just a hypocrite when it came to Sokol, Buffett came clean and admitted that he “obviously made a big mistake.” Time will tell whether Buffett’s reputation took a hit. He has built up considerable good will over the years and the Sokol fiasco as well as the big hit to Berkshire Hathaway profits in the first quarter as a result of insurance losses will likely not do lasting damage to the man or his company’s reputation.
The Sokol/Lubrizol affair is just the latest example of the response to a crisis situation creating seemingly more problems for a company and its executives than the crisis itself (think Toyota, BP, Goldman Sachs and Johnson & Johnson). Crisis communications 101 teaches that you take control of the message quickly, be transparent, only release information on what you know and never speculate. From the start, Berkshire Hathaway dropped the ball, whether due to Buffett’s loyalty to a key member of his team or just not knowing the facts. The media jumped all over the issue and for a month reveled in discussing the seamy details and timeline of events, repeating Buffett’s reputation mantra and highlighting the ode to Sokol in the company’s press release.
Now, a few weeks late, Buffett has held forth on the issue and provided a mea culpa. Charlie Munger, Buffett’s right hand man summed it all up nicely at the annual meeting in typical Berkshire Hathaway understatement when he admitted that it “wasn’t the most clever press release in the world.” It also wasn’t the most clever way to respond to a crisis and that should be the lesson for the normally very clever Oracle and the rest of us.
No Longer the Oracle?
April 8, 2011
Warren Buffet is famously known for saying, “lose money for the firm and I will be understanding; lose a shred of reputation for the firm and I will be ruthless.” The quote and the speaker are often seen as benchmarks for those of us in the reputation management business. However, the Oracle of Omaha is now embroiled in perhaps the biggest reputational crisis of his career after the surprise resignation of heir apparent David Sokol. The story has pivoted into a fulsome discussion of Buffett’s image and how much he knew or wanted to know about Sokol’s purchase of Lubrizol shares and subsequent recommendation of the company to his boss prior to Berkshire Hathaway’s purchase.
Buffett’s press release/letter on the subject, starts by expressing shock at Sokol’s departure and praises his extraordinary contribution to Berkshire Hathaway. He ‘secondly’ discusses the Lubrizol situation and concludes that nothing unlawful occurred. Unfortunately, regulators, who have already started investigating, may not see it that way and the incident has unleashed a relative savaging of Buffett by a normally fawning analysts and media. Yesterday’s column by David Weidner in the Wall Street Journal goes so far to as to chronicle a decade-long decline in Buffett’s mastery of his reputation.
The Sokol fiasco and media frenzy of the last ten days is guaranteeing that the Berkshire Hathaway annual meeting later this month will not be the usual lovefest in Omaha. The folksy Q&A format will no doubt be a lot more tension filled. Buffett has said that he will simply refer any questions on the Sokol and Lubrizol matters to the press release/letter issued on March 30. But that just won’t cut it. Buffett has already damaged his reputation by not addressing the very real concerns on the issue and any stonewalling at the annual meeting will only do further damage. He needs to meet this crisis head on and draw on his strength as a plain-speaking Nebraskan to tell shareholders what he knew when he knew it and show some ruthlessness regarding his and Berkshire Hathaway’s reputation. Buffett has already wasted precious time but the goodwill he has engendered over the years gives him a chance to rebound. He needs to be his usual candid self and provide the answers his audience wants. A better mea culpa, if his lawyers let him, also wouldn’t hurt.
As he prepares for the annual meeting, Buffett can refer to the recent DealBook post by the New York Times’ Andrew Ross Sorkin, one of the media regulars at the gathering, for a great list of questions to prepare for.
Succession Planning is a hot topic, with some of America’s Most Admired companies in the thick.
Speculation abounds about Warren Buffett’s successor, with general consensus being that Berkshire Hathaway can succeed in naming a potential new CEO, but that Buffett couldn’t be replaced. The communication about identification of successors, “should Buffett need one” are presumably about Buffett’s age…and perhaps a bit of a reaction to all of the emphasis on succession planning due to recent photos of a frail, thin Steve Jobs (who missed Apple’s annual meeting) entering a cancer clinic.
In contrast, it would seem that discussion of a successor at Apple might, unfortunately, be prudent, in the midst of Steve Jobs third medical leave in seven years. Yet Apple’s shareholders rejected a proposal requiring that Apple detail a succession plan. The company had opposed this proposal from the Laborers International – who has been advocating for succession planning and disclosure of such for the past few years and made similar proposals to Whole Foods and Bank of America.
There is no doubt that succession planning is a Board of Directors’ imperative…but should it be a communications priority? Do your stakeholders need to know about your succession plans, or simply need to know that you have plans in place? This is particularly sticky when your leader is iconic, like Buffett and Jobs.
My two cents: stakeholders need to know that you have a succession plan in place, like Frontier Communications’ innovative board member/potential successor mentor program. Unless that succession is imminent – whether a planned succession like Gates or Welch, or potentially accelerated by a health problem, or scandal, like HP, the specifics of your succession plans need not be disclosed. It undermines the authority of the leader in place, and diminishes his or her relevance.
In a perfect world, a succession is planned with an appropriate transition period…the successor is named, has his or her “tires kicked” by key constituencies, and works closely with the current CEO through a transition period. By the time that transition occurs, it becomes somewhat of a non-event. But we all know that this isn’t a perfect world.
What to do when succession is forced, unexpected or accelerated? This is the time for amped up communications programs to support the new leader…to build trust, engage key stakeholders and create a leadership platform and profile for your new leader. Make the time. Or you may be dealing with another succession sooner than you planned.
Bold Predictions…reputation builders, or a big BUST?
February 8, 2011
It’s hard to break through the clutter and make real news….and even harder to make a real difference. In the recent past, we’ve seen iconic Companies and leaders make the biggest, boldest predictions ever…Warren Buffet is going to get billionaires to give away half of their wealth. Bill Gates and the Gates Foundation are going to end HIV in Africa and Reinvent Education, among other things; and Google was going to reinvent philanthropy with Google.org (DotOrg).
These are major initiatives – the kind that get e-mailed about in ALL CAPS. They garner big headlines, and the kind of in-depth media coverage and ongoing discussion that is hard to accomplish in a world where stakeholders lose interest in seconds and minutes, not hours or days. They underscore your position as a game changer, a mega-influencer and certainly, a leader.
But what happens when you can’t deliver? Is it better to get credit for taking on the biggest, most unsolvable problems? Or better to tackle something smaller and succeed?
The easy answer is – it depends. One factor to consider when making such bold pronouncements is this:
Do you have the kind of leader who can pull this off? Who has enough gravitas to change the way others think, and act? And enough influence to get others to follow, and to play by your “new rules.”
Consider the three examples we began with:
Buffet’s fellow billionaire’s are jumping on his bandwagon. Not all of them, but enough of them to make a credible case that he is changing the notion of philanthropy among those who have the resources to make the biggest impact.
Gates is tackling far more complex problems than Buffet…things that have plagued the world for generations (on the short end) and even centuries. Has he solved one of those problems entirely? Not yet. Is he making an impact…I think so. And the Gates “likeability factor” has risen exponentially in the process.
Google’s Dot Org project is another story altogether. They’ve made good on their promise to commit their financial and human capital resources to reinventing philanthropy….but it’s hard to say they are actually succeeding in the bold, game-changing way they originally envisioned. The reasons for this are complicated….and in part due to a mismatch between the Google “silver bullet” model of change, and the nature of the problems they’ve tried to tackle. (This piece from the NYT does a great job in discussing the DotOrg issues). But I would argue it is also about their lack of a leader who really owns it, and is a meaningful “face” to both the Google brand and the DotOrg mission.
The moral of the story – big, bold pronouncements need a big, bold pronouncer.