After looking at several articles on the topic of David Sokol I have a real good understanding of the issues he is facing and whether they are unethical or not. David Sokol is a former top executive of Berkshire Hathaway and there were some questions raised about whether Sokol was participating in insider trading while working with the firm.
It all started when Sokol recommended to Warren Buffett to use the companies cash to buy out the company Lubrizol.
"According to The Wall Street Journal, Sokol's initial interest in Lubrizol was piqued during a Dec. 13 meeting with Citigroup bankers to discuss a list of "possible transactions." According to Dealbook, Sokol bought 2,300 shares of Lubrizol on Dec. 14, which he then sold on Dec. 21."
These actions started to raise question when Sokol bought 96,060 additional shares on January 5th. The very next week he pitched the idea to Buffett to purchase Lubrizol. Just two months later Berkshire's board announced the $9.7 billion it spent to acquire Lubrizol boosting Sokol's stock holdings by 27%. After Buffett soon realized what had happened he removed Sokol from Berkshire in fear of public embarrassment.
These behaviors represent what we consider insider trading, which by definition states, insider trading requires the perpetrator to possess "material nonpublic information at the time he bought or sold the stock and to have breached a duty to his employer. Different lawyers have assessed the situation and have suggested that Sokol would be not found in violation, because at the time of the purchase of the stocks he did not know if Berkshire was going to buy out Lubrizol. This is a very gray area being that the facts point fingers at Sokol because of his large profits he incurred during his last months at Berkshire.
This is a clear issue of unethical behavior and I feel that David Sokol portrays the theory of Ethical Egoism. His actions show that he is more concerned with the greater good for himself. This theory is usually good when it is applied to the entire organization as a means to maximize profits. However when one single person revolves all of their decisions around that mentality, there is room for error, and unethical behavior seems inevitable.
The biggest question is do you think that David Sokol is unethical in his ways of conducting business?
Do you think that he was in violation of insider trading, even though technically by law he was not?
Below are all of the articles I read over to gain full knowledge on the topic:
http://www.dailyfinance.com/story/market-news/warren-buffett-successor-david-sokol-resigns-lubrizol-stock-trade/19898158/
http://seekingalpha.com/article/261170-what-david-sokol-s-departure-means-for-berkshire-hathaway
http://blogs.forbes.com/frederickallen/2011/04/04/sokols-behavior-under-buffett-unethical-executives-agree/
I think that even if David Sokol is in violation of insider trading, he still should have had the decency to recognize that even though he was following the law, that he was making an unethical decision. How can he be a leader of a company if he is creating a culture for his business to be unethical? This goes back to setting an example as a CEO in order to not only follow the rules, but to base decisions off of corporate social responsibility and ethics. He should follow the principles of ethical leadership in order to create a culture for his company. The five principles are as follows; respect others, serve others, show justice, manifest honesty and build a community. By following an ethical leadership standpoint, there will be a much lower chance of employees making unethical decisions because they would trust their leader and his values.
ReplyDelete-Lauren Mowers
Even that David Sokol violation insider trading technically by the law, I think he was unethical in his ways of conducting business. And I strongly agree with Lauren that he should follow the principles of ethical leadership. I do not think his leadership style will work in the long run. If he goes as a role model and are unethical, his followers are going to do the same. He could also follow “Model the way” in Kouzes and Posner practices regarding to Transformational Leadership there leaders follow through on their promises and commitments and affirm the common values they share with others.
ReplyDelete- Eva-Lena Juhlin
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ReplyDeleteI agree with Lauren as well. I think even though he was not breaking the law, he was definitely unethical and unfair.
ReplyDeleteThis is just as we discussed in class concerning whether or not Google was acting ethically even though they weren't breaking any laws. This goes back to the deontological perspective we studied, that he has moral obligations and responsibilities to do the right thing.
Also, as a leader he is held to a higher standard, and is more responsible for his actions.
-Melissa Beechy
-Kyle Turner Wrote this blog post
ReplyDelete