Buffett's Policies Went Unheeded

This posts relates to David Sokol's ethical practices. Formerly an employee of Berkshire Hathaway Inc. and seen by many as the possible successor of Warren Buffet as CEO of Berkshire Hathaway, David Sokol made purchases of stock in a company which he recommended Berkshire Hathaway purchase one week later. Warren Buffet explicitly defined the ethical standards he expected of his employees in a memo one year earlier titled "Insider Trading Policies and Procedures". David Sokol obviously did not heed the guidelines given in this memo and his actions can be further reviewed in this article I read titled "Buffett's Policies Went Unheeded."


http://online.wsj.com/article/SB10001424052748703806304576245271170720328.html?KEYWORDS=ethics+in+business

David Sokol's actions can be analyzed using multiple perspectives we have learned in class and from Peter Northouse in Leadership Theory and Practice. In looking at this case from conduct perspective of ethical theory, David Sokol acted with ethical egoism. As Northouse argues, "ethical egoism states that a person should act so as to create the great good for herself or himself." David Sokol's insider trading practices definitely were done only in regard for himself, in an attempt to earn personal gain. Further, in Figure 15.1 (p380), Northouse illustrates ethical theories based on a concern for self-interest versus a concern for others. Ethical egoism ranks high in concern for self-interest, with the lowest possible concern for the interest of others. It is easy to see Sokol's lack of concern for the interest of others within the company when he obviously disregarded Warren Buffet's memo to staff describing which practices and policies were unacceptable within the company. Again, this raises the questions about why someone in such a powerful leadership position would act in a way that is so observably unethical.

Northouse also states "ethics is central to leadership, and leaders help to establish and reinforce organizational values." While it is apparent that Warren Buffet attempted to lead all of his employees in an ethical manner, his follow-up about the behavior that David Sokol exhibited is less than promising. The article gives that he does not publicly scrutinize Sokol's actions and he even states that he did not ask Sokol to resign, but that Sokol resigned on his own. It is disheartening to see that such a powerful, business leader like Warren Buffet would act toward this breach of ethics in such a way. Will his actions have a trickle down effect on the values of the employees in the entire organization? What could Warren Buffet do to reinforce the organization's commitment to business ethics in their trading practices and to what extent do you believe this ethical controversy will have a negative effect on the image of Berkshire Hathaway?

Thanks for reading and for your anticipated feedback,
Justin Fisher