Hard shoes to fill

Warren Buffett: Warren Buffett’s succession plans have hit serious turbulence. The shock resignation of David Sokol, the chief executive of Berkshire Hathaway's NetJets airplane charter unit who was considered a prime candidate to run the whole shebang, highlights two huge obstacles to filling the Sage of Omaha’s wingtips. First, the candidate needs to be beyond reproach. Second, there may be better ways to make a pile of money.

Until today, Sokol had been a golden boy. Buffett praised him for the NetJets turnaround and the chattering classes put him at the top of the list of successors. His credentials seemed to have been burnished by bringing to Buffett's attention the charms of Lubrizol , the lubricants maker Berkshire said it would buy for $9.7 billion just two weeks ago.

As it turns out, Sokol had made personal trades in Lubrizol shares around the same time he was telling the company's bankers at Citigroup that Berkshire might have an interest in discussing a takeover. Though Buffett and Sokol believe no laws were broken — as Sokol ultimately had no vote in making a deal happen — the disclosure suggests Sokol personally profited to the tune of almost $3 million from a transaction he sold to Buffett.

But comparing Buffett’s account of Sokol’s trades with Lubrizol’s own rendering of events in its regulatory filings over the deal leaves many questions unanswered. Whether prosecutors or the Securities and Exchange Commission agree with the assessment of Buffett and Sokol remains to be seen. But if there's one certainty, any candidate to succeed Buffett cannot have engaged in behaviour that is even remotely questionable. Even assuming Sokol’s actions were above-board his own words suggest Buffett faces another hurdle in grooming his successor: money. In his resignation letter, Sokol cited a desire to “utilise the time remaining in my career to invest my family's resources in such a way as to create enduring equity value and hopefully an enterprise which will provide opportunity for my descendents and funding for my philanthropic interests.” In other words, he wanted to make more cash.

Whatever the case, the Lubrizol saga is likely to rumble on. At a time when the 80-year-old Buffett and his board should be putting the final touches on a succession plan, it's a good bet they will be tied up with a whole different set of discussions — with a lot of lawyers present.