Wall Street analysts have used this minor event disclosed excellently by Buffett to say his company which has had so much success, seemingly lacks internal controls (as if this minor incident could not happen anywhere, it would just be unreported) . Berkshire Hathaway is known as an organic business as it lets its managers run the businesses themselves instead of having meddling involvement from Buffett. Buffett would not have it any other way.
Buffett is known to make less checks on workers he trusts .” In 1983 Buffett acquired Nebraska Furniture Mart from Rose Blumkin, the then ninety year old businesswoman. The furniture mart which began in her basement in 1937 transformed into a seventy five acre store and today is the largest home furnishing store in North America. Buffett, who had tried to acquire the store for a long time walked into Nebraska Furniture on his birthday and asked Rose to list a price. She said $55 million and he accepted in a famous hand shake deal. Buffett made the deal without reviewing the company’s financial records. He said “I would rather have her word than that of all the big eight auditors." He also said he would be part of any business with Blumkin, even if it was a “popcorn stand.” Rose Blumkin continued to run the business as a subsidiary of Berkshire until her death in 1998 at 104 years old.
This shows the success of Buffett, at the same time this is the kind of story that has put him under fire. The distinction that should be made is that Buffett obviously checks the finances carefully of all his subsidiaries. He is saying that he lets them run their business; he is not saying I let them commit fraud.
The incident with Sokol is barely news. He recommended the company to Buffett. It is unsure how many companies Sokol recommended during his time working for Buffett but it was surely more than one. Also it makes sense that he recommended buying a company in which he owned shares in because he obviously liked the comapny. Buffett himself chose to purchase the company and Buffett makes all these decisions. The profit of Sokol is also not substantial to his networth. Meanings its likely that no one planned this thing to happen.
Lastly, the only person that could be mad from the entire incident is Buffett. He bought a company for Berkshire that helped one of its bosses get a little richer. Though its unlikely Buffett cares who were the shareholders before the deal happened.
The deal while a little suspicious proves that many in the business community dislike Buffett, or more they are jealous.
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