COCO COntact » Anything for money?

04/4/11

Anything for money?

Author rethinks ethics in light of Sokol controversy

Photograph by Mike Beuselinck

I have been espousing the need to strengthen corporate ethics for quite awhile. In fact, I have taken the position that acting ethically is a sure-fire recipe for growing profits.

Alas, evidence presented during the last few weeks seems to be proving me wrong. Performers Beyoncé Knowles and Mariah Carey and Cambridge-based Monitor Group reportedly received millions for respectively entertaining and promoting rogue Libyan dictator Moammar Khadafy. Second, the New York Times, among others, reported “Survey Finds ‘Widespread Mis-Selling’ by Brokers.” Finally, my former boss David L. Sokol, heir apparent to Berkshire Hathaway CEO Warren E. Buffett, this week resigned under an ethical cloud involving a $3 million stock gain.

Have I been naïve or what?

While I have been planning a column on this topic for several months, the Sokol controversy encouraged me to speed up my timetable. I placed Sokol on a pedestal in the May 4, 2009 issue of COCO COntact (“Ex-boss – Buffett’s possible successor – provides inspiration during these times”). This week, however, I was disappointed to learn Buffett announced Sokol’s resignation. The Oracle of Omaha went on to detail how Sokol had personally purchased 96,060 shares in a company named Lubrizol. Sokol bought the shares around $100 each in January just before recommending Buffett buy the company. When Buffett chose to buy the company and share prices naturally rose, Sokol stood to gain $3 million on his two-month-old personal investment.

Sokol may not have broken any laws, and the timing of his resignation may be a coincidence. He could not have been sure Buffett would actually buy Lubrizol. Some call Sokol’s action “front-running,” at best, or “insider trading,” at worst. I’ll leave the correct term to the Securities and Exchange Commission (SEC) to decide. If it were me, I would have sold my shares during the time between Buffett agreeing to buy Lubrizol and the time the deal was announced. Maybe this is why I’m not one of the über rich, but I do sleep very well.

The last time I personally spoke with Sokol, I introduced him via telephone to a businss owner seeking an investor. I neither sought nor received a piece of any possible action. I’m funny (stupid?) that way. Since then, I’ve continued to follow Sokol’s advancement and kept him on COCO+CO.’s mailing list.

In the June 1, 2009 issue of COCO COntact (“Sketchy types harm prospecting efforts”), I wrote:

“Advertisers are mistaken if they believe they will succeed by adopting the same tactics as unscrupulous firms…businesses risk tarnishing their images, losing customers and forcing regulators to become more involved. In any event, one doesn’t build rapport and trust with customers by building the relationship on an unethical footing.”

Sokol is already facing uncomfortable scrutiny and Beyonce has given the $1 million for her 45-minute Khadafy show to Haiti relief efforts. Maybe there are still prices to pay for unethical conduct.

To answer my own question, have I been naïve? If being naïve means believing those that play by the rules will eventually reap rewards, then probably. I have no plans to change, but rather surround myself — personally and professionally — with those that share these beliefs. If you’re looking for an ethical corporate communications partner for your business, please call me at COCO+CO.

Submit your comments to creative@cocoboston.com.

Tim Coco is president and chief executive officer of COCO+CO., Inc.

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Last month’s column, “Report on the ‘Wannabee Effect’” generated some interesting comments:

“This is probably the most insightful analysis and commentary I have heard on this subject. Thank you.”

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“God bless you, you li’l ole class-warfaring socialist, you! You are painfully correct, and some days I despair of the possibility of a peaceful, mutually respectful, moderately well-fed and well-housed nation. I do have visions of civil warfare against those perceived to be at fault. Right now, the real thieves have done a good job of deflecting the frustrations of the former middle class against governments at all levels. There is a terribly twisted irony in yesterday’s Heroic First Responders being cast today as Greedy Villains.”

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“I do not have the time to read your liberal comments, so please do not send any more. Thanks.”