2011: Did Lubrizol's board breach its fiduciary duty by not running a competitive process to sell the company?

ANDREW ROSS SORKIN: This next question, actually, just came in by email from someone in the audience from their BlackBerry, actually a prominent investor that asked that his name not be named.

And his question is the following: He writes, “Your purchase of Lubrizol was done in a negotiated transaction. The board of Lubrizol did not market the company for sale nor run an auction.

“According to the proxy, you did not permit the company to run a go-shop process, despite the requests you allow them to do so.

“Did the board of Lubrizol breach its fiduciary duty by not running a more competitive process to sell the company? And if not, why not?”

CHARLIE MUNGER: Let me do this.

WARREN BUFFETT: OK. Charlie will. (Laughter)

He volunteers —

CHARLIE MUNGER: The answer is no, the board at Lubrizol did not breach its duty because we were not going to participate in the transaction if they didn’t do it our way. (Laughter and applause)

WARREN BUFFETT: Yeah, we basically don’t participate in auctions.

And actually, just very, very recently we were asked to participate in one, and we’re just not interested.

They may end up getting less money than they would have gotten from us. But if they want to auction it, the one thing I can guarantee them, you know, is that when they get all through, we will not pay them what we would have them paid originally if they stepped up.

So they get a very certain deal, they got a very significant price, in my view, and in the view of two advisors.

And if they had said we want to conduct an auction, we would have said good luck, and we’d have looked at something else.

CHARLIE MUNGER: Has anybody else got an easy question? (Laughter)