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Warren BuffettMatt Sayles

Every year, thousands of investors converge on Warren Buffett's hometown of Omaha, Neb., for an annual meeting that is unlike any other in the annals of shareholding. Part revival meeting, part pilgrimage, it celebrates the money-making prowess of the most admired investor of his day.

For the first time in memory, however, the faithful are restless. As shareholders start to gather ahead of this weekend's meeting, they are facing the uncomfortable prospect that Mr. Buffett's mystique is fading.

David Sokol, the man many presumed to be Mr. Buffett's successor at the helm of Berkshire Hathaway Inc., resigned from the company last month amid a swirl of controversy. His departure sparked questions about Mr. Buffett's famously laissez-faire approach to managing the sprawling conglomerate and reignited the debate over who will replace the 80-year old investing legend.

Mr. Sokol's conduct (he purchased stock in a company Berkshire went on to acquire) has already produced a shareholder lawsuit. More importantly, it has dented Mr. Buffett's reputation for fostering a culture of integrity and plain talk at Berkshire. The company's code of conduct, for example, asks employees to imagine how they would feel if anything they did ended up on the front page of their local newspaper.

For some observers, the controversy marks a turning point. "The old Berkshire era has ended, to the dismay of many and the delight of others," wrote Alice Schroeder, a former financial analyst and author of a biography of Mr. Buffett. "Whatever your feelings, it will never be the same."

With its stable of 70-odd companies in businesses from gas pipelines to candy, Berkshire's sheer size means that its most profitable days are likely behind it. Some analysts go further and argue the company is too huge to be an attractive investment and its stock doesn't have a large amount of upside, especially with the uncertainty surrounding its future leadership.

Needless to say, Mr. Buffett and his shareholders disagree, although they're rattled by the recent turmoil at the top. The investors who are headed to Omaha for the annual jamboree may be devoted Buffettologists - they quote his maxims and know his favourite local restaurants - but they still want answers.

"It's not like we're lusting for Sokol's head on a stick, but come on," said David Rolfe, chief investment officer at Wedgewood Partners, a Missouri investment firm that manages $1-billion (U.S.) and has owned Berkshire shares for most of the past 13 years. "We need some more explanations."

Mr. Rolfe expressed frustration that Mr. Buffett didn't appear to reprimand Mr. Sokol in any way. In January, Mr. Sokol amassed about $10-million worth of shares in chemical giant Lubrizol Corp. for his own account, then brought the firm to Mr. Buffett's attention as a possible acquisition. Berkshire announced a deal to buy Lubrizol for $9-billion in mid-March. Two weeks later, Mr. Buffett said Mr. Sokol would resign; Mr. Buffett added that he didn't believe the stock purchases were "unlawful."

The consternation surrounding Mr. Sokol's resignation threatens to disturb the feel-good vibe of the meeting, which usually unfolds in a well-rehearsed pattern. Mr. Buffett usually announces positive news - an acquisition or other transaction - the Friday before the meeting, and Berkshire organizes a cocktail reception, a picnic and a shopping event for the hordes of shareholders on the weekend.

Ravi Nagarajan, a long-time Berkshire shareholder and managing editor of the Rational Walk, a website devoted to Mr. Buffett's investing philosophy, said he has never seen this kind of tension surround the company. Although Mr. Buffett has been touched by scandals before (executives at Berkshire's insurance arm were convicted of fraud, for example) nothing reached the highest echelons of the firm.

"There's some unease about this," Mr. Nagarajan said. "I'm disappointed, like most other people, that David Sokol turned out to not really be on board with what Berkshire is all about."

Mr. Nagarajan is heading to Omaha and expects that Mr. Buffett will briefly address the controversy as he opens a day-long question-and-answer session on Saturday. As in previous years, the event will unfold in an arena that seats 18,000.

Long-time shareholders play down worries about who will replace him. "As brilliant as Mr. Buffett is, I think he's less important to Berkshire than Steve Jobs is to Apple," said Paul Lountzis of Lountzis Asset Management in Pennsylvania, who has attended the firm's annual meetings for more than a decade. "Each of these [Berkshire]businesses is getting more valuable over time."

Still, others say the imbroglio surrounding Mr. Sokol shows that Mr. Buffett needs to tighten Berkshire's controls and procedures when it comes to corporate governance. "They've got these basic principles that they live by and generally they do live by them," said Kevin O'Reilly, a Berkshire shareholder and financial planner in Phoenix. "Now, in retrospect, it feels a bit naive."

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