Home / Business / Warren Buffett faces impatient investors as Berkshire Hathaway returns fall.

Warren Buffett faces impatient investors as Berkshire Hathaway returns fall.

The California Public Employee Retirement System and Neuberger Berman have urged the Omaha conglomerate to add new directors and provide additional disclosures on climate risks and executive pay.

Leading up to Berkshire’s annual meeting on Saturday, proxy advisors Glass Lewis & Co. and Institutional Shareholder Services Inc. advised investors to hold their votes for board members.

While many of these complaints are not new and no shareholder proposals are likely to pass. But Berkshire’s ambiguous returns in recent years have made it more vulnerable to criticism amid investor interest in corporate sustainability issues.

The shareholder movement to pressure companies on climate change, social advancement and governance continues to be popular in the United States, making it a key selling point for money managers to offer. Words to protect clients̵

7; money

Under Buffett’s leadership, the company posted a total annual profit of 20% from 1965 to 2020, higher than the S&P 500’s 10.2% profit, including dividends during that period. Berkshire’s total returns for the past three and five years were 12% and 14%, respectively, compared with the 19% and 18% indices.

“Berkshire has gone through in part because of its historically strong financial performance,” said Simiso Nzima, Calpers’ head of corporate governance.

Berkshire, for its part, continues to emphasize its continued focus on the long game. Buffett, who is chief executive and chairman of the company, has built a diverse portfolio of most businesses and investments in the United States that are intended to operate for decades, not to compete with the volatile markets that have. Booming technology stocks

Calpers, the country’s largest public pension fund with $ 444 billion in assets, backed a shareholder proposal calling on Berkshire to disclose more information on climate-related risks and opportunities.

The pension fund also suspended voting for re-election of members of the board of audit and oversight as it failed to meet shareholder requirements for climate risk disclosure. It said it was concerned the board would lack new members, engage with shareholders and would not allow investors to vote on the management’s pay plan.

“If you don’t refresh the board, you don’t have the next generation of directors who can learn from longtime directors before they leave the board,” said Nesima.

Berkshire declined to comment before the company’s Saturday meeting.

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Neuberger, a private money manager with more than $ 429 billion in assets, said it would vote on several shareholder-led proposals dealing with environmental, social and corporate governance issues often abbreviated as ESG.

“One thinks that if companies are responsible for environmental stewardship or present good social and governance issues, Berkshire could be a leader in these areas,” said Michelle Giordano, a Neuberger analyst who follows the company. It will not be like that. “

Berkshire said in an annual proxy statement that while the companies agreed to have responsibility for managing climate risks, Berkshire said in an annual proxy statement. However, it requires the operating units to comply with their own environmental policies. A statement from the office of small companies, the company wrote, would violate the independent powers that help those businesses thrive under Berkshire’s ownership.Berkshire Hathaway Energy, for example, has provided a sustainability report.

Calpers also pledged to support proposals that require companies to report workforce distribution efforts.

Berkshire said the diversity report proposition incorrectly points out that “there are standard techniques for Berkshire’s 60+ operating businesses to deal with diversity, equality and inclusion.”

“It is unreasonable to request a consistent and quantitative report for the purpose of comparing these different operations in different geographic areas,” Berkshire wrote.

Warren Buffett’s legacy

Glass Lewis and ISS advised shareholders to vote for the ESG proposal and withhold voting for certain directors.

“This year, more mainstream investors are paying attention to the ESG issue,” said Courteney Keatinge, Glass Lewis senior director of ESG research.

It’s also something else: Berkshire shares are slowly changing hands.

Mr Buffett’s long plan to cut its stake in the company over time has turned Berkshire’s stock into a larger institutional investor, Lawrence Cunningham, a law professor. Of George Washington University, who writes extensively about the company.

About 70 percent of Berkshire’s shares are owned by individuals, most of whom are loyal shareholders of longtime Mr. Buffett, Cunningham said.

And many people don’t care that Berkshire doesn’t have a corporate sustainability report or an investor relations team ready to answer their questions.

“Berkshire’s unusual and high-value family of small shareholders may increase your understanding of our reluctance to court, analysts and institutional investors in Wall Street,” Buffett wrote in the letter. Recently to shareholders “We already have the investors we need and don’t think they will be upgraded by replacement.”

Although the gradual increase in institutional ownership could help professional managers cope with Berkshire on regulatory issues. When Mr Buffett and his real estate sell off the remaining shares, it is likely that those money managers hold a larger stake in the company, Cunningham said.

“There will be a major leadership initiation and structural change, and these holders are preparing for that fight,” Cunningham said.

Write to Justin Baer at justin.baer@wsj.com.

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