Dividends and Buffett’s ESG snub draws criticism on Wall Street

One of best investors by any definition is Warren Buffett, over the years Berkshire Hathaway has consistently had great results. The company is a cash machine and has over $140 billion in cash to look for value and grow the company. Every year, Mr. Buffett and his partner Charlie Munger discuss Berkshire Hathaway’s values and what they see and expect in the next year. Given the consistency of earnings for Berkshire, many people have gone to the AGM over the years. Berkshire major divisions include: insurance, tech (Apple shares), and energy (including shares in Chevron and pipelines), financial services and manufacturing.

In an article by Ross Kerber, Jessica Dinapoli, Jonathan Stempel of Reuters wrote the audience and shareholders are beginning to change. Mr.Buffett does not like bitcoin, bank-cheque acquisition firms (SPAC) and wild bets on trading app Robinhood and shareholders agree. However when it comes to ESG (environmental, social and corporate governance) standards they disagree.

Shareholders typically vote overwhelming for management, listening to a couple of annual meetings there was over 95% vote for all the motions; during the Berkshire AGM two motions on ESG 25% of the votes were against management. In most AGMs. the Chairman and President count votes before hand knowing the directors often control 35% to over 50% going into the meeting.

What is important is who voted against management – BlackRock, world’s biggest investment management, California Public Employees Retirement System – the largest US public pension fund, and Federated Hermes – has $625 billion in assets under administration (AUM) where among the sponsors of the motions and one expects voted against management.

Mr. Buffett said the ESG motions would not fit the decentralized model the company runs and impose restrictions on their ability to function, however if you believe in climate change you want to see the companies you invest in trying to mitigate their contributions. If the companies are doing it then it works through the supplier systems to stay suppliers.

According to proxy solicitor Georgeson, shareholder proposals on ESG at S&P 1500 companies average 28% support up from 20% in 2017.

Linking to dividend paying stocks, companies do not operate in a different silo than the rest of the economy, they are both part of the solution and part of the problem. The supply chains have moved to particular responses for both financial and practical reasons, to change means an investment to change which may or may not result in an increase in sales. However, companies need to relate the needs of its customers.

There are more questions than answers, till the next time – to raising questions.

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