Warren Buffett faces impatient investors as Berkshire Hathaway returns decline
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Professional money managers are turning up the heat on Warren Buffett’s Berkshire Hathaway Inc.
California Public Employees’ Retirement System and Neuberger Berman have demanded that the Omaha, Neb., conglomerate bring in new directors and provide more disclosures on climate risks and executive pay.
Leading up to Berkshire’s annual meeting on Saturday, proxy advisers Glass Lewis & Co. and Institutional Shareholder Services Inc. have recommended that investors withhold their votes for board members.
While many of the complaints aren’t new and none of the shareholder proposals are likely to pass, Berkshire’s lackluster returns in recent years have made it more vulnerable to criticism amid a growing wave of investor interest in corporate sustainability issues.
BERKSHIRE HATHAWAY, INC.
BERKSHIRE HATHAWAY, INC.
The shareholder movement to press companies on climate change, social progress and governance continues to gain steam in the U.S., emerging as a key selling point for money managers in their efforts to keep client money.
Under Mr. Buffett’s leadership, the firm boasts 20% compounded annualized gains from 1965 to 2020, outperforming the S&P 500’s 10.2% gains including dividends during the period. Berkshire’s total returns over the past three- and five-year periods were 12% and 14%, respectively, compared with the index’s 19% and 18%.
"Berkshire has gotten a pass in part because of its historically strong financial performance," said Simiso Nzima, head of corporate governance at Calpers.
Berkshire has continued to stress its continued focus on the long game. Mr. Buffett, who is chief executive and chairman of the company, built up a diverse portfolio of mostly U.S. businesses and investments meant to perform over decades, not to compete with a volatile market buoyed by booming tech stocks.
WARREN BUFFETT'S ANNUAL LETTER TO BERKSHIRE HATHAWAY SHAREHOLDERS
Calpers, the nation’s largest public-pension fund with $444 billion in assets, co-sponsored a shareholder proposal imploring Berkshire to provide more disclosures on climate-related risks and opportunities.
The pension fund is also withholding its votes to re-elect members of the board’s audit and governance committees on grounds of failing to meet shareholder demands over climate-risk disclosures. It said it was concerned that the board lacks new members, doesn’t engage with shareholders and isn’t letting investors vote on executive pay plans.
"If you don’t refresh the board, you don’t have a next generation of directors able to learn from the long-serving directors before they leave the board," Mr. Nzima said.