Berkshire
Hathaway Board of Directors
1440
Kiewit Plaza
Omaha, NE 68131
Dear Directors,
We thank you for the discussion at the annual shareholder meeting on the Judith Porter proposal regarding your large holdings in PetroChina. We appreciate that you were not required to publicly engage in this dialog and deeply respect your decision to do so.
The shareholder proposal requested divestment from PetroChina, but was rooted in concern for the people of Darfur and the unique opportunity for Berkshire Hathaway to make a difference in stopping the ongoing genocide there. There is another option that may be more powerful and which carries minimal financial risk. This option is for Warren Buffett and Berkshire Hathaway to actively and publicly engage PetroChina’s management and the government of China on behalf of the people of Darfur. Berkshire Hathaway has unique means and opportunity for engagement as a powerful tactic and can reserve divestment as last resort.
Berkshire Hathaway is by far the largest public shareholder in PetroChina and, therefore indirectly, in its parent, China National Petroleum Corporation (CNPC). This large holding, plus the unique stature and influence of Warren Buffett, provide you with unequaled ability to influence PetroChina, CNPC and the Chinese government. China’s susceptibility to influence was amply demonstrated by the effect of one letter by Steven Spielberg. Spielberg’s single letter resulted in China dispatching a senior official to Sudan to tour three refugee camps and give the government of Sudan encouragement to accept UN help. Given the enormous power, financial resources, and international influence that Berkshire Hathaway and Mr. Buffett in particular enjoy, just imagine what you could accomplish if you made a serious attempt at engagement.
In a May 10 interview on the Charlie Rose show, Mr. Buffett described intervening with PetroChina and the government of China as “futile.” However, the example he cited of the lack of response to Mr. Buffett's private letter over stock dilution two years ago need not discourage action now. PetroChina could not ignore Berkshire Hathaway if it made public statements and requested action regarding Darfur, because Berkshire Hathaway has the shareholder power to require that the company address the issue. A recent PetroChina filing with the SEC indicated that PetroChina must hold a special shareholder meeting if “shareholders holding 10% or more of our issued and outstanding voting shares request in writing the convening of an extraordinary general meeting.” Of all the public investors in the world, only Berkshire Hathaway, holding 11% of the shares outstanding, is in a position to request a shareholder meeting to address the Darfur issue. How could PetroChina, the government of China, or the world ignore such a request? How much action would they likely take in order to avoid such a request from you?
The concerns and facts raised at the annual meeting were only superficially addressed at that time. Mr. Buffett suggested that the relationship between CNPC and PetroChina was equivalent to that of Berkshire Hathaway and Wesco. However, Mr. Miller, from the Sudan Divestment Task Force, presented a wealth of evidence at the annual meeting showing the extensive overlap of senior management between PetroChina and CNPC. Since Jiang Jiemin is the President of both companies, Wesco would need to be run directly by Mr. Buffett or Mr. Munger to be roughly parallel. The detailed report from the Sudan Divestment Task Force, “PetroChina, CNPC, Sudan: Perpetuating Genocide,” leaves any impartial reader clear that PetroChina and CNPC are tightly connected organizations, not separate entities. Independent researcher KLD indicated in their May 4th report that “investors should treat CNPC and PetroChina as if they were a single entity.” Continued assertions that PetroChina is unrelated and has little to do with CNPC in the face of these facts are either misinformed or disingenuous.
During the question and answer period at the annual meeting, Mr. Munger said that gambling is a “dirty business” that Berkshire Hathaway would avoid despite it being profitable. PetroChina and CNPC are connected to a much “dirtier” business. A company like Berkshire Hathaway trades heavily on its reputation and that of its directors. PetroChina makes up only 1% of your assets but puts your entire reputation at risk. By failing to actively work to change the role of PetroChina/CNPC you risk serious damage to that reputation.
This issue is not going to go away and will become more contentious as time passes and more lives are lost. Thirteen states and 42 colleges and universities (including Harvard, Yale, and the University of California) have already taken action on divestment from Sudan. Additionally, other investment companies are facing increasing consumer outcry and pressure to divest. Consider, for example, the unprecedented national advertising campaign launched recently by the Save Darfur Coalition and directed against Fidelity. Berkshire Hathaway was already by far the largest public shareholder in PetroChina before Fidelity, the second largest holder, sold nearly half its shares. What will be the world’s reaction when others divest if your stake and unyielding position stand in stark and extreme contrast?
Berkshire Hathaway and Mr. Buffett have the position, power and opportunity, unlike any other company in the world, to make a difference for Darfur. For now, you have rejected all suggestions for an appropriate response. What will you do instead to help save the people of Darfur? Doesn't the worst humanitarian crisis on the planet and the first genocide of the 21st century warrant making every attempt to help?
In a recent column, Marc Gunther of FORTUNE and CNN Money writes, “Warren Buffett is, after all, much more than one of the world's great investors. He is a decent, generous man of unquestioned integrity. When he speaks, much of the world listens. He now has a platform to speak on behalf of victims of genocide. Why not take it?”
This excellent question is the one we also put before you today.
Sincerely,
Eric Cohen
Chair, Fidelity Out Of Sudan campaign
Addressees:
Warren E. Buffett
Howard G. Buffett
Susan L. Decker
William H. Gates III
David S. Gottesman
Charlotte Guyman
Donald R. Keough
Charles T. Munger
Thomas S. Murphy
Walter Scott, Jr.
Enclosure: Letter sent to Mr. Warren Buffett on March 9, 2007
Omaha, NE 68131
Dear Directors,
We thank you for the discussion at the annual shareholder meeting on the Judith Porter proposal regarding your large holdings in PetroChina. We appreciate that you were not required to publicly engage in this dialog and deeply respect your decision to do so.
The shareholder proposal requested divestment from PetroChina, but was rooted in concern for the people of Darfur and the unique opportunity for Berkshire Hathaway to make a difference in stopping the ongoing genocide there. There is another option that may be more powerful and which carries minimal financial risk. This option is for Warren Buffett and Berkshire Hathaway to actively and publicly engage PetroChina’s management and the government of China on behalf of the people of Darfur. Berkshire Hathaway has unique means and opportunity for engagement as a powerful tactic and can reserve divestment as last resort.
Berkshire Hathaway is by far the largest public shareholder in PetroChina and, therefore indirectly, in its parent, China National Petroleum Corporation (CNPC). This large holding, plus the unique stature and influence of Warren Buffett, provide you with unequaled ability to influence PetroChina, CNPC and the Chinese government. China’s susceptibility to influence was amply demonstrated by the effect of one letter by Steven Spielberg. Spielberg’s single letter resulted in China dispatching a senior official to Sudan to tour three refugee camps and give the government of Sudan encouragement to accept UN help. Given the enormous power, financial resources, and international influence that Berkshire Hathaway and Mr. Buffett in particular enjoy, just imagine what you could accomplish if you made a serious attempt at engagement.
In a May 10 interview on the Charlie Rose show, Mr. Buffett described intervening with PetroChina and the government of China as “futile.” However, the example he cited of the lack of response to Mr. Buffett's private letter over stock dilution two years ago need not discourage action now. PetroChina could not ignore Berkshire Hathaway if it made public statements and requested action regarding Darfur, because Berkshire Hathaway has the shareholder power to require that the company address the issue. A recent PetroChina filing with the SEC indicated that PetroChina must hold a special shareholder meeting if “shareholders holding 10% or more of our issued and outstanding voting shares request in writing the convening of an extraordinary general meeting.” Of all the public investors in the world, only Berkshire Hathaway, holding 11% of the shares outstanding, is in a position to request a shareholder meeting to address the Darfur issue. How could PetroChina, the government of China, or the world ignore such a request? How much action would they likely take in order to avoid such a request from you?
The concerns and facts raised at the annual meeting were only superficially addressed at that time. Mr. Buffett suggested that the relationship between CNPC and PetroChina was equivalent to that of Berkshire Hathaway and Wesco. However, Mr. Miller, from the Sudan Divestment Task Force, presented a wealth of evidence at the annual meeting showing the extensive overlap of senior management between PetroChina and CNPC. Since Jiang Jiemin is the President of both companies, Wesco would need to be run directly by Mr. Buffett or Mr. Munger to be roughly parallel. The detailed report from the Sudan Divestment Task Force, “PetroChina, CNPC, Sudan: Perpetuating Genocide,” leaves any impartial reader clear that PetroChina and CNPC are tightly connected organizations, not separate entities. Independent researcher KLD indicated in their May 4th report that “investors should treat CNPC and PetroChina as if they were a single entity.” Continued assertions that PetroChina is unrelated and has little to do with CNPC in the face of these facts are either misinformed or disingenuous.
During the question and answer period at the annual meeting, Mr. Munger said that gambling is a “dirty business” that Berkshire Hathaway would avoid despite it being profitable. PetroChina and CNPC are connected to a much “dirtier” business. A company like Berkshire Hathaway trades heavily on its reputation and that of its directors. PetroChina makes up only 1% of your assets but puts your entire reputation at risk. By failing to actively work to change the role of PetroChina/CNPC you risk serious damage to that reputation.
This issue is not going to go away and will become more contentious as time passes and more lives are lost. Thirteen states and 42 colleges and universities (including Harvard, Yale, and the University of California) have already taken action on divestment from Sudan. Additionally, other investment companies are facing increasing consumer outcry and pressure to divest. Consider, for example, the unprecedented national advertising campaign launched recently by the Save Darfur Coalition and directed against Fidelity. Berkshire Hathaway was already by far the largest public shareholder in PetroChina before Fidelity, the second largest holder, sold nearly half its shares. What will be the world’s reaction when others divest if your stake and unyielding position stand in stark and extreme contrast?
Berkshire Hathaway and Mr. Buffett have the position, power and opportunity, unlike any other company in the world, to make a difference for Darfur. For now, you have rejected all suggestions for an appropriate response. What will you do instead to help save the people of Darfur? Doesn't the worst humanitarian crisis on the planet and the first genocide of the 21st century warrant making every attempt to help?
In a recent column, Marc Gunther of FORTUNE and CNN Money writes, “Warren Buffett is, after all, much more than one of the world's great investors. He is a decent, generous man of unquestioned integrity. When he speaks, much of the world listens. He now has a platform to speak on behalf of victims of genocide. Why not take it?”
This excellent question is the one we also put before you today.
Sincerely,
Eric Cohen
Chair, Fidelity Out Of Sudan campaign
Addressees:
Warren E. Buffett
Howard G. Buffett
Susan L. Decker
William H. Gates III
David S. Gottesman
Charlotte Guyman
Donald R. Keough
Charles T. Munger
Thomas S. Murphy
Walter Scott, Jr.
Enclosure: Letter sent to Mr. Warren Buffett on March 9, 2007