Warren Buffett's Berkshire Hathaway Shareholders Reject Climate Motion

By Mark Hirschey - Work of Mark Hirschey, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=2581999
Warren Buffett – By Mark Hirschey – Work of Mark Hirschey, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=2581999

Guest essay by Eric Worrall

Shareholders of Warren Buffet’s Berkshire Hathaway have rejected an attempt by activist shareholders, to force the company to write a report about the “dangers” climate change poses to the Insurance business.

Berkshire Hathaway shareholders have overwhelmingly rejected a resolution calling for the company to write a report about the risks climate change creates for its insurance companies.

CEO Warren Buffett says he agrees that dealing with climate change is important for society, but he doesn’t think climate change creates serious risks for Berkshire’s insurance businesses.

Buffett says the fact that Berkshire generally writes insurance policies for one-year periods allows it to regularly re-evaluate risks, such as climate change.

The activists who proposed the motion tried to urge Buffett to take a public stance in favor of measures to reduce consumption of fossil fuels, but he resisted.

Read more: https://www.washingtonpost.com/business/the-latest-buffett-arrives-for-berkshire-hathaway-meeting/2016/04/30/cb606d42-0ed8-11e6-bc53-db634ca94a2a_story.html

The most ridiculous aspect of this shareholder eco-drama, is that Buffett seems to be genuinely concerned about climate change.

But for the intolerant fanatics behind the climate movement, expressing concern is not enough.

Any deviation from the alarmist narrative of universal catastrophe ignites a hysterical response, and in some cases a campaign to bully high profile skeptics into submission, like when the “Skeptics Society” turned on their star fake claim debunker James Randi.

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May 1, 2016 1:54 am

I read that Buffett owes the IRS $1 Billion in back taxes (presumably including penalties, fees and interest), and he’s been fighting paying them for ten years.
I also read where Obama used Buffett to push for higher taxes. Buffett said that his secretary paid a higher tax rate than he did, and he wasn’t happy about that. He claimed that he wanted Obama to raise taxes on the wealthy because that would be more fair.
But what I never read was how the media asked Buffett and Obama to explain the contradiction of a man who fights paying taxes, while simultaneously politicking for higher taxes on himself. Nor did anyone ask the two men why they didn’t arrange for Buffett to make voluntary donations to the IRS.

Nigel S
Reply to  LarryFine
May 1, 2016 2:04 am

Did you read that he’s given $26 billion to charity so far, £2.8 billion last year alone? Perhaps he thinks they’ll make better use of it than the State. How much did you give last year. How much did you take?

Reply to  Nigel S
May 1, 2016 2:12 am

Are those donations tax deductible per chance?
I would genuinely like to know, and since I do not know the details of the US tax system, is it a case of donating to charity, or loosing the same amount to the IRS ?

Reply to  Nigel S
May 1, 2016 3:11 am

Charitable giving has nothing whatsoever to do with whether Buffett is avoiding paying his fair share of taxes, while politicking with Obama to raise taxes on other people.
But since you brought it up, I read that the $2.8 Billion you cited “..will all go to charities affiliated with the Buffett family.”
In addition, critics say that the new billionaire’s club charity pledge Buffett and Bill Gates setup “..has little to show for itself” and just looks like a tax dodge.
And I take it from your gratuitous insinuations about me that you were offended to read someone point out the hypocrisy inherent in Socialism?

Reply to  Nigel S
May 1, 2016 3:26 am

The answer to your question is yes. All of the money stashed into private family charities by American millionaires and billionaires is sheltered from the IRS.
And it’s makes interesting reading what some of these wealthy people do with their sheltered money.

george e. smith
Reply to  Nigel S
May 1, 2016 10:24 am

To what “charities” did he specifically give that 26B, or perhaps just the 2.8 Billion pounds; or izzat weird symbol Euros ??
I give money to charities. But I can’t take a tax deduction for one brass razoo of it. Government says I don’t give a big enough fraction of my income to charity to qualify for a tax deduction. I also don’t pay enough in medical bills to deduct any of my medical costs.
I’m better off if I don’t give anything to anybody, but then I wouldn’t be helping someone who may be in worse shape than I am.
When businesses give to charity; they are not necessarily losing any money.
I was able to get one former employer to contribute over $150,000 worth of state of the art equipment to a total charity. They actually made an after tax profit by giving that brand new equipment away, since they were allowed to deduct the Retail Market Value of that equipment for tax purposes; but it only cost them their inter-divisional transfer cost.
BUT ! They told me they would have done it anyway, because it was a very deserving enterprise (still ongoing). And their competitors would have given the equipment to that charity, if they didn’t. Plus they got the inside track on a related actual purchase of similar equipment, that they got paid good money for.
So corporations can and do have all sorts of real business reasons to “give” to charity; and it may not actually cost them anything. The Company I’m talking about has always been a good neighbor outfit, and like I said, they told me flat out that all the business reasons, that I gave to them, were true, but they would have done the deal even if it had cost them the entire 150 grand. And they gave the charity the very best equipment they make; not old stuff, and they told them to come back if they needed any more stuff.
So I wouldn’t judge Buffet either way on his charity positions.
I don’t give to “United” type charity programs. Half of the “agencies” on their lists are not what I would call charities.

Reply to  Nigel S
May 1, 2016 12:53 pm

Another point to take note of is that Buffet’s charitableness didn’t start until 2010 fairly late in his life, when he teamed up with Gates to start the Giving Pledge program. Before then he was not noted as being a philanthropist, and neither was Gates. Gates was rated as a Scrooge by many prior to his opening up his wallet. What took them so long?
Then there is this example of Buffet donating 600 million to each of his three children’s charitable foundations. Nice for the kids to be able to control a few bucks on their own…http://business.nbcnews.com/_news/2012/08/30/13573702-warren-buffett-on-his-birthday-gives-kids-600m

Boulder Skeptic
Reply to  Nigel S
May 1, 2016 6:34 pm

Nigel S.
It appears that you are defending Mr Buffet’s not paying his taxes per the IRS code. Apparently you believe that this is a forgivable offense if offset with charitable giving. A few questions for you…
1. Do you or do you not believe that everyone should pay taxes per the IRS code with no shady dodges or legal stalling tactics? Yes or No answer please.
2. How is charitable giving germane to not paying your taxes per the IRS code? Aren’t these two separate, independent issues?
3. Would you also be in favor of conservatives and/or conservative foundations like the Koch brothers not paying taxes per the IRS code in spite of the massive charitable giving they participate in?
Thanks in advance for your answers.

Nigel S
Reply to  Nigel S
May 2, 2016 12:21 am

The only problems with you’re arguments are two numbers $26 billion and $2.8 billion. They seem to indicate that Mr Buffett’s heart is in the right place whatever he may also have said about the peculiarities of the US tax system (don’t get me started on the UK one). I give a little to the lifeboats (I’m a sailor) and the Gurkhas (my father fought in Burma) and my alma mater (for scholarships and research) but I can’t match WB and I don’t suppose anybody here can so I’m not sure what gives you the right to complain about his astonishing generosity. If you don’t like your tax system complain to the people who devised it not about the most generous people in the Land of The Free.

Reply to  LarryFine
May 1, 2016 3:25 am

I always wonder why he never asks to lower his secretary’s taxes. That would help her more than raising his.
And Nigel, giving money to the Gates Foundation is a tax deduction with one billionaire helping another avoid paying to government.

Reply to  mkelly
May 1, 2016 3:37 am

Well said. Why assume that fairness automatically requires raising tax rates?
And as it turned out, 99.99% of the people that Obama wanted to raise taxes on weren’t billionaires or even millionaires. Everything they said was BS.

Nigel S
Reply to  mkelly
May 1, 2016 5:06 am

Well it’s tax deductible of course but it still has to be given. Heven’t seen an answer to my questions about givers and takers (into which categories all men are more or less divided).

Nigel S
Reply to  mkelly
May 1, 2016 5:22 am

LarryFine you asked why Buffett hadn’t given $1 billion to IRS. Giving £2.8 billion to charity seems the more rational choice. The kind of thinking that helped to make the money in the first place. I prefer it to giving money to people who think that Solyndra and Ivanpah and ‘The Great Imensity’ are good uses for it. (We hicks over here do read the papers.)

Reply to  mkelly
May 1, 2016 6:36 am

NigelS: You’re missing the point. Buffet is saying he should have to pay more taxes while actively making certain he won’t. It’s hypocritical. It matters not that he gives to charities. It would only matter if he said people should be more charitable and then he gave zero to charities. You’re comparing taxes to charitable donations and equating them.

Reply to  mkelly
May 1, 2016 6:57 am

The aptly named “Reality check” has got it right.

Nigel S
Reply to  mkelly
May 2, 2016 12:26 am

See my note above (May 2, 12:21 am) (clicked the wrong ‘Reply’). If you don’t like your tax system complain to the people who devised it not about the most generous people in the Land of The Free.

Manfred W Schropp
Reply to  LarryFine
May 1, 2016 10:25 am

I am assuming that it is not Buffet personally who owes $1 billion to the IRS but Berkshire Hathaway, but based on your above statement I don’t know that for a fact.
If BH owes the tax and he doesn’t think they do by law, then as head of BH he is obligated to fight for the best outcome for his shareholders or he would be violating his fiduciary duties. In that sense his attempt to not pay the $1 billion is entirely reasonable and not hypocritical.
Judging by my own tax return the days of low tax rates are over, even for capital gains where I assume most of Buffets personal income is derived from.

Reply to  LarryFine
May 1, 2016 7:53 pm

He pays a lower tax rate than his secretary because his secretary is rich! I forget the exact amount, but I think she is paid around $250,000 per year if not more.
One simple way to lower her tax bracket would be to pay her less. Drop her to $40k and she won’t pay hardly any federal income taxes.

Reply to  LarryFine
May 2, 2016 10:52 am

What Buffet didn’t tell you was that his secretary makes well into six figures and pays taxes at the highest federal rate.

May 1, 2016 2:09 am

The most ridiculous aspect of this shareholder eco-drama, is that Buffett seems to be genuinely concerned about climate change.

Or rather, he’s just being a smart business man and paying lip service to it for PR, whilst the business decision to soundly reject it probably lies closer to his true feelings on the matter.

Reply to  YouSoWould
May 1, 2016 7:03 am

I’ve always said: “Watch the ‘smart money.”

May 1, 2016 2:25 am

The business model of insurance companies by definition is scaring people: so that they pay the insurance companies huge sums for unlikely events. The more unlikely the event, the higher the profit, because there never will be the need for a pay out.

Reply to  Hans Erren
May 1, 2016 6:39 am

To a degree. However, I suspect everyone knows someone who has used life, auto or property insurance at some time in their lives. I also know of those who opt not to buy insurance, then beg on TV or the internet for others to cover the cost of their home burning down. It’s a sweet deal—”free” insurance and full coverage. Save all those expensive premiums and let others cover your losses voluntarily. Maybe we should all go that route—just beg for money if bad things happen.

Reply to  Hans Erren
May 2, 2016 10:59 am

One of the types of insurance that BH sells is short term life insurance policies to people who know that they are dying.
If you give your heirs an inheritance, the govt takes a big chunk of it, both in inheritance taxes on the estate and income taxes for the beneficiaries.
On the other hand payouts from an insurance policy are not taxable for the beneficiaries.
In other words it’s a great way to get money to your heirs, tax free.
The higher the tax rates, the better these policies look.

Bruce Cobb
May 1, 2016 4:54 am

The whole “risk to shareholders” gambit is a last-ditch effort by the Warmunist ideologues. It is nothing but a giant red herring. I guess one could call it an Appeal to the Pocketbook illogical argument on their part.

george e. smith
Reply to  Bruce Cobb
May 1, 2016 10:36 am

Well those risk averse shareholders could eliminate their risk, by selling out their shares in BH and investing in something they believe is less risky.
Shareholders of companies that are doing “bad or risky” things have an option to invest in something more to their liking.
if …. YOU … don’t like what company XYZ is doing; you have options.
1/ DO NOT invest in that bad company.
2/ DO NOT go to work for one of that bad company.
3/ DO NOT buy any product or service from that bad company.
See how easy it is to get a company to do your bidding.
You DO have a fourth option.
4/ DO start your own company which does NOT DO any of those bad company’s things, and compete that bad company out of business.

Reply to  george e. smith
May 2, 2016 11:00 am

None of those options are available when its govt doing the things you disagree with.

george e. smith
Reply to  george e. smith
May 2, 2016 1:27 pm

I do believe I said you have those options … IF … you don’t like what company XYZ is doing.
I said nothing about what the government does. I presume it does exactly what the voters want it to do; that’s how the system is designed to work.

James Schielein
May 1, 2016 5:01 am

This rejection by the shareholders is hardly newsworthy. Activist proposals are rarely, if ever, endorsed by the Board of Directors and therefore almost always go down in flames. What would have been noteworthy, had the Board endorsed the proposal and the shareholders shot it down anyway.

Reply to  James Schielein
May 1, 2016 9:34 am

Buffet is almost certainly the single largest stockholder in Berkshire Hathaway so if he didn’t want it any shareholder’s proposal was likely doomed.

Reasonable Skeptic
May 1, 2016 5:20 am

All fanatics exhibit the same “if you are not with us you are against us” mentality. Ultimately it will destroy them as lines facture the alarmist herd and non-alarmist realize how foolish their demands are.

May 1, 2016 6:06 am

Buffet recently wrote:
“Up to now, climate change has not produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years, which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely – though far from certain – effect on Berkshire’s insurance business would be to make it larger and more profitable.
…As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries.”
I think that sums up his position.

May 1, 2016 7:08 am

Unless you’d like to float a new business model. “Climate Change Insurance,” anyone? Whoo. Think of the market! Every True Believer given the opportunity to put their money where their “activism” is, and pay a smacking great premium to Feel Safe from the Big Bad Whatever. If their house gets covered up by a glacier or rising sea level, the company pays out. Otherwise–ka-CHING! 😉 I think Mr. Buffett should pay me a commission for this idea!

Walt D.
May 1, 2016 7:21 am

The fundamental formula for calculating insurance premiums is:
probability of loss x severity of loss
Obviously, the actuarial models are more complicated than this.
However, the key reason why global warming and climate change are not important is that they are not insuring for losses that will occur in 50 years time. The policies renew every year and they can adjust their premiums accordingly.

May 1, 2016 7:36 am

I’d be curious if someone made an insurance claim blaming Climate Change, what would happen? Crash your car in a bad snow storm, wind damage from a bad storm, flooding, etc. As “acts of God” are often not covered by insurance companies but climate change is man made and thus it should be covered. You would have 97% of all scientist to take to court with you.

Reply to  Duncan
May 1, 2016 10:24 am

Exempted under my farm policy as “acts of God.”

Reply to  Goldrider
May 1, 2016 10:26 am

I’ve always thought it stupid media-spin that if you crash your car on a clear day, it’s your fault or that of some other driver, BUT if you crash during a “weather event,” it’s the STORM’s fault and winds up counted in the “Death Toll” (crap drama term) for said storm. This is the kind of horseshit we need to be calling out.

Reply to  Goldrider
May 1, 2016 11:06 am

“Exempted under my farm policy as “acts of God.”” Not any more as far as I am concerned, as any extreme event is likely due to AGW. You should be entitled to some of that money earmarked to mitigation. Maybe they can rebuild your farm dwellings out of steel on pontoons, flood barrier and wind break included.

Dick Meyers
May 1, 2016 9:06 am

Odd that Buffett says he’s concerned about climate change but has invested heavily, along with Gates, in Canadian rail to haul crude oil to market

Bruce Cobb
Reply to  Dick Meyers
May 1, 2016 9:44 am

He gives it lip service, that is all. Like a good, obedient Democrat.

May 1, 2016 12:25 pm

At least one of the Evil big oil companies who champion a price on carbon (dioxide) and claim that gullbile warming is the greatest challenge of our time has an activist shareholder that makes exactly this type of proposal every year; all exploration activity should be stopped so the oil stays in the ground, all ‘dirty, uneconomic’ activities (unconventional oil operations in North America in particular) should be divested before they become stranded assets, and the resources spent instead on monuments to folly and wishful thinking like wind energy (yesterday’s technology tomorrow)
Anyway, the board’s backpedalling response to shareholders tries to keep to the ‘gullble warming must be stopped at all costs’ script, while explaining to shareholders that the activitist’s motion is absurd because it will cost too much.
In any case, these motions, regardless of the annually specific details, are soundly rejected every year. Probably because rent seekers aren’t generally significant shareholders of successful businesses and the people who are generally know bullshit when its distinctly pungent bocquet is in the house.

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