Berkshire shareholders reject PetroChina divestment for Darfur

May 5, 2007 (OMAHA, Nebraska) — Berkshire Hathaway Inc. shareholders voted by a 53-to-1 margin against an investor proposal calling on the firm to divest a $3.3 billion stake in PetroChina Co. because it’s controlled by a company that does business in Sudan.

China National Petroleum Corp., PetroChina’s parent, holds oil reserves and pipelines in Sudan, where the government has been accused of supporting genocide. At final count, 830,598 votes were cast against the resolution and 15,740 for it, the company said today at Berkshire’s annual meeting in Omaha, Nebraska.

“We have no disagreement with what PetroChina is doing,” said Berkshire Chairman and Chief Executive Officer Warren Buffett. “If there was a disagreement it would be with what the Chinese government is doing.”

China, which controls China National, joined with Russia, Qatar and South Africa to block a U.S. effort at the United Nations to increase pressure on Sudan to accept more than 20,000 peacekeeping troops in Darfur. Sudan has accepted about 3,000 UN soldiers and police to support the 7,000 African Union troops trying to protect civilians in Darfur.

Buffett said he agrees “100 percent” that Darfur violence is wrong. He has said PetroChina has no influence over China National. Divestment would only help the Sudanese government get control of the Chinese assets inexpensively, Berkshire says on its website.

Buffett’s decision hasn’t swayed activists who say putting the world’s third-richest man on the spot will draw attention to their campaign to cut the flow of oil revenue to Sudan’s government. Buffett, 76, often scolds corporate America for putting profits ahead of ethics. The billionaire in June pledged the bulk of his fortune to the Bill and Melinda Gates Foundation, a gift valued at the time at about $37 billion.

`An Extremely Ethical Man’

“As an exemplar of business ethics and integrity, your divestiture would send a message to China,” said Judith Porter, a semi-retired college professor, who introduced the resolution.

Conflict broke out in 2003 when rebels seeking a larger share of Sudan’s political power and oil wealth attacked the government. At least 200,000 civilians have since died in Darfur, in the western region of Sudan, according to the United Nations and Human Rights Watch.

The government, dominated by Muslim Arabs, has been accused by the UN and the U.S. of supplying money, weapons and vehicles to mainly Arab militias known as the Janjaweed that have targeted African villages in rebel held areas. The U.S. Congress said the killings amounted to genocide.

`Never Again’

“Genocide should never again happen,” said Judith Porter. “The world was silent when my grandparents were murdered by the Nazis,” then during genocide in Cambodia, Bosnia, Rwanda, she said. “How many times must we say `never again?”’

Buffett said he sees “no effect whatsoever in Berkshire Hathaway trying to tell the Chinese government how to conduct business.” It’s “understandable” China is looking worldwide for energy, said Buffett. The U.S. Congress “snubbed” the Chinese in 2005, when it opposed an attempt by Chinese company Cnooc Ltd. to acquire U.S. oil producer Unocal Corp, Buffett said. Chevron Corp., based in San Ramon, California, later acquired Unocal.

Berkshire owns 1.3 percent of PetroChina and is the largest shareholder after China National, which owns 90 percent of the stock. China National Petroleum led development of the first oil field in Sudan and is the largest foreign oil company operating in the country.

Supporters of the resolution say PetroChina and China National have some of the top managers.

“They look different, but they are actually two sides of the same corporation,” said Gerald Porter, Judith’s husband.

Lopsided Vote

The lopsided vote margin reflects votes by large shareholders, including Buffett, who owns about a third of Berkshire’s stock, Porter said. The tally includes both Class B shares and more highly valued Class A shares, which carry larger voting weight. Buffett said that without his votes, the ratio would have been 25-to-1.

“I think if you look at the number of people who voted for the resolution, it’d be a much higher percentage,” Gerald Porter said.

Berkshire paid $488 million for its PetroChina stake, according to regulatory filings. It soared sevenfold in value through Dec. 31.

Buffett has built Berkshire over the past four decades from a failing textile maker into a holding company with businesses ranging from ice cream to utilities to insurance and a market value of $168 billion.

Insurance Earnings

He told shareholders not to expect a repeat of the earnings Berkshire’s insurance units had last year or in the first quarter. Profit from underwriting climbed 82 percent to $601 million in the first quarter as its catastrophe reinsurance business benefited from higher prices and mild weather, Berkshire said yesterday. That contributed to a 12 percent increase in net income to $2.6 billion, or $1,682 a share.

“The insurance earnings are going to go down, there’s no question about that. It’s up to Mother Nature how much,” Buffett told shareholders at a gathering at Omaha’s Qwest Center, attended by 27,000. “What we really hope over time is more or less to break even on underwriting of insurance.”

Hurricane Katrina, which caused $40.7 billion in insured losses along the U.S. Gulf Coast in 2005, isn’t “anywhere near a worst-case scenario,” Buffett said. It would be “crazy” to sell insurance at the rates that existed before Katrina, he said.

Buffett uses insurance premiums and cash from the company’s other operations to invest in stocks and buy companies.

Looking for a Deal

“We have 10 billion or more dollars a year coming in that’s free to go into almost anything,” Buffett said in an interview. “And that’s always a challenge.”

Berkshire had more than $40 billion in cash as of March 31, and the company would even sell some of its holdings to raise more money if it were needed for the right acquisition, Buffett told shareholders. Berkshire’s utility unit last year purchased PacifiCorp from Scottish Power Plc for $5.1 billion in the company’s biggest deal since Berkshire bought insurer General Re Corp. in 1998 for $17.6 billion.

“We’re as prepared as we’ve ever been to buy a big business outright,” said Buffett.

Berkshire businesses related to residential construction have been hurt by a housing slump in the U.S. economy that is likely to continue for “quite a while,” Buffett said. Sales of previously owned homes in the U.S. declined more than forecast in March, falling to the lowest level in almost four years, the National Association of Realtors said.

Berkshire owns building products manufacturer Johns Manville Corp. and paint maker Benjamin Moore & Co.

Berkshire shares rose $650, or .6 percent, yesterday to $109,250 in regular trading on the New York Stock Exchange. They have dropped .7 percent this year.

Shares of Berkshire are up about 3,600 percent since 1987, six times more than the New York Stock Exchange Composite Index, which measures the performance of all the companies listed on the Big Board.

(Bloomberg)