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BRK2011: Berkshire and a Green Future: Shareholder Proposal

Flowers in a Field

So far, we have discussed Berkshire’s dividend policy and future leadership. Today, we are going to focus on a particular shareholder proposal that led to the most contentious moments of the day.

The proposal that started the debate:

Emily S. Coward, 2020 Pershing Street, Durham, NC 27705, owns 62 shares of Class A Common Stock and has given notice that a representative of hers intends to present for action at the meeting the following proposal.

Resolved that Berkshire – in response to strict new EPA regulations – establish quantitative goals for the reduction of greenhouse gas and other air emissions at its energy-generating holdings; and that Berkshire publish a report to shareholders by September 30, 2011 (at reasonable cost and omitting proprietary information) on how it will achieve these goals – including plans to retrofit or retire existing coal-burning plants at Berkshire-held companies.

This is an incredibly complex proposal for a company like Berkshire Hathaway and requires a lot of background knowledge, scientific understanding, and business acumen to fully understand. I will try to give you the executive summary version here.

Image by mikebaird / flickr

Greenhouse Gasses and the Environment

The scientific evidence that greenhouse gas emissions, such as those from burning fossil fuels like oil, natural gas, and coal, are having a massive impact on our atmosphere, ecosystem, and planet. If you think this is fabricated or not proven, you are either stupid, ignorant, or trust Rush Limbaugh over science. The evidence is clear.

We can debate all day about how much of an impact we are having and whether we need to take actions to avoid our impact. That is subjective. But we are having an impact.

My personal opinion is very strong and clear. We need to, as a global society, do all we can to eliminate greenhouse gas emissions from fossil fuels. However, even if the United States never put out another ounce of carbon into the atmosphere, the impact from China’s coal power plants alone has the potential to impact our planet’s temperature and ecosystems.

The Polar ice caps are shrinking. Ships have used the northern passage for cargo transportation. That would have been impossible just a few decades ago. I have seen the dead coral reefs in the Caribbean with my own eyes.

I have lots of ideas on how to fix this issue, but none are immediate and all are expensive.

Berkshire Hathaway Impact

Berkshire Hathaway owns several energy focused companies. The largest and best known is MidAmerican Energy. As of a recent initiative in Iowa, MidAmerican is the number one wind electricity generator in the United States. In addition, Buffet is a nuclear energy advocate.

These are two major steps in securing our energy independence in a way that does not destroy the planet. Despite what you may have heard, nuclear is the safest and cleanest energy to meet base load needs. Wind, in combination with solar and hydro, can meet our peak demand needs.

Based on their current track record, I trust that Berkshire Hathaway managers are on the right track for a move to profitable, clean energy forms.

My Take on the Vote

There were passionate speakers both for and against the shareholder resolution. While more people spoke for it, it seemed that the crowd was against it. From my position, it appears that most Berkshire investors either don’t care about the environment or don’t understand it. I am always shocked to hear people say that global warming is not real. It certainly is, and it is not “hot air” as one commenter stated.

However, as an investor and a finance minded person, I am in the camp with Milton Friedman. The purpose of a business is to make money. Warren Buffet and the Berkshire board agree.

I do support moving toward cleaner energy. I am a huge nuclear advocate. However, a shareholder meeting is not the forum to change the world. It is a forum to increase profits.

The Result

The resolution failed, as I expected it would. However, I hope Berkshire and other energy companies continue on the path toward more renewable, sustainable energy that will not destroy our planet.

Do you think this was the right thing to do? Is it the responsibility of big business to protect the environment pro-actively?

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