Calpers, the largest public pension fund in the United States, and other investors are demanding that Berkshire appoint an independent chair to replace Buffett and disclose more information about how its dozens of businesses promote diversity and address climate risks and greenhouse emissions. Buffett would continue to serve as CEO.
Nonetheless, these may not have a high chance of success until Buffett steps down. Buffett is 91 years old.
"In the post-Buffett world, we may see a more aggressive shareholder base agitating for greater change," said Cathy Seifert, an analyst at CFRA Research in New York. "At this point, there is a lot of respect for Warren Buffett."
The proposals have received backing from the powerful proxy advisory firm Institutional Shareholder Services, as well as some backing from investors such as Norges Bank Investment Management and Neuberger Berman.
Berkshire Hathaway, which opposes the proposals, has long opposed a restructure.
It claims that its insurance, name-brand energy, and other operating businesses already address investors' concerns, and that its "unusually decentralized" business model eliminates the need for Buffett to impose one-size-fits-all reporting requirements.
Last May, Buffett stated that requiring reports from Berkshire's dozens of smaller companies would be "asinine."
Regarding the separation of the CEO and chairman roles, Berkshire has stated that once Buffett is no longer in charge, the company should be chaired by someone outside of management, but Buffett should retain both roles.
Indeed, the proposals are likely to be defeated, owing to Buffett's control of nearly one-third of Berkshire's voting power. Last year, less than 30% of those who voted supported similar proposals on climate risk and diversity.
Shareholders will vote at the conclusion of Berkshire's annual meeting, after Buffett and Vice Chairman Charlie Munger, 98, answer shareholder questions at the meeting, which is the main event of a weekend that draws tens of thousands of investors.
Vice Chairmen Greg Abel, 59, who would take over as CEO if Buffett were to resign, and Ajit Jain, 70, will also be on hand to answer shareholder questions.
Reverence
Two worlds collide within Berkshire's investor base.
Buffett has long been admired by many smaller and larger investors who have stuck with him for decades, some of whom believe there is no need for change.
Bill Smead, founder of Smead Capital Management and a longtime Berkshire shareholder, pointed out that Berkshire Hathaway Energy is already investing heavily in cleaner energy, with the goal of halving greenhouse gas emissions by 2030 compared to 2005.
"Spending $3.9 billion on wind and solar in Iowa tells you everything you need to know about Berkshire," Smead said.
The calls for change come at a time when shareholders are enjoying above-average returns on their investments, after significantly underperforming in 2019 and 2020 and slightly outperforming in 2021.
Berkshire shares were up 10% year to date as of Wednesday, outperforming the S&P 500 index.
The S&P 500 was down 12% as investors shifted away from growth stocks and toward value.
After four years of talks with Berkshire, Timothy Youmans, engagement lead for North America at EOS, a Federated Hermes subsidiary that co-sponsored the climate risk proposal, admitted that a victory on Saturday is unlikely.
But he remains optimistic, citing Abel's discussion of Berkshire's sustainability efforts in the company's most recent annual report.
"Abel appears to have a very good understanding of the risks associated with climate change," Youmans said. "We're optimistic... He will put in place the parent company level climate reporting that we have requested."
Mohnish Pabrai, a principal at Pabrai Investment Funds and a longtime Berkshire shareholder, described the increased reporting requirements as a distraction.
"Companies should concentrate on the mission of caring for their shareholders, employees, and customers," he said. Berkshire Hathaway, he predicted, will "do well for the next 100 years."