Billionaires don’t do divestiture

One familiar complaint on the left about George Soros is that while he espouses a left-liberal worldview and generously funds pro-democracy programs around the world via his Open Society Institute and other projects, he is a wrecker of worlds through his currency trading business. Soros famously bet against the British pound in 1992, embarrassing the Bank of England, and he often gets accused of having a hand in several Asian currency crises as well.

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What these critics miss, of course, is that business is one thing, and politics is another. You don’t become a billionaire by mixing the two; nor can you retain the confidence of your shareholders if you start to stray from a relentless focus on the bottom line. Which helps explain why billionaire investor Warren Buffett has no interest in threatening to divest from PetroChina in order to try to convince the Chinese government to stop covering for the Sudanese government’s brutal behavior in Darfur. When about a dozen shareholders in Berkshire Hathaway raised the issue last week at the company’s annual meeting, Buffett shut them down:

Mr. Buffett said shareholders were mistaken in thinking PetroChina has any impact on the Chinese government, or that a divestment of the Chinese oil company would influence Beijing. The Chinese government owns 100% of China National Petroleum Corp., which owns about 88% of PetroChina.

A shareholder resolution to divest PetroChina sponsored by shareholder Judith Porter, a retired professor, was defeated by a margin of more than 98%.

“PetroChina in no way tells the Chinese government what to do,” said Mr. Buffett. “We have no disagreement with what PetroChina is doing.” He added that he sees “no effect whatsoever in Berkshire Hathaway trying to tell the Chinese government how to conduct their business,” although he added that he is in full agreement over the significance of the problems in Darfur.

UPDATE: Reader William Mitchell points out via email that the Wall Street Journal account above leaves out one crucial detail: that Berkshire Hathaway pointed out the following in a commentary posted online (pdf):

[W]e have seen no records, including the various materials we have received from pro-divestment groups, that indicate PetroChina has operations in Sudan. The controlling shareholder of PetroChina, CNPC, does do business in Sudan … Subsidiaries have no ability to control the policies of their parent.”

Even so, the memo goes on to acknowledge my original point above:

We do not believe that Berkshire should automatically divest shares of an investee because it disagrees with a specific activity of that investee.