Buffett sells Petrochina

Toby Shute, writing for The Motley Fool, reports that Warren Buffett, notorious sponsor of genocide, has sold off about 70% of his Petrochina stake. Shute feels that Buffett is probably doing so for reasons of valuation, not for ethical concerns. However, he feels that in doing so, Buffett is doing right by both his shareholders, and activists.

Is he? What is a stock? A stock is an ownership share of a company. If I hold 100 shares of Johnson and Johnson, for example, I own a fraction of the company: 100 divided by 2.89 billion. I have a proportionate share in the dividends it pays out. My shares may appreciate because of market conditions. I have a proportionate say in votes brought before shareholders: stuff like elections for the board of directors, resolutions on pay, the environment, etc. Warren Buffett generally likes to buy shares of companies with strong competitive advantages and good management, and hold them forever (he may trim or add to his position). This corresponds to the ownership model of investing.

Some people trade in and out of shares. For them, investing is a game of skill. It doesn't matter so much that they own a piece of the business, it matters more which direction the stock price is headed (usually up, but you can sell shares short, which is a bet that they will decline). For these people, I suppose ethical concerns are irrelevant, also. Warren Buffett does not generally use this model; he finds it impossible to predict the short term variations in share price.

If Buffett sold his Petrochina shares solely because of valuation, that doesn't seem very satisfying to me as an ethically-minded investor. He made no public statements condemning their activities in Sudan (he makes few public statements about his buying or selling anyway), and if he had been making an ethical decision, he should have publicly condemned their activities. It does more than owning a piece of a business whose majority owners (connected to the Chinese government) grant you no say in how the business is run (an American or European business would at least be minimally responsive if investors demanded an accounting of activities that supported genocide).

If you live in America, and if you have any sort of retirement plan, you own stocks. You most likely own them through a mutual fund. Your pension fund, if you have one, owns stocks. You might invest directly in stocks yourself. You need to consider what it means to own stocks. Are they just financial tools you buy and sell, or are they a piece of a business? If you feel you can retire by just socking away cash in your IRA and relying on Social Security, then I guess you don't have to ask yourself that question (but you very likely won't have enough to retire on). But the rest of us are all probably profiting, indirectly, from questionable activities of corporations. We need to demand that our financial system allow us to demand an accounting from large corporations. They are essentially unelected, barely accountable entities that have huge effects on people's lives, whether by financing genocide, or by withdrawing from countries that have strong generic drug laws, or by polluting the environment, or by funding groups that deny global warming, or by buying legislators who then ignore citizens who aren't rich.