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This article is based on more than 35 interviews and hundreds of documents, including thousands of pages of Bill & Melinda Gates Foundation grant descriptions, tax forms and lists of endowment holdings as of 2005, the most recent data available. It also included Gates Foundation and Berkshire Hathaway Inc. filings to the U.S. Securities and Exchange Commission through September 2006 for the foundation and December 2006 for Berkshire, and Berkshire annual reports from 1998 through 2006. In considering Berkshire Hathaway holdings, The Times included the investments by General Re Corp., Berkshire's wholly owned subsidiary.
Data regarding PetroChina Co. and China National Petroleum Corp. is from SEC filings, company reports and websites.
Information was used from six leading services that give investors guidance on corporate performance: Calvert Group Ltd., Innovest Strategic Value Advisors, KLD Research & Analytics Inc., the Goldman Sachs Group Inc., Institutional Shareholder Services Inc. and Oekom Research. Ownership analysis was provided by Cary Krosinsky of CapitalBridge, a capital markets intelligence firm. None of the companies was directly involved in The Times' assessment of the Gates Foundation or Berkshire portfolios; they have taken no position on The Times' conclusions.
The corporate performance research groups consider companies in context and weigh their efforts to improve. For example, oil and gas companies are big polluters by nature, but some vigorously pursue pollution reduction or alternative-energy development. The researchers give more-favorable ratings to companies that make strong efforts to improve.
The Times' tallies of Gates Foundation and Berkshire investments in companies that contradict the foundation's goals included only those firms that were ranked among the worst by the investment rating services, which considered their performance in one or more broad categories, including governance, environmental practices and social practices, or on one or more specific issues, such as product safety or human rights. Data from the services include unique but overlapping sets of companies:
Calvert: The 1,000 largest U.S. companies measured by market capitalization.
Innovest: 1,255 U.S. and foreign companies.
KLD: The Russell 3,000 companies, plus many other U.S. and foreign companies.
Goldman Sachs: 26 U.S. and foreign companies in the oil and gas industry.
Institutional Shareholder Services: 16 U.S. and foreign companies.
Oekom: 108 U.S. and foreign companies in the oil and gas, banking and pharmaceutical industries.
Calvert rates companies based on several governance, social and environmental measures. Companies rejected for the Calvert social investment index, because of poor performance in one or more categories, were included in The Times' totals of investments in firms that counter the Gates Foundation's charitable goals or socially concerned philosophy.
Innovest rates companies on seven levels for two overall categories: environmental and social. The Times' total of Gates Foundation investments in firms that counter its goals or socially concerned philosophy included companies that received the lowest possible rating in either of those overall categories.
KLD provides relative scores in several governance, social and environmental categories. The Times included in its totals of investments that counter the Gates Foundation's goals or philosophy any holdings in companies that scored at least one standard deviation below the norm for all firms in each category. Depending on the category, this represented 1% to 15% of evaluated companies.
Goldman Sachs provides relative scores in several governance, social and environmental categories. The Times compared a weighted average of those scores for the largest 100 U.S. institutional investors' holdings in oil and gas stocks — the larger the holdings, the more it contributed to the average score. Goldman Sachs also provided executive compensation evaluations for 107 companies in several industries.
Institutional Shareholder Services provides a range of descriptions of company practices and evaluations. These were used for background, and where applicable, for comparative data on executive compensation.
Oekom uses a minimum passing score within an industry group for overall corporate responsibility. Companies that failed to achieve a passing score were included in The Times' totals of investments that conflicted with the Gates Foundation's goals or philosophy.
Companies with significant operations in Sudan were derived from research by the Sudan Divestment Task Force, Calvert and KLD.
The Times also included companies screened by Calvert, KLD or Innovest for significant problems involving diversity, human rights, product safety or other product-related concerns, and tobacco-product manufacturing and sales.
The rating companies look at similar factors and often reach the same conclusions. However, each service uses unique weightings and analysis, naturally resulting in some conflicting conclusions.
These evaluations were supplemented with Times reporting.
The Times also included companies among the 100 highest-polluting in the United States, derived from rankings by the University of Massachusetts Political Economy Research Institute. These rankings consider total air pollution released, toxicity of pollutants and the number of people at risk of exposure. The top 50 polluters in Canada were rated by the trade publication Corporate Knights, based largely on the University of Massachusetts approach.
The Times used several studies that reviewed or evaluated actions of the pharmaceutical industry regarding intellectual property rights, patents and drug pricing in developing nations. A preliminary list of relevant companies was drawn up using studies or evaluations conducted by Innovest, KLD, Oekom, the nonprofit medical group Doctors Without Borders and the Interfaith Center on Corporate Responsibility, a coalition of 275 faith-based institutional investors that includes religious groups, pension funds, endowments, hospital corporations and colleges.
The list was refined and validated in interviews with experts and through a review of more than 40 technical papers and analyses, including studies by the World Bank and the World Health Organization. Those sources were supplemented with reports and announcements from the pharmaceutical companies and the Pharmaceutical Research and Manufacturers of America, a leading trade group.
Subsidiaries were considered part of the parent companies if the parent owned more than 50% of the subsidiary. Although attempts were made to discover all such corporate linkages, those efforts were not exhaustive.