Every year, thousands of investors flock to Omaha to hear the wisdom of Warren Buffett and Charlie Munger. For as long as six hours, with only one break for lunch, the two business legends take questions from investors, the press, and analysts.
Appropriately for a shareholder meeting, the focus is the business of Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) but it's not the only topic they discuss. This year, Buffett discussed Berksire's disclosure of executive compensation in response to a question from financial journalist Andrew Ross Sorkin of The New York Times .
Following are my notes on Sorkin's question, along with responses from Buffett and Munger.
Andrew Ross Sorkin: In other companies, the compensation is listed for top five execs, but for Berkshire it's only three. I think it'd be useful to add two execs from the subsidiaries to let shareholders know how they're being compensated. Would you be willing to add that in recent years. How much should the next CEO of Berkshire be paid?
Warren: The answer to the last question is "a lot." I'm going to write about that question in the annual report next year.
Regarding compensation disclosure, we are following the SEC rules. In my sporting mood, I'd say Comcast (NASDAQ: CMCSA ) has people that exceed the salaries of the people listed in the proxy statement. Is it in the interest of shareholders to disclose who hosts the local news? I would say they would be hurt if you published the five highest salaries paid. I think that's a good reason for not publishing the salaries for our top 10 managers.
At Salomon, every was dissatisfied with their pay and they got enormous amounts. They were disappointed because they looked at others, and it drove them crazy. Our first big crisis was when management a secret deal that John Meriwether and his crew got paid a lot of money. When that happened, it made compensation an even bigger problem.
It is very seldom that publishing compensations does much for shareholders. CEOs would be paid less if proxy statements didn't reveal comp. It's only natural to use that information to negotiate and ask for more.
Charlie: You're asking for something that's going to not be good for shareholders, and that's why we don't do it. It's not going to happen unless the SEC asks for it.
Warren: No CEO looks at proxy statements and comes away thinking that I should be paid less. Charlie, have you seen that?
Charlie: I would say that envy is doing the country harm.
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