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https://scmp.com/magazines/style/luxury/article/3126736/does-warren-buffett-deserve-pay-rise-berkshire-hathaway-ceos
Style/ Luxury

Does Warren Buffett deserve a pay rise? The Berkshire Hathaway CEO’s annual salary stayed at just US$100,000 for the past 40 years – but he enjoys other perks too

  • He’s the sixth-richest person on the planet with a net worth of US$95 billion – so why didn’t billionaire Warren Buffett ever ask for a pay rise?
  • He breakfasts at McDonald’s and his annual salary hasn’t changed since it was set at US$100,000 in 1980 – a fraction of S&P 500 CEOs’ US$15 million average
Berkshire Hathaway chairman and CEO Warren Buffett enjoys the simple things in life – like Dairy Queen ice cream and McDonald’s for breakfast. Photo: Reuters

Warren Buffett is a legendary investor, leads one of the world’s biggest companies, and has ranked among the world’s wealthiest people for decades. Yet he earns a modest annual salary of US$100,000 – and hasn’t had a pay rise in 40 years, US government filings show.

As Berkshire Hathaway’s CEO and chairman, Buffett recommends to his board of directors how much he should be paid, and decides the rest of the executives’ compensation. The 90-year-old has received US$100,000 a year since 1980 – a fraction of the US$15 million average pay of S&P 500 CEOs in 2019.

Berkshire Hathaway chairman Warren Buffett appears to be content with his (US$100,000-a-year) lot. Photo: Reuters
Berkshire Hathaway chairman Warren Buffett appears to be content with his (US$100,000-a-year) lot. Photo: Reuters

Buffett doesn’t earn much from other sources, either. He netted double his salary in annual directors’ fees in the 1990s and early 2000s, before he resigned as a director of The Washington Post Company and stepped down from other corporate boards.

The highest total compensation he’s ever received at Berkshire was US$525,000 in 2010, comprising his US$100,000 salary, US$75,000 in directors’ fees and US$350,000 allocated to his security costs.

The 10 richest people in the world, ranked in 2019. Source: Hurun Research Institute
The 10 richest people in the world, ranked in 2019. Source: Hurun Research Institute

Berkshire spends far more on Buffett’s personal and home security than it pays him directly. Keeping the boss safe has cost the company an average of US$339,000 a year since 2008, or US$4.4 million in total.

Buffett isn’t in desperate need of a big salary. He owns roughly US$100 billion of Berkshire stock – which he’s gradually giving away – and doesn’t spend much: he lives in a modest family home, drives a basic car, and eats breakfast at McDonald’s.

Warren Buffett enjoys McDonald’s as his breakfast. Photo: @darrenrovell/Twitter
Warren Buffett enjoys McDonald’s as his breakfast. Photo: @darrenrovell/Twitter

The investor also doesn’t use a company car, belong to any clubs where Berkshire pays his dues, or commandeer company-owned aircraft for his personal use.

Buffett shared his views on salaries at Berkshire’s annual shareholder meeting in 2017, when he was asked how much his successor would be paid. He expressed hope that the next CEO would already be rich, and wouldn’t be motivated to earn 10 or 100 times the money their family needs to live on.

“They might even wish to, perhaps, set an example by engaging for something far lower than, actually, what you can say their true market value is,” he continued, adding it would be “terrific” if that was the case.

Warren Buffett, chairman and chief executive officer of Berkshire Hathaway, speaks during the virtual Berkshire Hathaway annual shareholders meeting in May 2020. Photo: Bloomberg
Warren Buffett, chairman and chief executive officer of Berkshire Hathaway, speaks during the virtual Berkshire Hathaway annual shareholders meeting in May 2020. Photo: Bloomberg

Buffett is a firm believer that CEOs should be incentivised to deliver long-term success for their companies. He believes massive annual salaries, bonuses and short-term stock options encourage short-term thinking.

Charlie Munger – Buffett’s right-hand-man and Berkshire’s vice-chairman – has followed Buffett’s example. He’s also received a salary of US$100,000 a year for several decades now, filings show.

Berkshire Hathaway Chairman Warren Buffett and vice-chairman Charlie Munger are seen at the annual Berkshire shareholder shopping day in Omaha, Nebraska, in May 2019. Photo: REUTERS
Berkshire Hathaway Chairman Warren Buffett and vice-chairman Charlie Munger are seen at the annual Berkshire shareholder shopping day in Omaha, Nebraska, in May 2019. Photo: REUTERS

In contrast, Ajit Jain and Greg Abel, who head up Berkshire’s insurance and non-insurance divisions respectively, are paid far more handsomely. Both men have earned a US$16 million salary in each of the past of three years, plus total bonuses of US$7 million each.

Finally, Berkshire’s finance chief, Marc Hamburg, has seen his salary grow from about US$300,000 in 1996 to US$3.3 million last year.

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This article originally appeared on Business Insider