Warren Buffett, CEO of Berkshire Hathaway, said he has seen a booming trend of CEO pay rising as executives eye each other on ever-increasing compensation deals.
In his annual letter to shareholders — the last letter he will write as CEO before Berkshire Vice Chairman Greg Appel takes office on Jan. 1 — Buffett suggested that CEOs are driven by greed and selfishness to increase their pay after seeing competitors increase theirs.
“What often upsets wealthy CEOs — they are human, after all — is that other CEOs are getting richer,” he said. “Envy and greed go hand in hand. Which advisor recommended a significant reduction in CEO compensation or board pay?”
Buffett’s comments come on the heels of Tesla investors approving CEO Elon Musk’s record $1 trillion pay package on Thursday. The compensation package, conditional on the electric car company reaching a market value of $8.5 trillion, would effectively make the world’s richest man the first trillionaire. Musk’s net worth is currently approximately $449 billion.
The next day, rival electric vehicle company Rivian announced a A $4.6 billion compensation package CEO RJ Scaringe over the next decade, similar to Musk’s plan. The package, which would double Scaringe’s $2 billion base salary, also depends on the automaker reaching certain operating income and cash flow targets over the next seven years.
Tesla and Rivian did not immediately respond luckRequests for comment.
Reflecting on 60 years of leadership of his multi-industry group, Buffett said in his letter that corporate disclosure of CEO pay was in part an attempt to at least make CEOs feel self-conscious about how much money they were making. However, what was intended as a gesture of humility instead became a contest of superiority.
“During my lifetime, reformers sought to embarrass CEOs by requiring disclosure of their boss’s compensation compared to what the average employee was paid,” Buffett said. “The proxy statements immediately swelled to more than 100 pages compared to 20 or fewer pages earlier. But the good intentions did not work; instead they backfired.”
He added: “Based on the majority of my observations, the CEO of Company A looked at his competitor at Company B and subtly told his board that he should be worth more. Of course, he also boosted directors’ pay and was eager to put them on the compensation committee.” “The new rules produced envy, not moderation.”
In fact, compensation packages have swelled dramatically, rising 34.7% among the 100 largest low-wage employers in the United States from 2019 to 2024, according to an August report by the Institute for Policy Studies. Likewise, the CEO-to-worker pay ratio has swelled, rising from 560:1 in 2019 to 632:1 last year. Excessive pay packages helped make the country’s richest billionaires $698 billion richer this year, according to an Oxfam report published this month. In contrast, Buffett has… Annual salary is $100,000 (Although his net worth is About 150 billion dollars Thanks to his investments, which made him ranked 11th on the list of the richest people on Earth).
Other financial giants have spoken out against exorbitant pay packages, especially Musk. Norges Investment Management, the entity behind Norway’s $2 trillion sovereign wealth fund and a 1.14% shareholder in Tesla, voted against Musk’s compensation plan.
“While we appreciate the significant value created under Mr. Musk’s visionary role, we are concerned about the overall size of the award, the dilution, and the lack of dilution of key person risks — consistent with our views on executive compensation,” the group said in a statement last week.
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