Buffett rejects company car, salary hike; pays CFO more

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World’s newly crowned richest person Warren Buffett may have some lessons for other billionaires and CEOs of the world.

Buffett, CEO and chairman at Berkshire Hathaway, does not use office car, has neither taken a salary hike for 25 years nor desires any in future, pays back the company for minor items such as phone calls, postage and favour from office personnel that are personal in nature, does not fly in company jet for personal visits and gives over four-times bigger pay package to his chief financial officer.

These disclosures are part of Buffett-run Berkshire Hathaway’s compensation policy as mentioned in a notice being sent to its shareholders for their annual meeting on May 3.

Besides, Berkshire said it does not grant stock options to its executive officers, all the compensation would be deductible under tax laws and the company’s profits or market value would never be a yardstick for any remuneration.

Stating that its compensation program is different from most of the public companies, Berkshire said that Buffett’s annual salary has been at $1,00,000 for over the last 25 years and he has conveyed that “he would not expect or desire it to increase in the future.”

The amount of his compensation was recommended to the company’s board of directors by Buffett himself.

Berkshire vice chairman Charles Munger has also been paid an annual salary of $1,00,000 for last 25 years and Buffett does not anticipate any hike in Munger’s package as well in the future.

Buffett’s total compensation actually fell in 2007 to $1,75,000, from $2,14,250 in the previous year. Buffett’s non-salary compensation fell in 2007 to $75,000 in 2007 from $1,14,250 in 2006. These are related to directors’ fees received by him from the firms where Berkshire has significant investments.

In comparison, the annual salary of Berkshire’s vice president and CFO Marc D Hamburg rose from $6,62,500 in 2006 to $7,12,500 in 2007. Besides, Hamburg’s total compensation, including other compensation, rose to $7,23,750 in 2007 from $6,73,500 dollars in the previous year.

“Both Buffett and Munger would on occasion utilise Berkshire personnel and/or have Berkshire pay for minor items such as postage or phone calls that are personal.”

But, the two would reimburse the company for these costs through an annual payment that is equal to or greater than the costs that Berkshire has incurred on their behalf. During 2007, Buffett reimbursed Berkshire $50,000 and Munger reimbursed Berkshire $5,500.

“Buffett and Munger do not use company cars or belong to clubs to which the company pays dues. It should also be noted that neither Buffett nor Munger utilises corporate-owned aircraft for personal use. Each of them is personally a fractional NetJets owner, paying standard rates, and they use Berkshire owned aircraft for business purposes only.”

Berkshire further said that directors of the company or its subsidiaries who are employees or spouses of employees do not receive fees for attendance at directors’ meetings.

However, a director who is not an employee or a spouse of an employee receives a fee of $900 for each meeting attended in person and 300 dollars for participating in any meeting conducted by telephone.

Besides, directors are reimbursed for their out-of-pocket expenses incurred in attending meetings of directors or shareholders, the company noted.