Warren Buffett on Executive Compensation

The Oracle points to executive comp committees made up of spaniels, not dobermans.

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The Atlantic's Megan McArdle was liveblogging the annual Berkshire Hathaway shareholder meeting in Omaha over the weekend and she shared some of Warren Buffett's remarks on executive compensation. He was responding to a question on setting compensation for managers at capital-intensive subsidiaries.

An excerpt:

Your question implies that the board sets these things.  In the recent forty years, basically the board has had little effect on these things.  The CEO has had an important role determining their compensation.  These people pick their own compensation committee.  I've been on one compensation committee out of nineteen boards because these people aren't looking for Dobermans; they're looking for cocker spaniels.  It's been a system that the CEO has dominated.  In my experience, boards have done little in the way of thinking through as an owner what they ought to pay these people. 

It makes sense--no human being is going to choose a roster of Dobermans to set his or her compensation. But I'd encourage you to rest of McArdle's post on why loyalist comp committees don't explain everything.


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