2014: Will Berkshire disclose how much its highest paid subsidiary managers make?

ANDREW ROSS SORKIN: Thank you, Warren. This question comes from Dave Hitchy (PH) from Auburn.

It’s a long question. He says, “As a shareholder for about a dozen corporations in addition to Berkshire, I always see a number of proxy statements each year. In all, except Berkshire, the summary compensation table has the compensation listed for at least five or more of the highest paid executives. Berkshire lists three, Warren, Charlie and Mark.

“I assume that since Berkshire is a holding company structure, that’s the way it is. I think it would be instructive to include at least two of the highest paid executives from the wholly-owned subsidiaries in the summary table, Ajit, Tony, or Greg, or Matt, to give the shareholders, your partners, a sense of how Berkshire compensates its strongest and highest-paid leaders, as other companies do.

“This would be particularly valuable since two-thirds of the current listees, Warren and Charlie, only receive nominal salaries of $100,000 per year, a figure that is vastly below the value they bring to the company.

“Would you, in the spirit of transparency, be willing to add at least two of the highest-paid subsidiary officers in the table in future years? And how much do you think the next CEO of Berkshire should be paid?”

WARREN BUFFETT: Well, the answer to the last is he certainly will be entitled to pay — get paid a lot. But their decision as to how much they accept is another question.

But I’m going to write about that very end question next year in the annual report because it has a lot of interesting ramifications.

We, obviously, are following the SEC rules, which I can’t recite, in terms of the officers required to be in the proxy statement as to their pay.

But, you know, Andrew, in my sporting mood, I would say that Comcast probably has some people in the employ that make a lot more money — not at CNBC, we’re not —but — that would exceed the salaries of the people that they list in the proxy statement, as well.

And there’s a real question as to whether it’s in the interests of the shareholders of the company to start listing, you know, how much the person who’s the anchor of the nightly news or whomever it might be, gets paid because it might have a very negative effect, in terms of negotiating salaries with other people within the organization.

I would say that the — I would say the shareholders of Comcast would be hurt, actually, if you published the five highest salaries paid at the subsidiaries or at Comcast itself.

And certainly, if you carried it to every subsidiary there was. I mean, if you were to publish the five highest salaries at CNBC, I don’t think the salaries overall would go down the following year.

So, I think that is a — I think that’s a good reason for not — for us not publishing the salaries of, you know, say, our top ten managers of the company.

At Salomon — we mentioned that a little earlier — everybody — virtually everybody — was dissatisfied with what they were getting paid. And they were getting paid enormous amounts of money.

But they were disappointed, not because of the absolute amount. They were disappointed because they looked at somebody else in the place and it drove them crazy.

And as a matter of fact, the first big crisis we had in compensation was when the management made a — what was regarded as a secret deal, with the arb group, as I remember — whereby, John Meriwether and his crew got paid a lot of money, which I would argue they earned. I mean, I think they deserved it.

But as soon as that happened, it made compensation, which had always been a terrible problem, an even greater problem because of the jealousy that broke out among the people that weren’t in John Meriwether’s group.

I think it’s been — I think it’s very seldom that publishing compensation accomplishes much for the shareholders.

In fact, you can argue that much of what’s going on in corporate America — well, I would put it this way: corporate CEOs, as a group, would be being paid a lot less money if proxy statements hadn’t revealed how much other people were getting paid.

It is only human to look at a whole bunch of proxy statements and say, “Well, I’m worth more than that guy,” and negotiate that way. And a comp committee is going to respond to that.

So, American shareholders are paying a significant price for the fact that they get to look at that proxy statement every year and see how much those top five officers are earning.

Charlie? (Scattered applause)

CHARLIE MUNGER: In the spirit of transparency, you’re asking for something that wouldn’t be good for the shareholders. And it’s not going to happen unless the SEC makes it happen.

We’re way better off without adding to the culture of envy in America.

WARREN BUFFETT: Yeah, there’s no one that looks at —there’s no CEO that looks at other proxy statements and comes away thinking, “I should get paid less.” I mean, that — you know? (Laughter)

We haven’t seen — have we ever seen them?

CHARLIE MUNGER: No.

WARREN BUFFETT: No.

CHARLIE MUNGER: No, I —

WARREN BUFFETT: Well, we’re not old enough.

CHARLIE MUNGER: I would say that envy is doing the country a lot of harm. And our practices are envy dampeners.