The Berkshire Hathaway CEO salary is quite interesting because of three reasons. Firstly, it has always remained the same for 40 years at least. Secondly, the person receiving this pay is Warren Buffet, one of the richest persons in the world. Lastly because for a company of its size, the pay is undoubtedly small. Warren Buffet’s pay of $100,000 is not something many CEOs would want to take. It remains a very little fraction of the total pay of S&P 500 CEOs’ annual salaries. According to Investor’s Business Daily, the Berkshire Hathaway CEO salary is amongst the lowest four wages received by CEOs of S&P 500 companies as of May 2022. The other three CEOs on this list are Charles Magro of Corteva’s (CTVA), Strauss Zelnick of Take-Two Interactive (TTWO), and Jason Adair of Copart (CPRT).
Berkshire Hathaway’s CEO has always been known as a modest man who isn’t into showoff. He doesn’t need a pay rise. Being the largest shareholder, owning 283,000 of the company’s Class A stock which makes up most of his $103 billion fortune, he can live any kind of luxurious life he wishes. But he chooses philanthropy instead and is giving away much of his wealth to charity. A rundown of the salary he earns as the CEO of one of the largest holding companies in the world shows he brought his frugal nature into business and is one of the key reasons for his success.
Berkshire Hathaway is one of the largest companies in the world
Berkshire Hathaway isn’t just one of the largest holding companies in America, it is one of the world’s most valuable companies. Though it started as a company originally involved in textile milling, it has grown to become a large conglomerate thanks to Buffet’s ingenuity and foresight. The company was ranked the third largest American Fortune 500 corporation in terms of total revenue. It has total assets, total equity, and net revenue values of $958.8 billion, $514.9 billion, and $89.8 billion as of 2021. Its market capitalization is close to $700 million making it the seventh largest in the world in that regard. Forbes also rated it as the world’s eighth largest public company. Also, its Class A shares (BRK.A) are among the most expensive in the commodity market. On the 17th of May 2022, it was pegged at $471,670/share. It set a new price record for rising above $500,000/share on the 16th of March 2022. Even with the price, investors are coming in as Berkshire Hathaway is very profitable.
Berkshire Hathaway has a long history. It was founded as Valley Falls Company by Oliver Chace in 1839 in Rhode Island, USA. It later operated under the name Berkshire Fine Spinning Associates in 1929 after the merger of the former with Berkshire Cotton Manufacturing Company. It later merged with Hathaway Manufacturing Company in 1955 and had more than 12,000 workers at the time. Buffet came along in 1962 and helped position the company where it is now. Firstly he began to buy more of the company’s shares in a bid to change its business model. Since the textile business wasn’t moving well, he got lots of shares on the cheap. He became the majority shareholder of a failing business but he wasn’t deterred. He later expanded into other businesses in 1967 starting with insurance. Since then, Buffet has led Berkshire Hathaway to where it is now.
This Conglomerate now has diversified business interests cut across many sectors. Berkshire Hathaway, based in Omaha, Nebraska, owns many American companies in its entirety and also has significant holdings in some publicly listed companies. The companies wholly owned by this American giant include BNSF Railway, Helzberg Diamonds, Pampered Chef, Dairy Queen, Fruit of the Loom, GEICO, FlightSafety International, NetJets, Long & Foster, Shaw Industries, Duracell, Forest River, and Dairy Queen. It also has sizeable stakes in Apple, American Express, and The Coca-Cola Company, amongst others.
Who is Berkshire Hathaway’s CEO
Warren E. Buffet sits atop the board of Berkshire Hathaway. The 91-year-old billionaire is currently the seventh richest man in the world with a net worth of about $103 billion as of August 2022. The business magnate is also a philanthropist who has even pledged to give out 99% of his fortune to charity.
Buffet has always been known for his frugality and financial discipline. One wouldn’t expect this from a multi-billionaire but he eats breakfast at McDonald’s and doesn’t spend more than $3.17 at once. He still stays in his old home in Omaha, Nebraska which he purchased in 1958. When questioned about why he hasn’t moved to another, he responds by saying it’s the “happiest house in the world” most especially because of lots of memories it has. For him, true happiness isn’t always about money. He has always maintained that he is happy and would always be even if he had much less.
Berkshire Hathaway’s CEO has always been a proponent of long-term commitment and planning amongst CEOs. He acknowledges the need for better incentives but also states that huge salaries, stock options, and bonuses often end up encouraging short-term thinking and planning.
Warren Buffet has been earning $100,000 yearly since 1980
Being one of the topmost companies on earth, one would expect the Berkshire Hathaway CEO salary to be at least one of the highest. This is however very far from reality all tanks to Warren Buffet. The business Mogul receives $100,000 per year as the Chairman/CEO for one of America’s largest holding companies since 1980. For many years, this salary didn’t come with the very perks associated with the pay of many top American CEOs. The large conglomerate stated in securities filings that aside from his (Buffet’s) salary, he doesn’t earn bonuses or stock options despite his position in the company.
But the company’s regulatory filing reports showed the Berkshire Hathaway CEO salary for 2021 was a total of $373,204. The 2021 pay, according to the fillings, is a 29.6% increase from the $100,000 total sum he earned in each of the past 40 years. The company’s board stated proudly that Warren had the lowest pay amongst almost all publicly listed companies. $100,000 of this was for his base salary while the remainder, $273,204, was for other forms of compensation. However, Warren Buffet earned a lot due to the 30% increase in the company’s shares in the 2021 fiscal year. Being the largest shareholder in Berkshire Hathaway with 238,625 share units representing more than 16% stake, he saw a massive return on his stakes to the tune of $24.5 billion.
Buffet had at one time crossed the $500,000 mark but it was 12 years ago. Buffet earned a total compensation of $525,000. This salary comprised of his base salary of $100,000, directors’ fees of $75,000, and security fee of $350,000. Since then, there hasn’t been any report of Buffet collecting engineers’ fees.
Berkshire Hathaway spends quite a good amount on the CEO’s home and personal security. A total sum of $339,000 per annum is being spent to keep Buffet and his family safe and out of trouble. This started in 2008 and the company has spent a total sum of $4.4 million since the period. The company doesn’t also provide Official cars for the CEO nor does it have a fleet of aircraft to maintain. The CEO keeps everything simple.
It might be interesting to know that there isn’t much difference between Berkshire Hathaway’s CEO salary and that of the average worker in the company. The median pay at Berkshire Hathaway is $53,510 as of 2017. This means the mega investor only earns $46,490 more which is very rare amongst CEOs of top companies anywhere around the world. Also aligned with the CEO on this issue of pay, is his right-hand man and vice president of the company, Charlie Munger. Munger has always received the same pay as the Berkshire Hathaway CEO salary and a raise isn’t expected anytime soon. This is in contrast with the pay received by other top executives of the company. Marc Hamburg, the company’s CFO now earns $3.3 million per annum, a great increase from the $300,000 he started in 1996. Heads of the insurance and non-insurance divisions, Ajit Jain and Greg Abel earn far more. Last year, they received $16 million each and a total yearly bonus of $7 million individually.
Buffet hopes that the next CEO of Berkshire Hathaway would be rich. Rather than looking to earn more than 100 times what his/her family truly needs, the next CEO should be looking at the development of the company and how to take it to higher levels.
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