"Manager" Compensation

Mon, 05/03/2010 - 11:20

From a Barclays Capital research report. "Some of the CEOs of operating units earn tens of millions of dollars annually. Buffett could not recall losing a manager over compensation issues." Warren, I'm calling you on this one because I've seen the file. Yes, "some," like maybe three people out of the dozens, in a good year.

Except for a couple of people who have made special deals with Buffett, the managers write a letter to Buffett each year asking for their bonus and explaining why they deserve it. (If you think through this in the context of The Snowball, it is vintage Buffett.) The files are full of letters that say, $1 million, $1 million, $1 million, $1 million. Some deviations plus or minus but rarely more than a few million. Mostly it is repetitious -- $1 million, $1 million, $1 million, $1 million. After all, these guys are mindful their boss makes $100,000 a year.

(This is as of a couple years ago, so maybe now the files say $1.25 million, $1.25 million.)

As a side note, some people who are CEOs of sizeable companies, including public companies, discover they were not expecting the psychological shock when they go to work for Berkshire and suddenly receive the public title of "manager," becoming one of many "Berkshire managers" instead of being referred to as EVP or President.  Warren's personal interest in them really is the glue that holds it together.

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Mon, 05/03/2010 - 23:16 — aliceschroeder

of course!

Warren loves paying people in praise.

Mon, 05/03/2010 - 20:24 — Anonymous

I find this almost funny. If

I find this almost funny. If you allow people to judge themselves, they actually tend to be tougher than you would be in a lot of situations. I generally let people that worked for me write their own reviews and found that it tended to work pretty well.

I think it takes a compensation consultant to come up with a really outrageous package. You need a few intermediaries to add the spin (plus fear, uncertainty, and doubt) that can push someone's pay to astronomical levels. Any executive that is negotiating with Buffett face to face is never going to end up on the high end of the curve.

Just consider the idea of waking in to Buffett's office with one sheet of paper and meeting face to face vs a 50 or 100 page consultant's report meeting with a committee of directors.

The flip side is that there could be no better job than having Buffett praising your work, leaving you alone, and letting you manage the business. Most CEO's understand the value of this.

Based on the annual meeting comment about envy being a bigger factor than greed, it probably makes a lot of sense to give em all the same bonus.

Mon, 05/03/2010 - 23:31 — aliceschroeder

berkshire manager

got a call from a former manager today who said "basically everybody gets paid a million except ajit and sokol" so okay, it's true, it is out there. that's more or less the deal. there are a few other exceptions. but ajit, sokol, and greg abel all have special deals.

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