Warren Buffett’s salary was only $100,000 last year — a fraction of the $20 million raked in by his deputy and planned successor, Greg Abel.
Buffett won’t be resentful though. As Berkshire Hathaway’s CEO and chairman, Buffett recommends to his board of directors how much he should be paid, and sets the compensation of Abel and other executives.
Why does Buffett make so little?
The world-famous investor has requested a $100,000 annual salary with no bonus or stock awards for over 40 years. That’s a tiny amount compared with the roughly $17 million average compensation among S&P 500 CEOs in 2022.
Buffett’s slim pay packet reflects his belief that CEOs should be incentivized to deliver long-term success for their companies — and that huge salaries, big bonuses, and short-dated stock options encourage near-term thinking.
It also speaks to Buffett’s unusually modest lifestyle. Even though his $134 billion of Berkshire stock ranks him among the richest people on the planet, Buffett still lives in the same family home he bought for $31,500 in 1958. He also drives a decade-old car and grabs breakfast at McDonald’s on his way to work.
Buffett also doesn’t have a company car, belong to clubs where Berkshire pays his dues, or use Berkshire-owned aircraft for non-work trips, per the conglomerate’s latest proxy statement.
He also hands back $50,000 or half of his salary each year to reimburse Berkshire for his occasional use of employees, phone calls, and stamps for personal tasks.
Berkshire spent about $314,000, or more than triple Buffett’s salary, on his personal and home security last year. That meant his total compensation was $414,000, which Berkshire estimated was 5.4 times its median employee’s all-in pay last year. For comparison, McDonald’s CEO Chris Kempczinski made 1,224 times more than the median pay of his workers in 2022.
Buffett likely supplements his salary with dividends and coupon payments from his personal investment portfolio, which could be worth billions of dollars.
ProPublica reported last year that based on leaked tax records, Buffett sold close to $500 million of stocks between 2000 and 2019, and disposed of bonds worth a lot more.
The investor also likes to minimize his tax bill, and earning a small salary helps with that. There’s no evidence that he borrows against his company’s stock to fund his lifestyle like other executives.
Buffett has pledged to give virtually all of his fortune to good causes. He’s already gifted over half of his Berkshire stock to the Bill & Melinda Gates Foundation and four family foundations.
What has Buffett said about Abel’s pay?
Buffett has said it would be “terrific” if Berkshire’s next CEO were already wealthy and wanted to set an example by accepting a salary much lower than his market value.
The investor has put Abel in good stead to do that by paying him around $100 million in total salary and bonuses over the last five years, including a flat $20 million last year, up from a $16 million salary and a $3 million bonus in 2022. Berkshire’s insurance boss, Ajit Jain, has made the same amount.
Abel also received $870 million before taxes in 2022, in exchange for selling his estimated 1% stake in Berkshire Hathaway Energy to Berkshire.
The head of Berkshire’s non-insurance businesses signaled last spring that he’s willing to invest more of his own money in Berkshire, like Buffett who keeps upwards of 98% of his wealth in the stock. Abel bought about $25 million worth of Berkshire shares, boosting his stake by around a third.
Abel earns a much bigger salary than Buffett, but that could change once he takes over as CEO if he subscribes to Buffett’s ideas around not wasting shareholders’ money, living frugally, and having lots of skin in the game.
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