Buffettisms, 2007

From this years letter to shareholders by Warren Buffett, CEO of Berkshire Hathaway…

Regarding directors of companies:

… many directors who are now deemed independent by various authorities and observers are far from that, relying heavily as they do on directors’ fees to maintain their standard of living. These payments, which come in many forms, often range between $150,000 and $250,000 annually, compensation that may approach or even exceed all other income of the “independent” director. And – surprise, surprise – director compensation has soared in recent years, pushed up by recommendations from corporate America’s favorite consultant, Ratchet, Ratchet and Bingo. (The name may be phony, but the action it conveys is not.)

Regarding the size of the corporate office (this from a company with revenue of over US$80 billion!):

Our federal return last year, we should add, ran to 9,386 pages. To handle this filing, state and foreign tax returns, a myriad of SEC requirements, and all of the other matters involved in running Berkshire, we have gone all the way up to 19 employees at World Headquarters.

This crew occupies 9,708 square feet of space, and Charlie – at World Headquarters West in Los Angeles – uses another 655 square feet. Our home-office payroll, including benefits and counting both locations, totaled $3,531,978 last year. We’re careful when spending your money.

(By the way, 655 square feet is 60 square metres, or roughly an office 7 x 8 metres. And 9708 square feet is 900 square metres, or roughly 30 x 30 metres, which is NOT MUCH to fit 19 staff into.)

Further on executive pay at companies:

CEO perks at one company are quickly copied elsewhere. “All the other kids have one” may seem a thought too juvenile to use as a rationale in the boardroom. But consultants employ precisely this argument, phrased more elegantly of course, when they make recommendations to comp committees.

You can find the full 36 page letter to shareholders here. Every year it makes good reading, and should be mandatory for boards and CEOs everywhere, for it candour, honesty and simplicity of presentation.

One Comment

Yet the average Aussie worker now cannot attend the ANZAC Day parades because he has been forced to sign away all public holidays with his Oh-so-fair AWA. Added to the low-wage auction which is about to begin.

“I have here an excellent job with $8 per hour remuneration. Do I hear $7.50 anywhere? Yes $7.50, ahh, $7.00 over there, $6.50. Do I hear $6 anywhere? Going once, Going twice. Sold to the man with a wife and three kids at $6.50. Gee, not many people are serious about getting jobs these days!”

Comment by Archie | April 25th, 2007 9:51 pm | Permalink

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