In 1970 Warren Buffett was appointed CEO of Berkshire Hathaway Inc. (NYSE:BRK.A). This analysis aims first to contrast CEO compensation with other large companies. After that, we will consider the growth in the business. And finally we will reflect on how common stockholders have fared in the last few years, as a secondary measure of performance. This method should give us information to assess how appropriately the company pays the CEO.
How Does Warren Buffett’s Compensation Compare With Similar Sized Companies?
At the time of writing our data says that Berkshire Hathaway Inc. has a market cap of US$503b, and is paying total annual CEO compensation of US$100k. (This is based on the year to December 2017). It is worth noting that the CEO compensation consists almost entirely of the salary, worth US$100k. We took a group of companies with market capitalizations over US$8.0b, and calculated the median CEO total compensation to be US$11m. (We took a wide range because the CEOs of massive companies tend to be paid similar amounts – even though some are quite a bit bigger than others).
A first glance this seems like a real positive for shareholders, since Warren Buffett is paid less than the average total compensation paid by other large companies. While this is a good thing, you’ll need to understand the business better before you can form an opinion.
You can see a visual representation of the CEO compensation at Berkshire Hathaway, below.
Is Berkshire Hathaway Inc. Growing?
Over the last three years Berkshire Hathaway Inc. has grown its earnings per share (EPS) by an average of 18% per year (using a line of best fit). In the last year, its revenue is up 2.9%.
This demonstrates that the company has been improving recently. A good result. It’s good to see a bit of revenue growth, as this suggests the business is able to grow sustainably. You might want to check this free visual report on analyst forecasts for future earnings.
Has Berkshire Hathaway Inc. Been A Good Investment?
I think that the total shareholder return of 44%, over three years, would leave most Berkshire Hathaway Inc. shareholders smiling. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.
It appears that Berkshire Hathaway Inc. remunerates its CEO below most large companies. Many would consider this to indicate that the pay is modest since the business is growing. The pleasing shareholder returns are the cherry on top; you might even consider that Warren Buffett deserves a raise!
It’s not often we see shareholders do so well, and yet the CEO is paid modestly. But it is even better if company insiders are also buying shares with their own money. If you think CEO compensation levels are interesting you will probably really like this free visualization of insider trading at Berkshire Hathaway.
If you want to buy a stock that is better than Berkshire Hathaway, this free list of high return, low debt companies is a great place to look.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.