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. Then we'll look at a snap shot of the business growth. Third, we'll reflect on the total return to shareholders over three years, as a second measure of business performance. This process should give us an idea about how appropriately the CEO is paid.
How Does Warren Buffett's Compensation Compare With Similar Sized Companies?
Our data indicates that Berkshire Hathaway Inc. is worth US$506b, and total annual CEO compensation is US$389k. (This figure is for the year to December 2018). We think total compensation is more important but we note that the CEO salary is lower, at US$100k. When we examined a group of companies with market caps over US$8.0b, we found that their median CEO total compensation was US$11m. There aren't very many mega-cap companies, so we had to take a wide range to get a meaningful comparison figure.
This would give shareholders a good impression of the company, since most large companies pay more, leaving less for shareholders. 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?
On average over the last three years, Berkshire Hathaway Inc. has grown earnings per share (EPS) by 11% each year (using a line of best fit). It achieved revenue growth of 4.9% over the last year.
This demonstrates that the company has been improving recently. A good result. It's nice to see a little revenue growth, as this is consistent with healthy business conditions. Shareholders might be interested in this free visualization of analyst forecasts.
Has Berkshire Hathaway Inc. Been A Good Investment?
Most shareholders would probably be pleased with Berkshire Hathaway Inc. for providing a total return of 39% over three years. As a result, some may believe the CEO should be paid more than is normal for companies of similar size.
It looks like Berkshire Hathaway Inc. pays its CEO less than the average at large companies. Since the business is growing, many would argue this suggests the pay is modest. The pleasing shareholder returns are the cherry on top; you might even consider that Warren Buffett deserves a raise!
It is relatively rare to see a modestly paid CEO when performance is so impressive. The cherry on top would be if company insiders are buying shares with their own money. So you may want to check if insiders are buying Berkshire Hathaway shares with their own money (free access).
Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.
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.