Buffett blasts excessive executive pay

Buffett blasts excessive executive pay

Mar 4, 2006

NEW YORK (MarketWatch) -- Berkshire Hathaway Inc. Chairman Warren Buffett used his latest annual letter to shareholders to blast excessive executive pay, a ballooning U.S. trade deficit and rising fees for professional money managers.

"Too often executive compensation in the U.S. is ridiculously out of line with performance," said Buffett in his 2005 letter. See full text of Buffett's letter.

Buffett said the problem lies in the way executive compensation is decided.

"Huge severance payments, lavish perks and outsized payments for ho-hum performance often occur because comp committees have become slaves to comparative data."

Buffett said compensation committee members are bombarded with pay statistics and told about new perks that other managers are receiving.

"In this manner, outlandish 'goodies' are showered upon CEOs simply because of a corporate version of the argument we all use as children: 'But, Mon, all the other kids have one.'"

The billionaire investor, known as the Oracle of Omaha, also had a few choice words for rising fees paid out to professional money managers.

"These costs are now being incurred in amounts that will cause shareholders to earn far less than they historically have," said Buffett.

He added that these fees may cause equity investors to earn "only 80% or so of what they would earn if they just sat still and listened to no one."