For the latest Warren Buffett, go to WarrenBuffettNews.com – CEO pay got out of control because you had an unbalanced set of incentives. The CEOs are highly interested in increasing their salary, and it is given by a compensation committee that meets once per year for 15 minutes. As CEO compensation rises across the board, they use that as a bargaining tool and so the salary continues to get ratcheted up. No company wants to be in the bottom quartile as far as CEO pay goes either. Buffett’s CEOs are satisfied because they know that right or wrong, he is looking at things as an objective owner. His CEOs have poured their lives into their businesses and they love it. They don’t want to deal with Wall Street or lawyers, so Buffett relieves them of that burden. Buffett is creating his own painting, but he wants the founders and managers to have the ability to create their own painting within their own company as well.
For the latest Warren Buffett, go to WarrenBuffettNews.com – When Buffett bought Berkshire Hathaway, it was a textile business that was doomed to fail. It had a great CEO, but it was just a bad business.He simply got into the wrong business at the time. He had a wonderful manager, but the economics just didn’t work. The best thing to do is to simply avoid bad businesses. It is amazing that when a company relocates, they always end up settling where the CEO wants because a good golf course nearby. When thinking as an investor, you should sometimes keep the ego of the CEO in mind.