Buffett renews call against executive greed
By Andrew Hill in Omaha, Nebraska and Jane Croft and Rebecca,Bream in London
Published: May 4 2003 2:44
Warren Buffett has mounted a fresh assault against greedy chief executives, complacent directors and pliable compensation consultants - urging shareholders to rebel against excessive executive pay.
The influential investor, one of America's richest men, told the weekend shareholder meeting of Berkshire Hathaway, the investment and insurance group he chairs, there had been more misdirected compensation in corporate America in the past five years than in the last century.
His attack is likely to increase pressure for government action on executive greed - in the UK as well as the US. Patricia Hewitt, Britain's trade and industry secretary, is expected to issue a consultation document on the subject in the next few weeks. Measures may include a link between remuneration and share price performance
Mr Buffett, 72, told more than 10,000 shareholders and guests, including Michael Eisner, chief executive of Disney, who gathered in Omaha over the weekend, US chief executives "don't care whether their boards are diverse, or not diverse - they care about how much money they make".
He said at a press conference yesterday: "This [executive pay] is not something where all the CEOs in America are all of a sudden going to wake up and read the Boy Scout oath and moderate their behaviour."
He is one of the fiercest critics of US executive compensation and the abuse of stock option grants, which he blames for fuelling the corporate scandals of the past 18 months. Last year he received a salary of only $100,000 (£64,100) and total annual compensation of just under $300,000.
Mr Buffett told shareholders they had to "provide some countervailing force or you will have what we had in the last 20 years - that is, an enormous disparity in the rates of compensation between people at the top and people at the bottom, and a disconnect between people at the top and the share owners".
In a five-hour question-and-answer session on Saturday, Mr Buffett and Charlie Munger, Berkshire's vice-chairman, again attacked the majority of US companies that do not treat stock-option costs as expenses. Shareholders gave the duo their usual rapturous reception, in sharp contrast to other annual meetings this year at which investors have castigated executives.
In the UK, Royal & Sun Alliance, the general insurer, is the latest company to face shareholder protests over executive pay. The National Association of Pension Funds is urging institutions to abstain from voting on the remuneration report at RSA's annual meeting on May 14.
The NAPF has raised concerns that Julian Hance, finance director, is set to receive a "loyalty" bonus of £250,000 on top of his £400,000 salary, if he remains with RSA for 2003. It said RSA had not provided sufficient justification for the retention bonus.
RSA defended its decision yesterday and said the bonus had been put in place last year when the company was going through a period of uncertainty.
Lloyds TSB likewise defended its £349,000 benefits package awarded to Eric Daniels, incoming chief executive.
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