In recent years compensation committees too often have been tail-wagging puppy dogs meekly following recommendations by consultants, a breed not known for allegiance to faceless shareholders who pay their fees. (If you can't tell whose side someone is on, they are not on yours.) True, each committee is required by the SEC to state its reasoning about pay in the proxy. But words are usually boilerplate written by the company's lawyers or its human-relations department.
There's nothing wrong with paying well for truly exceptional performance. But, for anything short of that, it's time for directors to shout "less!" It would be a travesty if the bloated pay of recent years became a baseline for future compensation. Compensation committees should go back to the drawing boards.
I have been the Typhoid Mary of compensation committees.
Let me pause for a brief confession. In criticizing comp committee behavior, I don't speak as a true insider. Though I have served as a director of twenty public companies, only one CEO has put me on his comp committee. Hmmm....
At Berkshire, after all, I am a one-man compensation committee who determines the salaries and incentives for the CEOs of around 40 significant operating businesses.
How much time does this aspect of my job take? Virtually none. How many CEOs have voluntarily left us for other jobs in our 42-year history? Precisely none.
Berkshire employs ...