Sunday, March 05, 2006

Warren Buffett on Executive Compensation

Buffett's opinion about the overall state of executive compensation in the United States:
"[R]idiculously out of line with performance," a fact that's unlikely to change in the current environment.

He said corporations should pay their CEOs relative to performance but added that CEOs today can receive a bigger payout for being fired than "an American worker earns in a lifetime of cleaning toilets."
Looking ahead, Buffett predicts the following:
As for the overall stock market, Buffett braces investors for more modest returns to come, citing increased "frictional" costs that eat away at performance. These include costs related to trading, advice and money management.

"These costs are now being incurred in amounts that will cause shareholders to earn far less than they historically have," writes Buffett.
Reduced earnings will also hurt the millions of retirees who have their money invested in pensions, 401K's, etc. Social security is still the safest investment for lower and middle income Americans who don't have the financial liquidity to ride out the lean years.


Lew Scannon said...

Excessive executive compensation is part of what is driving up the cost of everything. While I'm sure the person scrubbing the toilet doesn't expect to be rich, they would like to earn a livng wage doing it.

Mike Bogle said...
This comment has been removed by a blog administrator.
Anonymous said...

(I originally posted this comment using my real name but opted for some anonymity in light of my work comments. Never can be too careful!)

It's just shocking, isn't it!? I can't help but see its similarity to governmental bureacracies sometimes, where the upper tiers of management make wide-sweeping decisions that affect thousands of people without the slightest idea of the lives they may be affecting.

And when it comes to actually doing anything, the actually labor is left to the peons. Yet the idea comes from management, so they get all the glory and the spoils.

Seems almost as if the higher you go up the corporate ladder, the more out of touch you get with reality you become, and the more entrenched in theory.

The sector I work in is no different to that (I'd love to rant here but had better exercise some restraint of tongue and pen).

I visited the area where all the big-wigs reside and was disgusted by the disparity in conditions from that of the average joe/jane.

They obviously spend thousands - if not more - in tarting the place up, when a lot of the nameless ground-level people are forced to work in structures that haven't been maintained in decades.

Management plays a very important role - don't get me wrong - I just think it is accorded a disproportionally large amount of undue credit...

Neil Shakespeare said...

Buffet seems to be pointing out the obvious with that toilet cleaning line. People who clean toilets don't need to be told this. Nor do most workers in America, I should hazard. And so now they want to deny workers pensions and social security too. What wonderful people...

Kathy said...

Anonymous removed his original comment and reposted it to disguise his identity out of fear of reprisals from his employer. What a sad situation we have in the world today. Anonymous lives in another democratic country where the problems seem to echo those of ours here.

We are entering a new world order where corporations rule.