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CEO salary negotiations aren't "a fair fight"

Buffett & Munger2007-05-05videoOpen original ↗

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SpeakersWarren1
[0:01]
WarrenCharlie and I think that compensation has, there's a natural tendency because of ratcheting, because of the publicity of what other people get, and because of the lack of intensity in the bargaining process. I mean, you read about labor contracts, you know, where impasses go on for weeks and where they negotiate till three in the morning. And, you know, both sides take their cases. to the press and everything, I ask you, when have you heard of a comp committee, you know, working till four in the morning, declaring an impasse for a week not being able to make a deal? It just doesn't happen because the CEO cares enormously how he or she is paid and to the comp committee, and they're doing perhaps a little better job now. But it's basically plain money. And of course, as I pointed out in the past, I've been on 19 boards. They put me on one comp committee. regretted it subsequently. You know, they are looking for cocker spaniels with their tails wagging to put on comp committees, and, you know, they are not looking for Dobermans. And I try to pretend I'm a Cocker Spaniel just to get on one, but it doesn't work. But it is, it is not, there is not a parity of intensity in the bargaining process. One guy cares enormously and the others don't. The comp committee sits down. The human relations person comes in. The human relations persons knows that what the CEO thinks of them is going to determine their future. And the human relations the department recommends some comp consultant. The comp consultant knows that his recommendation to other firms is dependent on whether what these people say about him. So under those circumstances, you know, can you imagine that it's anything like a fair fight? It's a joke. That reminds me of the old story where the mother asked the child why she told the census that the man of the house was in prison for embezzlement. And the child said, I didn't want to admit he was a compensation consultant.