Investing

Buffett Makes Less Than 2 Times What Average Berkshire Employee Does

Douglas A. McIntyre

Published: March 17, 2018 7:45 am

Last Updated: January 12, 2020 2:21 am

While the chief executive officers of many public corporations make hundreds of times what their average employees do, one famous CEO makes less based on the same scale. Warren Buffett of Berkshire Hathaway Inc. (NYSE: BRK-A) makes 1.9 times what the company’s average employee does.

According to the Berkshire proxy:

In light of the fact that Mr. Buffett’s total compensation is far less than almost all public company CEO’s, Berkshire believed that the cost/benefit of complying precisely with the requirements of Item 402(u) would provide little, if any, useful information to its shareholders. Therefore, Berkshire used a judgmental sample representing approximately 2/3 of the total employees of Berkshire and its subsidiaries to determine the median employee’s compensation.

The median employee was determined using 2017 W-2 wages for all U.S. employees and equivalent taxable compensation for all non-U.S. employees included in the sample. The median employee determination included all employees within the sample group who were employed at December 31, 2017. The annual total compensation for the median employee was calculated using the same methodology for calculating the total compensation in accordance with Item 402(c)(2)(x) of Regulation S-K.

Based on the information obtained as described above, the ratio of Mr. Buffett’s annual total compensation ($100,000) to the annual total compensation of the median employee ($53,510) was 1.87 to 1.

Item 402(u) requires companies to make the calculation of the ratio. Item 402(c)(2)(x) is an extension of the rule.

Of course, Buffett is among the richest people in the world. According to the same filing, he owns 37.8% of the class A shares, which essentially means he controls the company. Several reports on Buffett’s net worth put it close to $90 billion.

As companies file their proxies and the ratio of CEO pay to that of an average employee, Buffett is certain to be among those with the lowest ratio, and he may have the lowest figure of all.