In his final annual letter as CEO of Berkshire Hathaway Inc (NYSE:BRK) (NYSE:BRK), Warren Buffett has highlighted a concerning trend of escalating CEO compensation amid Tesla (NASDAQ:TSLA) CEO Elon Musk‘s revised pay.
Buffett Criticizes CEO Pay Spiral
Buffett pointed out the growing trend of CEOs increasing their own pay after witnessing their peers’ remuneration. The 95-year-old billionaire, who has been at the helm of Berkshire Hathaway for six decades, suggested that CEOs are driven by envy and greed, leading to a never-ending cycle of pay hikes.
"Envy and greed walk hand in hand. And what consultant ever recommended a serious cut in CEO compensation or board payments?" said the legendary investor.
Buffett also criticized the practice of disclosing CEO pay, which was intended to create self-awareness but instead turned into a competition for higher pay. “Good intentions didn't work; instead, they backfired,” wrote Buffett.
He noted that CEOs would use their peers’ compensation as leverage to justify their own pay raises and would also increase the remuneration of their directors.
Billionaire Pay Gaps Spark Fresh Outrage
The issue of CEO compensation has been a topic of intense debate in recent times. Notably, other industry leaders are following Musk’s lead, with Rivian Automotive‘s (NASDAQ:RIVN) CEO, R.J. Scaringe, receiving a revised pay that could be worth up to $4.6 billion over the next decade.
Figures like Sen. Bernie Sanders (I-VT) have criticized the widening wealth gap, particularly in light of Musk’s $1 trillion pay package, saying 60% of Americans are "living paycheck to paycheck." Notably, America's 10 richest billionaires gained $698 billion over the past year amid widening wealth inequality. According to a new Oxfam report, the top 0.1% now own nearly a quarter of U.S. stock market wealth, while the bottom 50% hold just 1%.
Musk, on the other hand, has defended his compensation, highlighting the irony of critics who claim Tesla is overvalued while also arguing that his compensation package, tied to the company’s future valuation, is too large.
See Also: Meta’s AI Chief Scientist To Reportedly Depart, Launch Own Startup Amid Zuckerberg’s AI Push
Elon Musk and Buffett's Mutual Jabs
In 2022, Buffett praised Musk for Tesla’s accomplishments, despite having passed on investing in the company. Musk, on the other hand, had earlier suggested that Buffett’s image as a “kindly grandfather” was perhaps overstated.
The Tesla CEO also expressed his lack of admiration for Buffett’s job, describing it as “super boring.” However, he couldn't deny the value Buffett adds and wished the legendary investor would take a position in Tesla.
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