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7 Warren Buffett Snubbed! BySelena Maranjian|More ArticlesDecember 31, 2010|Comments (5) Wait! Don’t buy yet…Successful investing starts with a smart watchlist.
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What CEO wouldn't want to include himself in the same circles as Warren Buffett? MetLife's (NYSE: MET), apparently. This major insurance company has decided to exclude fellow heavyweight insurer Berkshire Hathaway (NYSE: BRK-A, BRK-B) among the peers to which it compares itself when setting executive compensation levels.
The folks at footnoted.com discovered this in a footnote (of course) of a MetLife filing. MetLife apparently likes to look at peers in the S&P 500 when determining compensation. But the recent addition of Berkshire Hathaway to the index threw a spanner in those works.
According to the footnoted article, MetLife Chairman and CEO C. Robert Henrikson took home $11.6 million in 2009, while Berkshire's Buffett has collected $100,000 from his company annually in recent years, along with $75,000 in director's fees from Washington Post. A number like $100,000 or even $175,000 can really bring down the average, making executives earning many millions look, well, kind of greedy.
Wriggling out
Thus, MetLife explained that, given "the diversity of its business outside of insurance and financial services," Berkshire Hathaway isn't really a peer. Sure, Berkshire has many businesses under its roof, including candy, flight training, bricks, jewelry, and furniture. But its insurance division has long been a huge part of the company.
According to footnoted.com, insurance recently generated about a third of the company's income; last year, before Berkshire's Burlington Northern purchase, the insurance-income figure was 62%. According to Bloomberg data, Berkshire has a 31% weighting in the S&P 500 Insurance Index, versus 9% for MetLife. Yet it's not a competitor?
Imagine executives at major retailers choosing to exclude Costco (Nasdaq: COST) from peer-group comparisons. Like Buffett, Costco CEO Jim Sinegal is famous for receiving a relatively modest salary of $350,000 -- while paying employees more than their counterparts at other retailers. In the recently ended fiscal year, his bonus, stock, and options gave him a total take of $3.5 million, but that's still small potatoes next to many CEOs.
The lapdog problem
The problem of CEO overcompensation isn't going anywhere, alas. Buffett has explained that the whole system is rigged, with CEOs hiring compensation consultants who point out how much the CEOs' peers are making to compensation committees peopled with fellow bigwigs from other companies. It's not a surprise that Buffett is rarely appointed to compensation committees at the companies he serves as a director.
It all makes me shake my head and long for a better way. If a board of directors wanted to cut costs significantly, it could put the CEO job out for bid. I'm sure plenty of qualified people would love to do it for peanuts. In the meantime, Fools, make sure you vote against outlandish packages whenever your investments' proxy statements give you the opportunity.
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Read/Post Comments (5) | Recommend This Article (7) EmailPrintFeedbackDiggDeliciousRSS Comments from our Foolish ReadersHelp us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the
Report this Comment icon found on every comment. Report this Comment On December 31, 2010,at 1:03 PM, madmilker wrote:Just maybe Mr. Henrikson realizes that ....
a 5 & 10 from the Ozarks, stick furniture, DQ burgers, insurance for lizards, six horses and a stagecoach, a Choo Choo train and batteries from China ain't gonna get America out of this mess.....On Wal*Mart's China web page under "About Us.""Wal-Mart China persists in local procurement which provides more job opportunities, supports local manufacture industry and promotes local economy. So far, 95% of merchandising sold at Wal-Mart China store are local products by which Wal-Mart has established business relations with nearly 20,000 suppliers. At Wal-Mart, we treat suppliers as partners and would like to develop with them. In 2008 Wal-Mart won the Supplier Satisfaction published by Business Information of Shanghai for five consecutive years."5% foreign in China...That doesn't support American exports and American jobs.Remember what Lance Winslow wrote in that article "The Flow of Trade in a Global Economy"...."Now let us look at Wal-Mart again; you buy a product there, 6% goes to the employees, 10-18% is profit to the company, 25% goes to other costs and 50% goes to re-stock or the cost of goods sold. Of the 50% about 20-25% goes to China, a guess, but you get the point. Now then, how long will it take at 433 Billion dollars at year for China to have all of our money, leaving no money flow for us to circulate? At a 17 Trillion dollar economy less than 40-years minus the 1/6 they buy from us. Some say that if we keep putting money into our economy, it would take forever, but if we do not then eventually all the money flow will go. If China buys our debt then eventually they own us, no need to worry about a war, they are buying America, due in part to our own mismanaged trade, so whose fault is that? Not necessarily China, as they are doing what's in the best interests, and we should make sure that trade is not only free, but fair too." Think for a moment about George Washington....yes the man that is on the US dollar bill....How do you think George feels being sent overseas in return for all that foreign so-call cheap items and being left in a foreign bank because the American worker doesn't make anything for the foreigners to buy. Cheap items didn't make this great union of 50 states the greatest place on the face of this Earth.....the American worker (union and non-union) did. You can't have a strong country without having a strong currency and you can't have a strong currency unless you keep it floating around within your 50 states. This is why the store with the star in the name puts 95% China made items in their stores in China....to keep their "yuan" in their country helping the nice people there. And with only 5% left for all the other 182 country's that make stuff including the United States of America....that doesn't produce very many jobs outside of China. Being an old person myself and knowing how it was back in the 40's, 50's and 60's in this union of 50 states....I look at George each time I pull him out of my billfold and make a promise to send him out for items made in America so after floating around helping each hand he touches just maybe one day he will shake mine again.Fifteen cargo ships pollute as much as 760 million automobiles.$9 billion a year in hidden taxes to all American taxpayers to clean fish from ballast tanks of ships...think about all those facts the next time you pull that George out of your pocket....Retail makes NOTHING...Governments only make MORE DEBT...It's time for less of those two and for America to get back to what it does best....MAKE STUFF..cause George Washington on that dollar can't help anyone in the United States of America if he is being held in a foreign hand.Made In America is the only way out of this mess cause foreign made put US here. Report this Comment On January 01, 2011,at 6:35 AM, 137596 wrote:Tell Obama!
There's no room for Capitalism in the U.S.Where can manufacturing go with a governmentrestricting growth and opportunity to investwithout being penalized. This is all done onpurpose by a manchild who is not one of us.Talk about a CEO being overpaid, look atwhat we pay this Idiot president.I suppose he's to be worshiped by both civiliansand military, to which is is commander in chief,enjoying his extended vacation right now.Does anyone get the fact the the Presidentof the United States is our Enmy?Clean up government first and America willtake care of itself.Robert E. Tewksbury Report this Comment On January 01, 2011,at 7:33 AM, ryanalexanderson wrote:Uh, I don't exactly disagree with the first comment - but what does it have to do with the article?
And the second comment is just a generic anti-authority rant - I could cut and paste any President's name into the first line.Good article, though. Report this Comment On January 02, 2011,at 2:22 AM, ilovesumm wrote:good article ,, ceo's + mgmnt bleed the companies dry
there should at the very least be a profit factor involved in the salary not just market cap gm aig bac etc made zero profits despite being multibillion dollar corps , any fool can make nothing if the company made nothing management should make nothing period Report this Comment On January 02, 2011,at 2:37 AM, ilovesumm wrote:company profit + profit divided by marketcap should be the formula for mgmnt times an x bonus factor + 100k base salary , at least the poor babies wont starve with the 100k base salary
profit +(profit/market cap)*bonus +100kzero profit = 100k have a nice day gm:0 profit + (0 profit/market cap) + 100k = 100k ceo salary what difference does the market cap make if the profit is little or none ? Add your comment.Your Fool username will be displayed with your comment.Please be respectful with your comments. Review our Fool's Rules.
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