‘Envy and greed walk…’: Did Warren Buffett take a dig at Elon Musk’s $1 trillion Tesla pay package? What he said in final letter as Berkshire CEO
Berkshire Hathaway’s CEO Warren Buffett – widely regarded as an investment maverick – seems to have taken a subtle dig at Tesla CEO Elon Musk’s pay package. In his final shareholder letter as CEO, Warren Buffett observed a growing pattern where chief executives’ compensation continues to increase in a race for CEO pay.Buffett’s comments come days after Tesla approved a $1 trillion pay package for its CEO Elon Musk. The package, which requires the electric vehicle company to achieve an $8.5 trillion market capitalization, would elevate Musk, currently the world’s wealthiest individual, to become the first person worth a trillion dollars. Musk’s current net worth stands at approximately $449 billion.Subsequently, electric vehicle rival Rivian announced a $4.6 billion package for CEO RJ Scaringe spanning the next ten years, structured similarly to Musk’s arrangement. The package, which would increase Scaringe’s base salary of $2 billion twofold, is contingent upon the automobile manufacturer achieving specific operating income and cash flow objectives over the next seven years.
Envy and greed walk hand in hand: Warren Buffett’s sharp words
Buffett indicated that chief executives are influenced by self-interest and avarice to increase their compensation after observing their rivals’ rising pay packages.“What often bothers very wealthy CEOs—they are human, after all—is that other CEOs are getting even richer,” he said according to a Fortune report. “Envy and greed walk hand in hand. And what consultant ever recommended a serious cut in CEO compensation or board payments?”In his annual letter, Buffett shared insights from his 60-year tenure leading the conglomerate. He noted that the mandatory disclosure of executive compensation was initially meant to create awareness and perhaps discomfort amongst CEOs regarding their earnings. However, this initiative has produced an opposite effect.“During my lifetime, reformers sought to embarrass CEOs by requiring the disclosure of the compensation of the boss compared to what was being paid to the average employee,” Buffett said. “Proxy statements promptly ballooned to 100-plus pages compared to 20 or less earlier. But the good intentions didn’t work; instead they backfired.”“Based on the majority of my observations—the CEO of company ‘A’ looked at his competitor at company ‘B’ and subtly conveyed to his board that he should be worth more. Of course, he also boosted the pay of directors and was careful who he placed on the compensation committee,” he added. “The new rules produced envy, not moderation,” he reportedly said.
Rising pay of American CEOs
According to the Fortune report, statistics highlight this trend: amongst America’s 100 largest low-wage employers, compensation packages increased by 34.7% from 2019 to 2024, according to an August report from the Institute for Policy Studies.The CEO-to-worker pay ratio rose from 560:1 in 2019 to 632:1 in 2024. An Oxfam report released this month indicates that the nation’s wealthiest billionaires increased their wealth by $698 billion this year. Notably, Buffett maintains an annual salary of $100,000, although his investment portfolio contributes to his $150 billion net worth, positioning him as the world’s 11th wealthiest individual.
