WASHINGTON: Warren Buffett (pictured) called on corporate America to make their boards of directors more accountable to shareholders and less beholden to chief executive officers, perhaps by reducing their pay and requiring that they buy more stock.
In his annual letter to Berkshire Hathaway Inc shareholders, Buffett said pay for outside directors has “soared” to levels that might threaten their independence, sometimes reaching $250,000 to $300,000 for two weeks work, while “generous” age limits ensure “fabulous” job security.
Buffett said this can make even “independent” directors resist challenging bad decisions by CEOs, especially in takeovers.
“When seeking directors, CEOs don’t look for pit bulls,” Buffett wrote. “It’s the cocker spaniel that gets taken home.” He said one large American company he did not identify recently had eight directors who never bought its shares with their own money.
“I feel better when directors of our portfolio companies have had the experience of purchasing shares with their savings, rather than simply having been the recipients of grants,” Buffett wrote.
Berkshire has more than 90 operating units such as the BNSF railroad, Geico auto insurer, and Dairy Queen ice cream. — Reuters
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