Warren Buffett’s Shareholder Letter

As usually Warren Buffett’s Berkshire Hathaway shareholder letter is packed with good investment thoughts along with some management wisdom.

Too often, executive compensation in the U.S. is ridiculously out of line with performance. That won’t change, moreover, because the deck is stacked against investors when it comes to the CEO’s pay. The upshot is that a mediocre-or-worse CEO – aided by his handpicked VP of human relations and a consultant from the ever-accommodating firm of Ratchet, Ratchet and Bingo – all too often receives gobs of money from an ill-designed compensation arrangement.


Page 13, related posts:

  • Toyota Manufacturing Powerhouse “In a reflection of Toyota’s team-oriented approach, its executive pay is paltry by U.S. standards. Analyst Ron Tadross at Banc of America Securities estimates the total annual compensation of Toyota’s CEO at under $1 million – about as much as a vice president at GM or Ford Motor Co. makes in a good year.”
  • Excessive Executive Pay
  • CEO Pay: Obscene
My views on America’s long-term problem in respect to trade imbalances, which I have laid out in previous reports, remain unchanged. My conviction, however, cost Berkshire $955 million pre-tax in 2005.

From 2004 letter: “Should we continue to run current account deficits comparable to those now prevailing, the net ownership of the U.S. by other countries and their citizens a decade from now will amount to roughly $11 trillion. And, if foreign investors were to earn only 5% on that net holding, we would need to send a net of $.55 trillion of goods and services abroad every year merely to service the U.S. investments then held by foreigners. At that date, a decade out, our GDP would probably total about $18 trillion (assuming low inflation, which is far from a sure thing). Therefore, our U.S. “family” would then be delivering 3% of its
annual output to the rest of the world simply as tribute for the overindulgences of the past. In this case, unlike that involving budget deficits, the sons would truly pay for the sins of their fathers. – page 20″

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5 thoughts on “Warren Buffett’s Shareholder Letter

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  5. It’s refreshing that people like Warren Buffet are still out there taking a strong stance against unfair distributions of wealth. Benjamin Graham taught him well, and beyond that he has plenty of his own wisdom.

    One thing that’s always stood out to me is how Jay Z, as an extremely successful rapper, and savvy business man himself, basically defers entirely to Warren Buffet when it comes to matters of economics and finance. I think more executives would be well off taking suit; and generally more people on the whole. There are plenty of smart people working hard for far less pay than what some of these guys make, and then you have these guys straight out of Animal Farm doing less but making more.

    I’m not going to go as far as to generalize the entire group of “executives” this way, because there are plenty that are smart, hard-working, and deserving of their positions. However, this is a problem worth further consideration, for sure.

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