By Josh P. Hamilton
Buffett received no bonus as he steered Berkshire into bond insurance and arranged for its largest cash purchase, a $4.5 billion deal to buy Marmon Holdings Inc., the Pritzker family's collection of 125 companies. Buffett gets no stock options or grants for serving as chief executive officer and chairman, the Omaha, Nebraska-based company said in a regulatory filing today.
Since wresting control of Berkshire four decades ago, Buffett, 77, built the once-failing textile manufacturer into a $200 billion investment and holding company with a $75 billion stock portfolio and businesses from candy making to insurance. Buffett held about a third of Berkshire's Class A shares as of Feb. 29 and has pledged the bulk of the stake to the Bill & Melinda Gates Foundation and four family charities.
``This guy doesn't care about putting the money into his own pocket, the money is his way of keeping score,'' said Guy Spier, who has about 15 percent of his Aquamarine LLC hedge fund in Berkshire shares. Spier along with a friend paid $650,100 last year in an annual charity auction to lunch with Buffett. ``Of course, we don't know what Warren's private fortune is. He's always run a separate pool of money, which could well be a billion itself, totally separate from Berkshire.''
Buffett's wealth increased $10 billion in the 12 months through Feb. 11 to about $62 billion as he beat out Microsoft co-founder Bill Gates as the world's richest man, Forbes magazine said in its annual list.
Buffett did get $75,000 in 2007 for serving on the boards of companies in which Berkshire has stakes. The prior year, Buffett earned $114,250 in directors' fees.
Berkshire's shareholder equity, or assets minus liabilities, rose 11 percent to $120.7 billion in 2007 as the stock climbed 29 percent, outpacing the 3.5 percent gain in the Standard & Poor's 500 Index. Insurance, which typically provides about half of Berkshire's profit, benefited from another year of unusually light catastrophe claims, helping the company earn net income of $13.2 billion for the year.
``That party is over,'' Buffett said in his annual letter to shareholders, released with the 2007 annual report Feb. 29. ``It is a certainty that insurance industry profit margins, including ours, will fall significantly in 2008. Prices are down.''
Shunning Mortgage Debt
With prices falling for property coverage, Berkshire started a new bond insurer in December to compete with companies including MBIA Inc. and Ambac Financial Group Inc., charging more than rivals to guarantee payment on municipal debt while avoiding the mortgage-related securities that jeopardized their credit ratings.
As Berkshire has grown, Buffett has struggled to find acquisitions large enough to absorb the cash its businesses and investments generate. Berkshire had about $44 billion in cash and equivalents at year-end.
Berkshire needs ``large and sensible acquisitions to get the growth in operating earnings we wish,'' Buffett wrote in the annual letter. ``On Christmas day, Charlie and I finally earned our paychecks.''
Berkshire agreed Dec. 25 to buy 60 percent of Marmon for $4.5 billion. Companies owned by Chicago-based Marmon have operations in North America, the U.K., Europe and Asia, making products ranging from railroad tank cars to wire used in appliances and telecommunications.
Berkshire fell $1,360, or 1.1 percent, to $128,000 in New York Stock Exchange composite trading, down 9.6 percent this year. The Standard & Poor's 500 Index fell 13 percent so far in 2008.
No Stock Options
``Neither the profitability of Berkshire Hathaway nor the market value of its stock are to be considered in the compensation of any executive officer,'' the proxy said. ``Berkshire does not grant stock options to executive officers.''
Berkshire has had a compensation committee since 2004. Prior to that, Buffett recommended his own salary to the board. He reimbursed Berkshire $50,000 last year to cover any personal use of Berkshire postage, phones and personnel, the filing said.
Buffett sets pay for Vice Chairman Charles Munger, who also again earned a $100,000 salary, and Chief Financial Officer Marc Hamburg, who earned $712,500, a 7.5 percent raise from 2006. Buffett also determines the pay for managers of Berkshire's operating units.Visit Share Investor Blog
Last Updated: March 17, 2008 16:23 EDT