Warren Buffett recently defended the extremely high pay for CEOs and then brushed off the criticism by choosing not to vote in regards to a controversial compensation plan for executives at Coca-Cola, we learned about in an interview with Fortune that was just published on Monday morning.
“I don’t think [CEO pay] is out of whack with what the value is of an outstanding executive could bring,” said the legendary investor and Berkshire Hathaway chief executive officer to Fortune’s Stephen Gandel. “If you run a multibillion-dollar company the difference between a 10 and an eight [in terms of CEO performance] is huge in terms of value.”
In the last 30 years, the ratio of CEO-to-worker pay in the US has rapidly climbed higher. Back in 2012, the CEOs of Fortune 500 companies were typically paid 354 times more than the average employee at their company.
The gap in CEO/worker pay, which is expected to widen even further, is much wider in the United States than other developed countries.
Regardless, the third richest man in the world, worth roughly $65.5 billion, mentioned that some compensation packages for CEOs “should be somewhat restrained in some cases,” but on a “voluntary basis.” This interview comes right off of the heels of being slammed by critics for choosing not to vote against a hefty stock option plan for the top executives at Coca-Cola.
Just last month, David Winters, fund manager, complained that the 2014 equity plan for Coca-Cola awarded the top brass at the Atlanta beverage company unfairly, and provided them with an immensely large compensation that comes at the expense of shareholders.
“In effect, the board is asking shareholders for approval to transfer approximately $13 billion from all our pockets to the company’s management over the next four years,” Winters, the CEO of Wintergreen Advisers, wrote in a letter dated March 21. “This is a staggering transfer of value from shareholders to management.”
Winters asked Warren Buffett to intervene. And even though Buffett mentioned his disapproval of the plan, he did not choose to vote against it.
This past Friday, Joe Nocera, columnist for the New York Times, criticized Buffett in an op ed piece for failing to use his influence against the board of Coca-Cola.
“How sad,” he Nocera. “If Warren Buffett won’t use his unparalleled clout to rein in excessive compensation, how can we expect anyone else to?”
But in defense of Buffett, he mentioned last Wednesday on CNBC that he did not agree with the company’s plan, and said that it was excessive.
“I love Coke. I love the management. I love the directors. So I didn’t want to vote no,” he mentioned to Becky Quick while on CNBC. “I didn’t want to express any disapproval. But we did disapprove of the plan.”
A Berkshire Hathaway spokeswoman did not immediately respond to requests for comments. But Buffett mentioned to Fortune that not choosing to vote was his way of disapproving Coca-Cola’s plan.
“That’s a very loud voice coming from Berkshire,” he mentioned in the Fortune interview. “It obviously means we don’t approve of the plan.”