Putting Buffett’s income in perspective…

October 14, 2011

Warren Buffett made a splash this week when he disclosed just how much he made last year, as part of his push to raise taxes on the “ultra-rich” (himself included). No surprise, it was big bucks — $62.8 million — though only a fraction of it comes from Berkshire Hathaway in the form of direct compensation. But Buffett’s disclosure prompted us to leaf through the filings to see how it compares with other CEOs.

To some degree, of course, this is comparing apples to oranges, since Buffett was talking about income from all sources, and corporate filings only tell us what the individual companies paid the executives, not what they made from investments, part-time board gigs and other sources. Even so, we were surprised just how close some other executives got to Buffett’s income — and how often these hefty incomes seemed to surface at smaller or lesser-known companies.

First, Buffett’s millions: The Sage of Omaha didn’t tell all, so we don’t know just how his income breaks down. (We do know from his letter to Rep. Tim Huelskamp that his taxable income was $39.8 million, and he paid $6.9 million in federal income tax.) But turning to the latest proxy from Berkshire Hathaway (BRK.A), we learn how much came from there: just $524,946, of which $100,000 was cash salary and the rest

“Represents the costs of personal and home security services provided for Mr. Buffett and paid by Berkshire (2010 — $349,946 … ) and the value of director’s fees ($75,000 … ) received by Mr. Buffett from serving on the Board of Directors of The Washington Post Company in which Berkshire has a significant ownership interest. “

Buffett also owns a ton of Berkshire stock, of course — 26.7 million shares of BRK.B, according to our friends at InsiderScore.com — but clearly his holdings are diversified enough to provide plenty of additional income.

Now contrast that with Richard Handler, who rang up a whopping $47 million last year just from his primary job as chairman and chief executive of the Jefferies Group (JEF), the investment bank with a $2.6-billion market capitalization. (Berkshire Hathaway, just by contrast, has a market-cap of $174 billion.)

Oh, and that’s just for 11 months, thanks to a change in the company’s fiscal year. Most of the bucks ($39 million) came in the form of “non-equity incentive pay” that Jefferies helpfully breaks down as “intended to apply across the three-year period from 2010-2012”; another $6 million was stock paid based on 2009 performance, roughly $2.2 million came as cash salary and bonus (yes, distinct from non-equity incentive pay) and most of the rest went to pay

“$132,916 related to a driver we provide to Mr. Handler to facilitate his transportation to and from meetings, between our offices and for his personal use”

As long as we’re comparing and contrasting, of course, there’s also performance: Berkshire has delivered roughly double the stock gains that Jefferies has the last five years — and, really, in almost any period (though they’re about even over a decade). Moreover, this is the company that we footnoted last year for painting compensation bull’s-eyes around the performance arrows.

Not many executives get paid as much as Handler, but plenty still get paid a heck of a lot. Some examples: Total pay for K.S. Hachigian, chairman and CEO of Cooper Industries (CBE), came to $25.1 million last year, largely thanks to $15 million in stock awards, $3 million in options and some $5.2 million in cash salary, bonus and other incentive pay.

Mylan (MYL) Chairman and CEO Robert J. Coury saw total pay of $22.9 million last year thanks largely to $6.1 million in stock awards, $2.7 million in options, $3.3 million cash incentive pay, $8 million in pension gains and $1.2 million in perks, including a company-paid car, company jet rides, tax reimbursements and other retirement benefits.

At least Cooper Industries shares have performed pretty well relative to Berkshire’s.

Again, these pay figures are particularly eye-opening because they don’t include the income from investments and other sources that is almost surely wrapped into the income Buffett disclosed this week.

Let’s face it, Warren Buffett is one of the most successful, most imitated businessmen ever. Most CEOs don’t have even a fraction of his stature or track-record.

And yet, quite a few seem to be paid that way.

Image source: Mark Hirschey via Wikimedia Commons

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