Berkshire’s Munger Urges CEOs to Accept Less Pay

Berkshire Hathaway Inc.’s vice chairman said Monday that excessive executive pay would lead to dangerous levels of envy and called on corporate chieftains to take less compensation.

Charles Munger, the longtime business partner of billionaire investor Warren E. Buffett and a large Berkshire Hathaway shareholder, said the current uproar over compensation for business leaders was a serious matter that required sensitivity.

“Corporate compensation in America is offending a lot of people needlessly and it should be fixed. It is really dangerous to have a lot of envy taking sway in the world,” Munger said in a speech given during a Stanford University program for corporate directors.

Chief executives “have a duty to the larger civilization to dampen some of this envy and resentment by behaving way more noble than other people and more generous,” Munger said. “People should take way less than they are worth when they are favored by life.”

Compensation has become a hot issue with many shareholders, who increasingly question the rich bonus and pay packages awarded to chief executives.

The typical worker’s compensation averaged just under $42,000 in 2005, while the average chief executive brought home almost $11 million, according to the nonprofit Economic Policy Institute in Washington.

Munger criticized Pfizer Inc. CEO Hank McKinnell -- who defended his compensation package to the same audience Sunday -- for his argument that Pfizer’s share price was overvalued when he took over as chief executive and that the slump in the shares was not a good measure of his performance.

“If you’ve been with the company and had prospered mightily as the stock goes up to 45 times earnings, it would have been better behavior for the CEO to take some of the downside with the shareholders,” said Munger, who referred to his speech as the “curmudgeon’s breakfast.”

Although he called Exxon Mobil Corp. “the best-managed big company ever,” Munger did not spare that company’s ex-CEO, Lee Raymond, for accepting a pay package worth a reported $400 million including stock options, shares and perks.

“The departing CEO is one of the best CEOs that Exxon ever had, but I think it was damn stupid,” Munger said. “It would have been better to take a little less.”

Munger, who last year earned $100,000 in salary from Berkshire Hathaway and received no bonus, also criticized the use of corporate jets for personal use. He even took a dig at Buffett, who named the Berkshire Hathaway jet “the Indefensible” because it was hard to justify a company aircraft to shareholders.

“Warren doesn’t like it when I talk about corporate aircraft, but I think there is a lot to be said for charging corporate CEOs a lot more for use of the corporate aircraft,” Munger said.