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Warren Buffett, founder and chairman of Berkshire Hathaway, has drawn an annual salary of $100,000 for more than 25 years. The “Oracle of Omaha” is, however, remunerated in other ways. Buffett holds 259,382 Class A shares (BRK.A) of Berkshire Hathaway and 9,533 Class B shares (BRK.B). This accounts for much of his $71.5 billion estimated net worth, making him the fourth richest person on the planet as of June 2020.
Berkshire Hathaway owns 75 companies—including GEICO, Benjamin Moore, Fruit of the Loom, Benjamin Moore and See’s Candies—which together employ about 391,500 people. Though Buffett heads one of the world’s largest conglomerates, his annually salary might seem small, relatively speaking. In addition to his $100,000 annual pay, Buffett received an additional $274,773 in 2019 in the form of personal and home security services, bringing his total compensation to $374,773. By comparison, the median salary for a Berkshire Hathaway employee was $65,740 in 2019, meaning Buffett was paid 5.7 times more than the typical employee.
Buffett earned his substantial wealth through smart investing. Why would he take on such a small salary when compared to other CEOs of such large corporations? There can be a few explanations. Firstly, Buffett is known to be a modest man with a humble demeanor. Despite his vast wealth, he does not live lavishly. In fact, he has lived in the same house he bought in 1958 before his massive wealth was accumulated. And he plans on giving away 99% of his wealth to charities upon his death. By taking on a small salary, it provides him with the moral and social capital that underlines his modest living, which allows him the leeway to lecture corporate America on its greed and to reign in its voracious appetite for wealth generation. Buffett has spoken out against the unfair distribution of wealth in the United States and believes in a larger tax rate for the wealthy.
Secondly, it does not make financial sense for him to receive a large salary from a company of which he is a large stakeholder. It would reduce the value of Berkshire Hathaway and dilute the shares.
Further amplifying his modest living, Buffett has committed to giving away 99% of his wealth, under the Giving Pledge, which he started with Bill Gates. The Giving Pledge seeks commitments from extremely wealthy individuals to give away a majority their wealth. Buffett has already donated $24.6 billion to the Bill and Melinda Gates Foundation. He has a strong interest in philanthropy and has encouraged others to follow in his stead and contribute to the organization’s cause of improving health and education.
Encouraging higher estate taxes, as stated, Buffett has committed to giving away most of his wealth rather than allowing his heirs to inherit all of his investments. Instead, modest amounts of Berkshire Hathaway stock and real estate investments have been or will be given to Buffett’s children and other heirs. Buffett’s estate has already been divided. He continues to make other investments through Berkshire Hathaway and continues to benefit from gains in share prices and the results of wise investing and planning, and he will continue to receive his annual salary of $100,000.