The Director Compensation Project: Berkshire Hathaway Inc.

This post is part of an ongoing series that examines the way stock exchange independence rules relate to director compensation.  We are for the most part including companies from 2011’s Fortune 500 and using information found in their 2011 proxy statements.

Nasdaq and the NYSE have similar rules with respect to director independence.  NYSE Rule 303A.01 requires that each listed company’s board of directors be comprised of a majority of independent directors.  A director does not qualify as “independent” if he or she has a “material relationship with the company.”  NYSE Rule 303A.02(a).  In addition, the director is not considered independent under NYSE Rule 303A.02(b)(ii) if the director received more than $120,000 in direct compensation, other than director’s fees, during any of the previous three years.  NYSE Rule 303A.06 imposes a higher independence standard for directors serving on the company’s audit committee by requiring them to comport with Rule 10A-3 (C.F.R. §240.10A-3).

Independent directors are compensated for their service on the board.  The amount of compensation can be seen from examining the director compensation table from the Berkshire Hathaway (NYSE: BRKB) 2011 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Stephen B. Burke	3,300	0	0	0	3,300
Susan L. Decker	5,300	0	0	0	5,300
William H. Gates III	3,000	0	0	0	3,000
David S. Gottesman	3,300	0	0	0	3,300
Charlotte Guyman	7,300	0	0	0	7,300
Donald R. Keough	7,300	0	0	0	7,300
Thomas S. Murphy	7,300	0	0	0	7,300
Walter Scott, Jr.	3,000	0	0	0	3,000

Director Compensation.  During the 2011 fiscal year, Berkshire Hathaway held one annual meeting of the directors and four special meetings.  Every director attended all meetings except for Mr. Gates and Mr. Scott, who each missed one special meeting.  Directors received $900 for each meeting they attended in person and $300 for each meeting they attended by phone.  In addition, any director who served as an Audit Committee member received a $1,000 quarterly payment. 

Director Tenure.  Mr. Buffett has presided on the board of directors since 1965 and has served as Berkshire Hathaway’s Chairman and Chief Executive Officer since 1970, holding the longest tenure.  Several directors sit on other boards.  For instance, Mr. Burke sits on the boards of JPMorgan Chase & Co., as well as the Children’s Hospital of Philadelphia.  Mr. Munger currently serves as the Chairman of the Board of Daily Journal Corporation and as a director of Costco Wholesale Corporation. 

CEO Compensation.  During the 2011 fiscal year, Chief Executive Officer and Senior Vice President Mark D. Hamburg earned a total of $974,750 for his service.  Mr. Buffett, the Chief Executive Officer and Chairman of the Board, received a $100,000 base salary and a total compensation package of $491,925.  Mr. Buffet’s base salary has remained unchanged for 25 years, and he has advised the committee that he does not expect or wish it to be altered.  Berkshire Hathaway provided personal and home security services to Mr. Buffet, which amounted to $346,925 of his total compensation.  Mr. Buffet is the largest shareholder of Berkshire Hathaway, owning shares that amounted to a 34% voting interest and a 22% economic interest.