April 28 (Bloomberg) — Warren Buffett, the second-richest man in the U.S., said his eventual successor as chief executive officer of Berkshire Hathaway Inc. should be the company's sole manager getting stock options as compensation.
The next CEO should be "the only one who would receive options because he would be the only one who is responsible for the overall success of the operation," Buffett wrote in a memo to the company's board, he told Fortune Magazine in an interview published today. The billionaire said he may include the memo in the company's next annual report, to be published in 2015.
Buffett, 83, has long said that using stock options for pay can cost too much for shareholders and be counterproductive as a motivational tool. He said last week that he opposed Coca-Cola Co.'s equity compensation plan and abstained in a vote on the proposal out of loyalty to the soft-drink maker. Berkshire's stake in Coca-Cola is valued at more than $16 billion.
The billionaire in 1997 highlighted a plan at the Geico auto insurance unit that based incentive compensation on growth in the customer count and the profitability of policies that were on the books for more than a year. He said the system more accurately rewards the desired behavior than options, which give the holder the right to buy a specific number of shares for a set price in a defined period.
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