Скачать или смотреть Warren on How Todd Combs and Ted Weschler are compensated and taxed

WARREN BUFFETT: OK. Andrew?

ANDREW ROSS SORKIN: OK, here’s the question:

“Please tell us more about your experience this past year with Todd Combs and Ted Weschler. What did they do well, and did they make any mistakes? And please discuss how you compensate them a bit more.

In an interview, you said that Todd Combs was well compensated for the performance of his stock picks last year.

Should we be worried about a short-term horizon for compensation? How do you ensure that Todd and Ted don’t chase high-flying stocks for the sake of compensation?

WARREN BUFFETT: Well, we’ve always been more concerned about how our record is achieved than the precise record itself. And with both Todd and Ted, Charlie and I were struck by, not only a good record, but intellectual integrity and qualities of character, a real commitment to Berkshire, a lifelong-type commitment.

And we’ve seen hundreds and hundreds of good records in our lifetimes; we haven’t seen very many people we want to have join Berkshire.

But these two are perfect, and we pay them each a salary of a million dollars a year, and we give them 10 percent of the amount by which their portfolios beat the S&P.

So that if they beat the S&P by 10 points, they get one point, for example, and we get nine points. But we do it on a three-year rolling basis so you don’t get the seesaw effect.

And each one gets paid 80 percent based on their own efforts and 20 percent based on the other person’s, so that they have every incentive to operate in a collaborative way rather than sit there jealously guarding their own ideas and hoping the other guy doesn’t do very well.

So it’s a — I don’t think we could have a better — it’s the same structure on pay, basically, that we had with Lou Simpson for 20-some years, except he did not have a partner.

To the extent that they employ people underneath them, that comes out of their performance record, and it’s worked far better than either Charlie and I had hoped, and we had pretty high hopes.

We had 1 3/4 billion with each of them at year end, but we’ve added another billion each on March 31, so they’re running 2 3/4 billion apiece.

I don’t look at what they do. I see it eventually when I look at a GEICO portfolio at the end of the month or something of the sort.

But they operate through their own brokers. They don’t — I’ve told them that the only thing I want to know is, if they’re getting into a new name, I just want to know the name so I’m certain that it isn’t something that I am familiar with some inside information on, or something, so that there’s no inadvertent appearance that we would be — or that their purchase would have been influenced by something that I knew about.

That’s never come up. They can’t — they can’t — if there’s something we would have to file a 13D on, they would have to check with me. But basically none of that’s going to happen. Never happened with Lou, either.

They operate in different stocks. They’ve got a much bigger universe than I have because they’re working with 2 3/4 billion instead of 150 billion, so they can look at a lot more things.

And they’ve cheerfully pitched in for other duties that they don’t really get compensated directly on, but that are helpful to Berkshire. And they will — they’ll do a great job for Berkshire when they’re running a whole lot more money than they are now.

Ted only joined us this year. Todd did substantially better than the S&P last year, so he racked up a big performance gain, a third of which was paid to him in the first year, but the two years is deferred and he could lose that back if he were to underperform.