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Charlie Munger doesn't take a salary and wishes other executives would do the same

Julia La Roche
Vice-Chairman of Berkshire Hathaway Charlie Munger. REUTERS/Lane Hickenbottom
Vice-Chairman of Berkshire Hathaway Charlie Munger. REUTERS/Lane Hickenbottom

Warren Buffett, the third-richest man in the world, was the lowest-paid of the big company CEOs last year, according to a ranking released by Equilar 100.

The Berkshire Hathaway (BRK-A, BRK-B) CEO made $487,881 in 2016 and was the only one on the list below the $3 million mark.

Buffett’s right-hand man, Charlie Munger, Berkshire’s vice-chairman, shared his thoughts on executive compensation earlier this year at the Daily Journal annual meeting in Los Angeles that might shed light on the lower salary compared to other CEOs.

Munger, 93, is the chairman of the board for the Daily Journal (DJCO). Rick J.P. Guerin is the vice-chairman of the board. Neither takes a salary from the Daily Journal.

“We don’t take salaries and we don’t take directors fees,” Munger said, “We are a peculiar example. I wish our example spread more because I think if you’re wealthy and own a share of a company and you get to decide what it does and whether it liquidates or whether it keeps going, that’s a nice position to be in and maybe you shouldn’t try to grab all the money in addition. And that’s my theory on executive compensation.”

Munger added: “And some of the old-fashioned guys like [Andrew] Carnegie never got a salary to speak of and Cornelius Vanderbilt didn’t take any either. [Vanderbilt], of course, he owned the whole place, practically, he would have considered it beneath him. He lived on the dividends like the shareholders did.”

Munger lives by the principle of what he calls “deferred gratification.” He thinks that others who do this will be able to grow their business and their wealth.

“I lived all my life with people who are into deferred gratification. In fact, most of them will never have any fun. They’ll just defer gratification all the way to the end — that’s what we do. And it does cause you to get rich,” Munger said, adding a joke, “So we’re going to have a lot of rich dead people. But, we can incite a lot of envy. A lot of you when the people buy your grave it will be this nice grave with this nice monument and they’ll say, ‘God, what a great grave. I wish I were under it.’”

He added: “But at any rate, deferred gratification really does work if what you’re interested in doing is running a business that gets better and better or getting wealthy yourself so that your grave can look nice to outsiders.”

Buffett has an estimated net-worth of $74.1 billion, according to Forbes. Munger has an estimated net-worth of $1.44 billion.

Yahoo Finance will host the exclusive live stream of Berkshire Hathaway’s shareholders meeting on May 6, 2017.

Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.

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