Andrew Bary

Unlike most big companies, Berkshire Hathaway never made diversity an element in the selection of its board of directors.

With diversity, equity, and inclusion policies now in retreat across corporate America, CEO Warren Buffett's emphasis on merit looks smart and prescient.

Berkshire's proxy , released Friday, restated the criteria that Berkshire seeks in what will be its 13-member board -- and it's like nothing that appears in most corporate proxies.

"Berkshire does not have a policy regarding the consideration of diversity in identifying nominees for director. In identifying director nominees, the Governance Committee does not seek diversity, however defined."

"Instead, as previously discussed, the Governance Committee looks for individuals who have very high integrity, business savvy, an owner-oriented attitude, a deep genuine interest in the Company and have had a significant investment in Berkshire shares relative to their resources for at least three years."

Later in the proxy, Berkshire notes that four of its board members are women and that two are "ethnically diverse." The latter refers to Berkshire insurance executive Ajit Jain, who was born in India, and Ken Chenault, the former CEO of American Express, who is Black.

"However, it should be noted that these directors were not selected for diversity purposes," the proxy states.

The proxy itself is a throwback to the 1960s when Buffett took control of Berkshire.

Rather than pay top Berkshire executives based on complex and generally incomprehensible formulas as nearly every big corporation does, Buffett decides how much they get paid based on "his perception of each of their performance" and any changes in responsibility, the proxy states.

The top two executives, Jain, who heads the insurance business, and likely Buffett successor Greg Abel, who runs the non-insurance operations, got paid $21 million last year.

All the compensation is paid in cash because Berkshire doesn't give stock compensation to any of its employees or directors. If they want to own stock, they have to buy it in the open market like anyone else. Buffett, 94, views every share of Berkshire as precious and hates issuing equity for any reason -- including acquisitions.

The Berkshire board of directors gets paid a pittance, just $900 per board meeting with the result being that most got paid just $2,700 last year, compared with over $250,000 annually for the typical director in S&P 500 companies.

Talk to Berkshire directors like investment manager Chris Davis and they view board membership as a privilege and an opportunity to benefit from Buffett's wisdom.

Unlike nearly every big corporation, Berkshire doesn't provide directors and officers liability insurance to its board.

Buffett's salary of $100,000 annually with no bonus has been the same for at least 35 years and is a fraction of what most big-company CEOs take home.

Buffett, of course, has enormous wealth with his stake in Berkshire now valued at $167 billion after the 13% gain in the stock this year. He owns 15% of the company. The Class A shares ended Friday at around $771,000, near a recent record.

The company provides security services to him worth $300,000 a year, but that's a pittance relative to CEOs like Meta Platforms' Mark Zuckerberg, who was given $14 million for security in 2023.

Buffett hates consultants and refuses to use them for compensation and rarely for any reason. He has said he would rise from his grave in anger if the Berkshire board ever uses compensation consultants after his death.

And unlike many companies that have risk committees, that responsibility at Berkshire ultimately rests with Buffett, who consults with his top executives. "Berkshire's chief risk officer is its Chairman and CEO, Warren Buffett," the proxy says.

Berkshire's distinctive character as evident in the proxy has helped it thrive and become a $1.1 trillion company under Buffett's leadership. Investors are hoping that culture survives him and it will be the responsibility of the board to help ensure that.

Write to Andrew Bary at andrew.bary@barrons.com

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March 16, 2025 11:55 ET (15:55 GMT)

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