With an annual salary of $100,000, Charles Munger is hardly your typical big-company chief executive. But he doesn’t exactly need the money.
A founder of the L.A. law firm Munger, Tolles & Olson, he gave up practicing law in 1965 to focus on managing his investments.
In 1978, he teamed up with Warren E. Buffett to run holding company Berkshire Hathaway Inc. Munger’s Berkshire Hathaway shares are valued at $1.7 billion.
Like Buffett, Munger, 83, is a favorite of corporate watchdogs for his long-held view that too many executives feather their own nests at the expense of shareholders.
With executive compensation shaping up as an issue in Congress, the L.A. Times asked Munger about his views on the subject.
How did CEO compensation get so out of whack?
Some of the worst sinners are compensation consultants. I have always said that prostitution would be a step up for these people.
It isn’t that the CEOs are such terrible people, it’s that the system, with its envy-driven compensation mania, has developed to a place where it brings out the absolute worst in good people.
What about putting limits on how much a CEO can be paid?
Congress tried to do that in 1993 by passing a prohibition on pay of more than $1 million. You can see how effective that was. I think you can assume that any law will be promptly evaded.
I like the idea of high pay for people who are really worth it. The problem is that most of them are not.
What is the solution?
The reason this has grown to such an extreme degree is that it is so hard to do something about it. It’s like autocatalysis in chemistry–it’s a reaction that just feeds on itself and keeps ballooning.
If more executive compensation issues required shareholder approval, I think that might dampen some of the excess. That has been suggested, and there is a lot of discussion around that subject.
I don’t know. Just because something is a serious problem doesn’t mean that you can fix it. There’s an element of tragedy in this because some very good people are acting in some very bad ways.
You don’t seem to have much hope that things will change.
There’s always hope. But, frequently, when things are very excessive, the correction is very painful.
I would like to see CEOs act as exemplars. I would like them to realize that they are setting an example when they are setting their own pay. But CEOs are very pompous, and they assume they are right about everything. Saying that to them would be a total waste of breath.
