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No Pay Raise for Warren Buffett

Monday, 16 Mar 2009 07:58 AM

Warren Buffett was awarded compensation of $491,000 in 2008 for running Berkshire Hathaway Inc, which just lost its "AAA" credit rating from Fitch Ratings because of potential losses from derivatives.

Berkshire said Buffett's 2008 salary was $100,000, the same amount he has taken for a quarter century. He also received $75,000 in director fees from companies in which Berkshire invests, and was provided with $315,709 of personal and home security services.

Buffett, 78, has lived in the same Omaha, Nebraska, home, which sits on a three-quarter acre plot of land and is assessed at $727,600, for more than half a century.

Berkshire disclosed the compensation in a proxy filing with the U.S. Securities and Exchange Commission. It also said Buffett reimbursed Berkshire $50,000 for some personal expenses.

Berkshire Vice Chairman Charlie Munger's compensation totaled $100,000, entirely from salary, while Chief Financial Officer Marc Hamburg was awarded $786,500 of compensation, including a $775,000 salary, the filing shows.

Buffett is the world's second-richest person, though his net worth fell to $37 billion from $62 billion a year earlier, Forbes magazine said this week. Only Microsoft Corp co-founder and Berkshire director Bill Gates is worth more.

Most of Buffett's net worth stems from Berkshire, which has close to 80 operating units and has tens of billions of dollars of stock and bond investments. Buffett owns 26.9 percent of the company and has a 31.8 percent voting stake, the proxy shows.

Fitch late Thursday downgraded Berkshire's so-called issuer default rating to "AA-plus" from "AAA," and its senior unsecured debt rating to "AA" from "AAA." Its outlook is "negative," meaning another cut is possible within a couple of years.

The rating agency said Berkshire's equity and derivatives holdings leave its earnings stream and capital volatility "inconsistent with the stability required at the 'AAA' level."

In 2008, Berkshire's profit tumbled 62 percent and its net worth slid by 9.6 percent, the worst year since Buffett took over in 1965, largely from paper losses on derivative contracts tied to stock market indexes. The contracts mature a decade and more from now, and Buffett expects them to be profitable.

Fitch also said its downgrade reflects "key man" risk, in that Berkshire's track record and ability to find companies to buy is "intimately tied" to Buffett. It said this risk factor has grown larger in the "current stressful economic environment" and is unrelated to Buffett's age.

Buffett has said Berkshire's board has someone to replace him as chief executive if the need arises, and will install one or more people to replace him as chief investment officer.

Moody's Investors Service and Standard & Poor's still rate Berkshire "triple-A." Neither they nor Berkshire returned calls seeking comment.

In afternoon trading, Berkshire Class A shares were down $2,800, or 3.3 percent, at $82,900. They peaked at $151,650 in December 2007.

The cost of protecting Berkshire debt against default befits a low-investment-grade or "junk"-rated company.

On Friday, it cost $417,000 a year to protect $10 million of Berkshire debt against default for five years, down from $438,000 on Thursday, according to CMA DataVision. Friday's level is just below credit protection costs for debt issued by Colombia, Peru and Turkey

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Warren Buffett was awarded compensation of $491,000 in 2008 for running Berkshire Hathaway Inc, which just lost its "AAA" credit rating from Fitch Ratings because of potential losses from derivatives.Berkshire said Buffett's 2008 salary was $100,000, the same amount he has...
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