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Buffett says CEOs overpaid

Associated Press

Omaha, Neb. — Chief executives of some major companies are overpaid, Warren Buffett, the investment wizard who turned Berkshire Hathaway into a multibillion-dollar holding company, told his stockholders Saturday.

And at a time of criminal investigations of corporations such as Enron, Mr. Buffett cautioned stockholders to give careful attention to company financial reports.

"If I can't understand it, the management probably doesn't want me to understand it. And if management doesn't want me to understand it, there is probably something wrong going on," he said at the company's annual stockholders' meeting, which he has called "Woodstock for Capitalists."

The meeting comes about two months after Mr. Buffett filed the company's own annual report, which said earnings per share for the period ended Dec. 31, 2002, were up 436 per cent to $2,795 US from $521 per share in 2001. Net worth grew by $6 billion last year, a dramatic increase from the $3.77-billion loss in value the year before.

Mr. Buffett, the chairman of Berkshire Hathaway, said the consumer businesses the company holds had lower earnings in the first quarter because of the struggling economy.

"I really think we've been in a recession now for over two years," Mr. Buffett said, but added that the recession has not been a major one.

Berkshire owns businesses and stock in a wide variety of industries, including furniture, restaurants, candy, insurance and newspapers.

Asked by a shareholder to comment on the compensation given to chief executives of major companies, Mr. Buffett said the amounts paid have been much too high. He also said stock options offered by many companies are unfair because they can compensate poor executives during good years and can hurt good leaders during bad years.

When Berkshire purchased insurance company General Re, it inherited a stock option system that had General Re executives benefiting from the wider success at Berkshire - even as General Re struggled, Mr. Buffett said.

"That's not an indictment of General Re, but an analysis of an option system that's like a lottery ticket," he said.

Among the shareholders at Saturday's meeting was Disney chairman Michael Eisner.

"It's always invigorating," Mr. Eisner said. "They make things sound very clear and very simple, which, of course, it is not."

© The Globe and Mail

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