“When we use incentives - and these can be large - they are always tied to the operating results for which a given CEO has authority. We issue no lottery tickets taht carry payoffs unrelated to business performance. If a CEO bats .300, he gets paid for being a 300 hitter, even if circumstances outside of his control cause Berkshire to perform poorly. And if he bats 150, he doesn't get a payoff just becuase the successes of others have enabled Berkshire to prosper mightily. An example: We now own $61 billion worth of equities at Berkshire, whose value can easily fall or rise by 10% in a given year. Why in the world should the pay of our operating executives be affected by such $6 billion swings, however important the gain or loss may be for shareholders?”
