Thursday, September 25, 2008

Buffett and Icahn Scold Directors

I don’t get the sense that Carl Icahn and Warren Buffett hang out together. But as they watch Hank Paulson's new game show, "So You Want To Be A Risky Mortgage-Related Products Investor," both are suggesting that outside directors get paid too much.

The two have different styles: While Carl rants, Warren usually stays calm and lets his BFF Charlie Munger say the really mean stuff. So Carl trashed overpaid directors in a peevish blog post, and Warren chided them gently in an interview.

Take it, Carl:

"Total director remuneration at the largest American corporations is running over $1,000 per hour, according to the study by Steven Hall & Partners. With many U.S. corporations struggling, why are we paying board members all this money? Lehman's board members, for example, were paid just short of a half million dollars each last year...I would appreciate it if someone would advise me of what those board members did to deserve that compensation? Can any board member of these collapsed financial institutions claim to have truly monitored the risks their companies were taking?...If the boards did their jobs, many of the problems today would probably not exist."


"I think they should punish, in many cases, the people -- I would think they might insist on the directors of the institutions that participate in this program waiving all director's fees for a couple of years...."

I'll take Carl’s word for it that Lehman paid its directors nearly $500K a year. Definitely on the high side. I checked AIG's last proxy, and its directors all made north of $250K. Not astronomical, but Robert Willumstad (who was non-management Chairman at the time) raked in $435K.

AIG was also kind enough to donate over $500K last year to the Asia Society, an organization chaired by another outside director, Richard Holbrooke. (He resigned from AIG's board this past July.) The proxy proclaimed that this donation wouldn't impair Mr. Holbrooke’s independence in the least, plus it would “enhance AIG’s reputation and standing in Asia.” Dunno, the Asia Society is a lovely institution, and located right around the corner from my dentist, but I wonder how that reputation thing is working out.

Image source: Turbo Squid

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