Twenty-five million dollars is a rounding error.
The financial press is currently obsessing over the fact that Berkshire Hathaway bumped Greg Abel’s base salary. They treat it like a king’s ransom. They frame it through the lens of "corporate excess" or "succession milestones." They are missing the point so spectacularly it borders on professional negligence.
If you think $25 million for the man running the most complex balance sheet in history is "a lot," you don't understand how value is created. You’re still thinking like an hourly worker. You're looking at a paycheck when you should be looking at the cost of replacement.
Most CEOs at S&P 500 firms are glorified bureaucrats. They are caretakers who manage for the next quarter, collect their restricted stock units (RSUs), and parachute out before the rot they ignored starts to stink. Greg Abel is being paid a flat fee to oversee a $1 trillion conglomerate with 395,000 employees and a cash pile that could buy most European countries.
By any objective metric of capital allocation, Abel is working for pennies.
The Myth of the "Market Rate"
The "lazy consensus" says CEO pay should be pegged to "peer groups." This is a circular logic trap used by compensation consultants to justify mediocrity. If CEO A at a failing retail chain makes $20 million, then CEO B at a tech firm must make $22 million.
Berkshire Hathaway doesn't have a peer group.
Abel isn't just a CEO. He is the chief risk officer, the ultimate capital allocator, and the cultural steward of a decentralized empire. In any other structure, the heads of Berkshire’s subsidiaries—Geico, BNSF, Berkshire Hathaway Energy—would be CEOs making $15 million to $30 million themselves. Abel manages them all.
When a typical CEO gets a "raise," it's usually a shell game of performance-based options that incentivize short-term stock manipulation. Abel’s pay is remarkably transparent and, frankly, boring. It’s cash. No complex derivatives designed to hide the true cost from shareholders. No "golden hello" or "platinum parachute."
He is being paid to make decisions that have a 50-year horizon. If he makes one right decision on a single bolt-on acquisition, he generates billions in value. If he avoids one catastrophic insurance underwriting mistake, he saves tens of billions.
Asking if $25 million is "too much" is the wrong question. The real question is: What would a private equity firm charge to manage $900 billion in assets?
The standard "2 and 20" fee structure (2% management fee, 20% of profits) would put the bill at $18 billion a year just to keep the lights on. Abel is doing it for $25 million. He is the greatest bargain in the history of capitalism.
Why Incentive-Based Pay is a Scam
The most common "People Also Ask" query regarding executive pay is some variation of: Why isn't his pay tied to the stock price?
The premise is flawed. Tying pay to stock price creates a "agency problem" that eats companies from the inside out. When a CEO’s net worth depends on the ticker symbol, they do stupid things. They buy back stock at record highs to juice Earnings Per Share (EPS). They cut R&D to beat a quarterly estimate. They take on cheap debt to fund dividends.
Warren Buffett and Charlie Munger spent decades railing against this. They understood that you want a manager who thinks like an owner, not a gambler. Abel’s salary isn't an "incentive." It’s a retainer for one of the rarest skill sets on the planet: the ability to say "no" to 99% of deals.
I have seen boards of directors authorize $100 million packages for "turnaround specialists" who ended up burning the company to the ground within three years. These managers "leverage" the balance sheet until it snaps. They use "holistic" strategies that are just masks for lack of focus.
Abel does the opposite. He manages for resilience. You don't pay a nuclear plant supervisor based on how much power they generate this hour; you pay them to ensure the core doesn't melt down. Abel is the supervisor of the American economy’s most important reactor.
The Cost of the Succession Spectacle
The media is obsessed with the "post-Buffett" era. They treat $25 million as a "security deposit" to keep Abel from walking away.
This is an insult to the culture Buffett built. People don't stay at Berkshire for the cash. They stay for the autonomy. However, the market demands a signal. By setting a fixed, high-but-transparent salary, Berkshire is signaling stability.
But let’s be brutal: If Abel were to leave and start his own hedge fund tomorrow, he would raise $50 billion in an afternoon. His personal take-home would be hundreds of millions, if not billions, per year.
By accepting $25 million, Abel is effectively donating his time to Berkshire shareholders.
The Fallacy of Executive Equality
There is a growing movement to cap CEO pay at a certain multiple of the average worker's salary. It’s a sentiment rooted in fairness, but it ignores the brutal reality of scale.
If a mid-level manager at Geico makes a mistake, it might cost the company $100,000. If Greg Abel makes a mistake in capital allocation, he wipes out the retirement savings of hundreds of thousands of individual shareholders. The "stress-to-pay" ratio at the top of Berkshire is actually lower than it is for a middle manager at a struggling startup.
We are living in a winner-take-all economy where the delta between "good" and "extraordinary" is worth trillions.
- Good: Maintaining a 10% Return on Equity.
- Extraordinary: Navigating a global liquidity crisis while having $160 billion in cash ready to deploy when everyone else is panicking.
Abel is the guy who has to decide when to deploy that cash. He is the one who has to tell a subsidiary president that their business model is dying and they won't be getting any more capital. That level of institutional courage is not found in a "peer group" of S&P CEOs.
Stop Looking at the Number, Look at the Yield
In 2023, Berkshire Hathaway’s operating earnings were $37.3 billion.
$25 million is 0.067% of those earnings.
If you hired a wealth manager to handle your $1 million portfolio and they charged you $670 a year, you would think you were robbing them. That is the exact "fee" Berkshire shareholders are paying for Greg Abel.
The outrage over his salary is a distraction for people who prefer optics over arithmetic. It’s easier to complain about a "big number" than it is to calculate the internal rate of return on a CEO’s talent.
The reality is that Berkshire is entering its most dangerous phase. The transition from a founder-led cult of personality to a professionalized institution is where most companies fail. They become bureaucratic. They become "normal." They start using words like "synergy" and "robust" to hide a lack of vision.
Abel’s job is to prevent Berkshire from becoming "normal." He is the gatekeeper against the institutional imperative—the tendency of corporate giants to grow bloated and stupid.
If he succeeds, he is worth $250 million. If he fails, $25 million was too much. But based on the track record of the energy and rail divisions he ran for years, he’s the only person qualified for the seat.
Stop comparing him to other CEOs. They are playing checkers. He is playing an infinite game where the only goal is survival and compounding.
The $25 million isn't a "lift." It's a discount.
Would you rather have a CEO who costs $1 million and loses 1% of the company's value, or one who costs $25 million and protects it?
The math isn't hard. Your envy is just getting in the way of the data.
Buy the stock or don't, but stop pretending the captain’s salary is the leak in the ship. He's the one keeping it afloat in a sea of mediocrity.
