Some Ce Os Are Bargains, And Some...

Famed investor Warren E. Buffett has long held strong views on the way U.S. companies pay their top executives. The chief executive of Berkshire Hathaway Inc. has declared that too many pay plans are "long on carrots but short on sticks." He has railed against the misuse of stock options by executives and chided business leaders for lobbying against an accounting rule that would have made companies charge options to corporate earnings.

So it may be no surprise that the "Oracle of Omaha"--who pays himself a pittance of a salary--is one of this year's two winners in BUSINESS WEEK's pay-for-performance analysis. Buffett wins for giving shareholders the biggest gain on their investment. Laurence A. Tisch, CEO of CBS Inc., gave shareholders the highest return on equity (ROE) relative to his pay.

"PSYCHIC PERKS." Buffett draws an annual salary of $100,000, with no bonuses or stock options, while shareholders have seen the value of their stake in the company rise by 125% in the past three years. Buffett notes in Berkshire's latest annual report that he and Vice-Chairman Charles T. Munger share the view that they are beneficiaries of "the abundant array of material and psychic perks that flow to the heads of corporations. Under such idyllic conditions, we don't expect shareholders to ante up loads of compensation for which we have no possible need." Buffett certainly doesn't need the money. His 40.7% stake in Berkshire is worth some $11 billion.

Tisch doesn't need the money, either. Besides serving as CEO of CBS--which paid him $5.5 million in the past three years--he's chief of Loews Corp., where he earned $5.6 million in the same period. His stakes in both companies are worth more than $1.6 billion. He heads the profitability list because his CBS paychecks are relatively small, given the company's high ROE of 56.7%. That heady number is the result of a stock buyback, which has eclipsed recent operating woes at the web. Declining ratings have caused profits to dip, and CBS surprised analysts on Apr. 10 by reporting that net income plunged 68%, to $21.9 million, in the first quarter.

And the CEO who gave shareholders the least return for his pay? For the second straight year, the envelope goes to Walt Disney Co.'s Michael D. Eisner. From 1991 to 1993, he got $221.1 million, nearly all from stock options. A $100 investment in Disney rose to $163 in the same period. A spokesman says it is unfair to compare the value of Eisner's options--granted a decade ago but mostly exercised in fiscal 1993--with performance over the past three years. A $100,000 stake in Disney in 1984, when Eisner became CEO, would now be worth more than $1.5 million.

Delta Air Lines CEO Ronald W. Allen gave shareholders the lowest profitability relative to his pay. In the past three years, Allen earned only $2.1 million, but his company's return on equity was a negative 26.1%. Fare wars, a weak economy, and the cost of buying Pan Am led to a loss in 1991, Delta's first since 1983. Allen has cut costs, abandoned money-losing routes, and forged alliances with European lines. But he has a long way to go to get a shot at landing on the positive side of the pay-for-performance ledger.

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