Jamie Dimon, top executive at JP Morgan (NYSE:JPM) caused a stir last month when he declared “I’ll make you a bet he (Warren Buffet) pays his top 20 or 30 people more than we do” at a press conference at the bank. Dimon’s assertion could not be validated as full data for compensation at JP Morgan and Berkshire Hathaway Inc. (NYSE:BRK.A) isn’t easily available. It is possible to track some of the salaries at Buffet’s firm to see how much he is really paying his executives. It turns out Dimon is right at least in spirit all of the executives at Berkshire Hathaway are compensated very well, excepting possibly Buffet himself. Statements to regulators divulge the earnings of many of the company’s top personnel. Over 20 managers at the firms insurance units made over $1 million last year. $17.4 million went to United States Insurance Group CEO Thomas P. Nerney, and $12.4 million to Geico head Tony Nicely. Other highly placed executives were similarly paid.
The contradiction comes amid Warren Buffet’s campaign to lower pay among executives and raising tax rates for the ultra wealthy. Buffet famously pointed out last year that his secretary had been paying a higher rate of tax than he had. Buffet himself has accepted a salary of only $100,000 for the past 25 years. The question is one of hypocrisy. Is it right for Buffet to rage on against the high pay on Wall Street while offering the same types of compensation himself? It seem like an easy yes but many including Dimon and , it can be surmised, Buffet himself do not believe so.
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Their argument goes along the following familiar lines. If you do not attract the best professionals to run your business, ensuring it is as efficient, effective and profitable as possible, your business will fail. The only real world method of attracting the top talent is by offering at least a competitive salary if not the highest on the market. If Buffet refused to offer salaries that were competitive Berkshire Hathaway and its subsidiaries would fall to pieces without a doubt. His first obligation is to the company he leads. His second obligation, as he sees it, is as a private citizen of the United States. It is in this role he calls for greater prudence in financial institutions pay. Growing salaries of top executives at banks have gained traction in the media since the financial crisis. Owing to the multiple government bailouts citizens see their money used to pay massive salaries in positions they don’t understand the value of.