BUFFETT: Here’s the kind of person I’d like to head up Berkshire Hathaway when I’m gone

Rick Wilking/Reuters

Berkshire Hathaway shareholders walks by a photo of CEO Warren Buffett at the shareholder shopping day, as part of the Berkshire Hathaway annual meeting weekend in Omaha, Nebraska, May 5, 2017.

Even though the person may not replicate his investing track record, whoever replaces Warren Buffett as Berkshire Hathaway’s CEO will take one of the most prominent positions in finance.

Ajit Jain, who heads up the conglomerate’s reinsurance businesses, has long been considered Buffett’s likely successor.

But without getting into details of who will eventually replace him, Buffett told shareholders at the annual meeting what he’d like to see in a successor, following a question on how the person should be compensated:

“I actually would hope that we have somebody that’s already very rich — which they should be if they’ve been working a long time — and really is not motivated by whether they have ten times as much money than they and their families can need or a hundred times as much.

“And, they might even wish to perhaps set an example by engaging for something far lower than actually what you could say their true market value is. That could or could not happen, but I think it would be terrific if it did. I can’t blame anybody for wanting their market value.

“If they didn’t elect to go in that direction, I would say that you would probably pay them a very modest amount and then have an option which increased in striking price annually.”

This segued into a scathing critique of compensation consultants, who are hired by corporate boards of directors to provide independent advise on shareholders’ behalf.

“I have avoided all my life compensation consultants. I hardly can find the words to express my contempt,” said Charlie Munger, Berkshire’s vice chairman.

Munger did find such words during the 2012 meeting when he said for “compensation consultants, prostitution would be a step up.”

“If the board hires a compensation consultant after I go, I will come back mad,” Buffett said.

For Buffett, the problem is that compensation consultants use other companies as a guide.

“What consultant is ever going to get another assignment if he says you should pay your CEO down in the fourth quartile,” Buffett said. “It isn’t that the people are evil or anything, it’s just that the nature of the situation produces a result that is not consistent with how representatives of the owners should behave.”