Warren Buffett is the third wealthiest man in the world with a net worth of $88 billion as of Feb. 4, 2020, according to Forbes. As one of the most successful investors in the world, and known as the "Oracle of Omaha," his wealth comes from stock ownership in Berkshire Hathaway, the company he founded and runs.
Berkshire Hathaway owns over 50 companies, which include Geico, Duracell, and Benjamin Moore, and is one of the most successful companies in the world. Buffett owns approximately 283,00 shares of it and with a stock price of $334,860 as of Feb. 4, 2020, that's quite the holdings.
Even though Buffett is the head of one of the largest companies, he earns a small annual salary, relatively speaking, of $100,000. This number is 1.6x the approximate median salary of Berkshire employees, which is $61,000. Since at least the early 90s, Buffett's salary has remained the same, but his other benefits have fluctuated with the stock market, particularly with the value of Berkshire Hathaway.
Buffett earned his substantial wealth through smart investing. Why would he take on such a small salary when compared to other CEOs of such large corporations? There can be a few explanations. Firstly, Buffett is known to be a modest man with a humble demeanor. Despite his vast wealth, he does not live lavishly. In fact, he has lived in the same house he bought in 1958 before his massive wealth was accumulated. And he plans on giving away 99% of his wealth to charities upon his death. By taking on a small salary, it provides him with the moral and social capital that underlines his modest living, which allows him the leeway to lecture corporate America on its greed and to reign in its voracious appetite for wealth generation. Buffett has spoken out against the unfair distribution of wealth in the United States and believes in a larger tax rate for the wealthy.
Secondly, it does not make financial sense for him to receive a large salary from a company of which he is a large stakeholder. It would reduce the value of Berkshire Hathaway and dilute the shares. In addition to his salary, Buffett does receive additional compensation in the form of travel, security, and other business related compensation. This bumps total compensation up to over $300,000.
Further amplifying his modest living, Buffett has committed to giving away 99% of his wealth, under the Giving Pledge, which he started with Bill Gates. The Giving Pledge seeks commitments from extremely wealthy individuals to give away a majority their wealth. Buffett has already donated a significant portion of his wealth, a large part of which has gone to the Bill and Melinda Gates Foundation. He has a strong interest in philanthropy and has encouraged others to follow in his stead and contribute to the organization's cause of improving health and education.
Encouraging higher estate taxes, as stated, Buffett has committed to giving away most of his wealth rather than allowing his heirs to inherit all of his investments. Instead, modest amounts of Berkshire Hathaway stock and real estate investments have been or will be given to Buffett's children and other heirs. Buffett's estate has already been divided. He continues to make other investments through Berkshire Hathaway and continues to benefit from gains in share prices and the results of wise investing and planning, and he will continue to receive his annual salary of $100,000.