The leap

When Berkshire Hathaway’s long-anticipated succession became reality, one quieter development began to reverberate through the markets and the halls of corporate America: Greg Abel’s compensation package. A sum that approaches $25 million in a single year is more than a headline. It is a symbolic signal — a definitive move that places the company’s new steward squarely in the league of high-compensation S&P 500 CEOs, and it reframes how investors, boards, and employees think about leadership, continuity and reward.

The change is particularly striking when it is compared to Warren Buffett’s famously modest approach to pay. For decades Buffett accepted a comparatively small salary — long in the six figures — and relied on the gains of concentrated stock ownership and an economy of scale in reputation to keep his incentives aligned with shareholders. Abel’s package is not a repudiation of that stewardship; it is an acknowledgment of market realities and the evolving calculus that boards now use to secure top operational talent.

Why the number matters

A headline figure like $25 million does several jobs at once. It signals that Berkshire is willing to play by modern compensation rules. It acknowledges that run-rate pay for active CEOs — especially those leading conglomerates with sprawling portfolios — has moved substantially higher in recent decades. And it sends a message beyond the C-suite: that the benchmark for what constitutes fair, competitive leadership compensation now exists in a different neighborhood than it did under Buffett’s stewardship.

But beyond signal, the figure also invites questions about purpose. Is this pay primarily retention? Is it incentivization tied to measurable performance? Is it alignment with shareholder outcomes? The answers matter because how compensation is structured determines whether it shapes the right behaviors: long-term capital allocation, prudent risk-taking, and preservation of corporate culture — or casual short-termism and headline chasing.

Pay structure and governance: the levers that create outcomes

Compensation is never just a number. It is a set of instruments: base salary, cash bonuses, stock awards, long-term incentive plans, performance hurdles, and vesting schedules. In the modern S&P 500 playbook, equity-linked awards dominate headline totals because they both preserve cash and create the perception of alignment. But the devil is in the design:

• Performance metrics: Whether pay is linked to absolute stock returns, total shareholder return relative to peers, or operational metrics (revenue growth, margins, free cash flow) determines the behavior it will encourage.
• Vesting horizons: Multi-year cliffs and long-term holding requirements better encourage stewardship than short-term annual cycles.
• Clawbacks and recoupment provisions: These offer boards a safety valve when pay has been awarded based on metrics later revealed as unreliable or achieved through imprudent risk.
• Relative benchmarking: Relying on peer groups to set compensation can anchor pay to an industry median — helpful for competitiveness, but it can also ratchet compensation upward over time if not carefully curated.

Sound governance is the instrument that binds these levers to company purpose. Compensation committees, board oversight, transparent disclosure, and engaged shareholders are the institutional guardrails. When they function well, high pay can be a tool for attracting transformative leaders who create outsized value; when they fail, it can fuel misaligned incentives, erode trust and compound inequality.

The broader trend: why CEO pay has climbed

Several secular forces have driven executive compensation upward across the S&P 500:

• Market competition for top managerial talent: As companies become more complex and global, the premium for leaders with proven operating chops has risen.
• Shift to equity-based compensation: To conserve cash and align incentives, boards rely on stock grants that, when tallied, produce large headline numbers.
• Proxy practices and benchmarking: Peer-group benchmarking and proxy advisory influence can create a ratcheting effect, pushing pay higher over time.
• Investor tolerance tied to performance: As long as returns justify pay, large packages are more palatable to the market.

But these forces also create tension. Higher pay packages increase scrutiny from employees, customers, and the public. They magnify the CEO’s role as a steward of corporate values. And they shift the conversation from mere compensation mechanics to the social contract between a company and its stakeholders.

Implications for workers and the workplace

For the broader workforce, the rise of CEO pay is not merely academic. It feeds into how organizations attract and retain talent, how they design career ladders, and how they communicate value to employees. A few considerations:

• Perception of fairness: When top pay soars while median wages stagnate, employees can become disillusioned. Transparent links between executive pay and workforce outcomes — investment in skills, pay parity, and job stability — help preserve morale.
• Talent mobility: High CEO compensation reflects a tight market for senior leadership. That competition can drive investment in middle-management development and succession planning to reduce reliance on external hires.
• Cultural sustainability: Pay signals values. If a company wants long-termism and prudence, compensation design must reward those traits, not only short-term stock spikes.

Shareholders, accountability and the public spotlight

Shareholders are increasingly assertive in weighing in on pay. Proxy votes, activist campaigns and public scrutiny have improved transparency and encouraged more rigorous linkage of pay to performance. Yet, accountability is uneven: institutional investors may tolerate large packages when the math of returns looks sound, while public perception may still hinge on narratives of fairness and stewardship.

As corporate compensation becomes more public, boards must articulate a coherent story: why this package is necessary, how it aligns with long-term strategy, and how it preserves the company’s fiduciary commitments. Those narratives are themselves a governance tool — clarity breeds trust.

Between tradition and modernity: Berkshire’s transition as a case study

Berkshire Hathaway’s culture was built on the particular charisma and restraint of one leader. Moving to a new generation required reconciling that legacy with marketplace realities. Greg Abel’s pay marks the balancing act: honoring the company’s long-term, value-centric ethos while ensuring the board has the tools to secure and reward an active, accountable manager in a competitive market.

This is not an anomaly so much as a structural pivot. Companies with storied founders often find that their compensation models must evolve to reflect succession, scale and competitive pressures. The test is whether the new model remains faithful to the company’s core—capital discipline, rational allocation, and long-term thinking — while accepting the contemporary demands of the corporate talent market.

Practical takeaways for companies thinking about leadership pay

Boards and leaders should consider a few pragmatic principles when designing or approving large packages:

1. Align: Make the nexus between pay and measurable, long-term company outcomes explicit.
2. Time-horizon: Favor multi-year vesting and holding requirements to emphasize stewardship over short-term gains.
3. Transparency: Clearly explain structure and rationale to investors, employees and the public to reduce uncertainty and misinterpretation.
4. Balance: Use a mix of cash and equity that fits the company’s capital needs and investor expectations.
5. Link to workforce health: Show how executive incentives relate to broader employee investment, including training, pay fairness and job quality.

Conclusion: leadership pay as a mirror

Greg Abel’s $25 million compensation package — and the conversations it sparks — is less about a number and more about how modern corporations define stewardship. Pay levels reflect market forces, but pay design reveals priorities. When a board awards a large package, it is making a bet on strategy, culture and the kind of leadership it believes will create value over decades, not quarters.

For the broader workforce and for those who follow the arc of corporate governance, the moment is instructive. It invites a renewed focus on alignment: between leaders and owners, between incentives and outcomes, and between the life of a company and the people it serves. Done well, thoughtful compensation can be a lever for resilience, innovation and shared success. Done poorly, it can be a distraction from the very stewardship it seeks to ensure.

In the end, the test will be what comes after the headline — the track record Abel and Berkshire build, the clarity of the company’s communication, and whether compensation practices across the market evolve to reward real, measurable value that benefits investors, workers and the broader economy.