Costco’s Director Compensation

Published on October 9, 2023

“Costco is a different kind of place. It’s one of the most admirable capitalistic institutions in the world. And its CEO, Jim Sinegal, is one of the most admirable retailers to ever live on this planet. Costco will continue making huge contributions to society. It has a frantic desire to serve customers a little better every year. When other companies find ways to save money, they turn it into profit. Sinegal passes it on to customers. It’s almost a religious duty. He’s sacrificing short-term profits for long-term success. More of you should look at Costco.”

— Charlie Munger, 2011 Wesco Financial Annual Meeting


Berkshire Hathaway has a unique board of directors with significant skin in the game. Directors serve on the board for minimal cash compensation and receive no equity awards of any kind.1 When there is a vacancy on the board, candidates are expected to have a meaningful ownership interest in the company along with sufficient business acumen. This combination should provide strong incentives for board members to fulfill their duties without receiving meaningful compensation for their service.

While I believe that the board displays the characteristics that I have described, the other important factor attracting members is the opportunity to interact with Warren Buffett and Charlie Munger. Although it is not likely the primary consideration, a director on Berkshire’s board automatically gains massive prestige because they have been selected by two of the world’s most successful businessmen. 

In the future, it is certain that Berkshire’s board will change significantly. Voting control of the company will change as Warren Buffett’s super-voting Class A shares are converted to Class B shares and distributed to philanthropy in the decade following his death. In addition, without Mr. Buffett and Mr. Munger’s presence, the prestige that comes with board membership will inevitably be diminished. 

If we fast-forward twenty years to 2043, what will Berkshire Hathaway’s board look like and how will members be compensated? The culture and history of the company strongly suggests that Berkshire’s board will continue to be far better than the boards of average American companies. However, Berkshire will lack a shareholder with Mr. Buffett’s enormous economic stake and voting power.

How can Berkshire avoid the pitfalls that afflict typical corporate boards? Given Charlie Munger’s service on Costco’s board since 1997, it is worthwhile to examine how Costco approaches director compensation. Mr. Munger is not a current member of the board’s compensation committee but he most likely approves of the overall compensation strategy. With an ownership interest of over $100 million in Costco, Mr. Munger certainly has a strong alignment of incentives with Costco shareholders.2

Let’s take a look at Costco’s latest proxy statement to see how directors are compensated and whether the company’s approach could be a model for Berkshire’s director compensation in the future.

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Costco’s Director Compensation
  1. Directors who are employed by Berkshire receive no compensation for serving on the board. Non-management members receive $900 for each in-person meeting and $300 for each meeting over the telephone. Audit committee members receive an additional $1,000 per quarter. Directors receive reimbursement for out-of-pocket expenses to attend director and shareholder meetings. No directors and officer liability insurance is provided to directors. See the 2023 proxy for further details and my article analyzing the proxy. []
  2. Charlie Munger controlled 187,180 shares of Costco, including 19,565 on behalf of a charitable foundation that he funded and controls. as of November 11, 2022. With the stock trading at $557.53 as of October 6, 2023, this ownership interest is worth $104.4 million. []
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