John Malone’s Compensation Philosophy | The Acquirer's Multiple®

In their recent episode of the VALUE: After Hours Podcast, Jake Taylor, Mike Mitchell, and Tobias Carlisle discussed John Malone’s Compensation Philosophy. Here’s an excerpt from the episode:

Mike: I have this Malone philosophy of compensation. It’s probably more relevant to me than the Berkshire theory of compensation.

Tobias: What’s the Malone theory?

Mike: So, John’s idea is that you set these really high standards for stock prices and for results, but when they hit them, if they hit them, you pay the shit out of them. You just don’t cash on him. So, probably recent example, Charter, Tom Rutledge, his options package, I remember the stock was like $200– I think I’m going to be roughly right. I may not be exactly right on this, but John’s comp package and this was through Greg Maffei on comp committee, for Tom Rutledge was like a five different level strike options plan over 10 years. If the stock got above $580, $590, something like that, the guy would stand to make like half a billion dollars. It was going to be insane. But Greg’s point to him was, “Look, if you can take a stock up 2x, 3x, I deserve to pay you,” and he is– [crosstalk]

Jake: Pay the man his money.

Mike: Everybody got rich. Yeah, everybody got rich. Tom, more so. So, John is okay with his guys doing better than everybody else. I would also say we don’t know what a lot of the executives at Berkshire Hathaway make. It’s just not disclosed.

Jake: A lot though, some of them.

Mike: I bet you some of those guys are making nine figures. That wouldn’t surprise me. I bet you if Warren were here, he’d say that’s true, and they’re totally worth it. I should pay him more. That’s my view too, is that you set these targets. For each of the businesses, they have a plan. Something they want to accomplish, it’s a multiyear plan. My view is, if they can do it, you all make a lot of money. So, I don’t mind paying them really well if they do it. If they don’t do it, then that’s a different story. But they do do it, I’m happy to pay them a lot of money. In my mind, that’s a good outcome for everybody.

Tobias: Let’s segue a little bit. Mike, lumber year on year, is that up, forgetting that little squirt in between.

Mike: I did not use that word. I want to be very clear. I did not use that word. I didn’t use it in the pregame talk we had. I didn’t use it– I’m happy to go into it, but I did not bring it up. I just want to make that clear.

Tobias: No, I’m bringing it up. Because I think it’s more of a conversation about inflation. What’s everybody’s feeling on inflation to you? Are we seeing it– as is it transitory? I’m interested because the more articles that I’ve seen, John Authers at Bloomberg has been on a pretty consistently. I think everybody who’s in a position that doesn’t want to see inflation doesn’t see it. Everybody who wants to see it sees it. So, I’m sort of a little bit confused and objectively trying to figure it out. Just interested to know what everybody else thinks.

Jake: Can I climb on my soapbox a little bit for this one?

Tobias: Please do.

You can find out more about the VALUE: After Hours Podcast here – VALUE: After Hours Podcast. You can also listen to the podcast on your favorite podcast platforms here:

Apple Podcasts