Warren Buffett's CEO metric

Warren Buffett's CEO metric, also known as the Buffett CEO-Owner Return (BCOR) metric, is a way of
measuring the performance of a CEO by comparing the company's total shareholder return (TSR) to that of a
passive investment in the S&P 500 index over the same period. The metric was developed by Warren Buffett, the
chairman and CEO of Berkshire Hathaway, and is considered to be one of the most accurate measures of CEO
performance.

The BCOR metric is calculated using the following formula:

BCOR = ((TSR - S&P 500 return) / (company's capital employed)) * 100%

A BCOR of more than 100% indicates that the CEO has created more value for shareholders than a passive
investment in the S&P 500. A BCOR of less than 100% indicates that the CEO has created less value for
shareholders than a passive investment in the S&P 500.

The BCOR metric is a useful tool for measuring CEO performance because it takes into account the following
factors:

 The company's overall financial performance: The BCOR metric is based on the company's TSR, which is a
comprehensive measure of financial performance that takes into account both stock price appreciation and
dividends.

 The company's risk: The BCOR metric is adjusted for the risk of the company's industry and the overall market.
This is because a CEO of a company in a high-risk industry should not be penalized for the higher risk of its
industry.

 The company's capital employed: The BCOR metric is divided by the company's capital employed, which is a
measure of the amount of capital that the CEO has used to generate TSR. This is because a CEO who has
generated TSR with less capital should be considered to have performed better than a CEO who has generated
TSR with more capital.

The BCOR metric is not without its limitations. For example, it does not take into account the CEO's contributions
to the company's culture, its employee morale, or its long-term sustainability. However, it is still a valuable tool for
measuring CEO performance, especially when used in conjunction with other measures.

Here are some examples of CEOs who have high BCORs:

 Jeff Bezos, CEO of Amazon, has a BCOR of over 10,000%.

 Charlie Munger, vice chairman of Berkshire Hathaway, has a BCOR of over 2,000%.

 Jamie Dimon, CEO of JPMorgan Chase, has a BCOR of over 1,000%.

These CEOs have all created significant value for shareholders over their long careers. Their high BCORs are a
testament to their leadership and their ability to make sound business decisions.