These comments come from Warren Buffett's letter to shareholders, page 15;

If you have been wondering why so many companies have been buying back stock, here is one explanation from Mr. Buffett.

"Too often, executive compensation in the US is ridiculously out of line with performance. That won't change. Moreover, because the deck is stacked against investors when it comes to the CEO's pay. The upshot is that a mediocre-or-worse CEO- aided by his handpicked VP of human relations and consultant from the ever-accommodating firm of Ratchet, Ratchet and Bingo- all too often receives gobs of money from an ill-designed compensation agreement."

Take, for instance, ten year, fixed-price options (and who wouldn't?). If Fred Futile, CEO of Stagnant, Inc., receives a bundle of these- let's say enough to give him an option on 1% of the company- his self-interest is clear: He should skip the dividends entirely and instead use all of the company's earnings to repurchase stock."