FORTUNE -- Last week, Warren Buffett declined to vote against a controversial stock option plan for Coca-Cola's (KO) top executives that he thought was excessive. That has unleashed a wave of criticism against the legendary investor and CEO of insurance conglomerate Berkshire Hathaway (BRKA), typically a media darling. New York Times columnist Joe Nocera called Buffett a coward. Shortly after the Coke vote, Buffett sat down with Fortune to defend himself.  Despite the criticism, Buffett says he believes he took a forceful stand against the Coke pay package. What's more, he says that he has little power to stop companies from handing out excessive pay. That's a big change from a few years ago, when Buffett wrote that large shareholders like himself were the only ones who could turn back runaway executive compensation within corporate America. Apparently, Buffett and others like him are outmatched as well.  Buffett also confirmed the widely held belief that, at least for now, his picked successor is male. Sorry, Tracy Britt Cool.  Fortune: Do you think executive compensation is out of whack with the rest of America?  Warren Buffett: Well, I don't think it is out of whack with the value an outstanding executive could bring. If you run a multibillion-dollar company the difference between a 10 and an eight is huge in terms of value. I don't think it is out of line in terms of entertainers or sports figures. Still, almost on a voluntary basis, I think it should be somewhat restrained in some cases.  MORE: How Warren Buffett helped save Harley-Davidson  In the past, you have said executive stock option plans are "a free lottery ticket" and "fair only by chance" and that they are compensation plans built for "managerial Rip Van Winkles who are looking to doze off."  All of that can be true.  In 2006, you said that the only way to change excessive executive compensation is if large shareholders like yourself take a stand -- demanding a fresh start. Why didn't you vote against the Coke [option] plan?  I think we did take a stand in abstaining. That's a very loud voice coming from Berkshire. It obviously means we don't approve of the plan.  Why not also abstain in the vote about the directors?  Because I actually think they have a good bunch of directors. What was done with their plan is so much the other guys doing it so we will do the same thing. The idea of fundamentally reexamining the whole thing doesn't occur to these companies, and it's very unlikely to, and their consultants are not likely to recommend it.  And what companies are doing with stock options is capitalizing executive compensation. It is shareholders years from now that are going to pay this expense.  I actually have written -- I may put it in the annual report next year -- a memo to the board of directors of Berkshire as to what I think would be a sensible option plan for the CEO of Berkshire who succeeds me. And he would be -- in this case it would be a he at the present time -- the only one who would receive options because he would be the only one who is responsible for the overall success of the operation.  One of the things Coke has said to defend its plan is that it's not just for its top executives but for its 6,500 employees. But you don't think that's a defense.  No, I don't think that's a defense.  And again, back to the Rip Van Winkle CEOs, according to the Coke plan, the company's return could go down 10% a year, and the executives would still qualify for billions?  It's a royalty on time.  Have you read the new book on inequality, Thomas Piketty's Capital in the Twenty-First Century?  I have read about six reviews on it. But not the book.  Are you planning to read it?  I don't know. I have read so many reviews I think I know what it says. I may or may not, but it is the kind of book that there is reasonable chance I will read.  The New York Times said recently, based on a study, that you have lost your alpha. Do you remember the last place you saw it, and if I find it, can I keep it?  Lost your alpha. Your ability to outperform the market.  Yeah. But I think some fellow wrote a response to that. It wasn't me. We'll find out.  David Witt, who had been described as a mild-mannered accountant in Middle America and a Berkshire shareholder, and would like a little bit of his money back. Why won't you give it to him?  I wrote a long essay on dividends and repurchases in the annual report. It was just a year ago. And I explained in great detail why I think he is better off if he doesn't get [a dividend]. We are having the vote now, and you will find it interesting how the shareholders feel about that.  Why do you love paying individual taxes but hate paying corporate taxes?  I will not pay a dime more of individual taxes than I owe, and I won't pay a dime more of corporate taxes than we owe. And that's very simple. In my own case, I offered one time to match a voluntary payment that any Senators pay, and I offered to triple any voluntary payment that Mitch McConnell made, but they never took me up on it.  MORE: When grads are jobless, schools come to the rescue  Actually, [Berkshire's] tax rate is pretty high if you look at it. But if it could be lower, I would have it lower. I will do anything that is basically covered by the law to reduce Berkshire's tax rate. For example, on wind energy, we get a tax credit if we build a lot of wind farms. That's the only reason to build them. They don't make sense without the tax credit.  In the shareholder letter this year, you talked about a growing problem with public pension plans. What do you think the solution is?  The solution is to either change the promises or tax more. But the trouble is for any given politician he's only going to be there for a year or two. His best solution is to do nothing because he will be gone. And it isn't the kind of problem that you wake up tomorrow and causes the lights to go out or the streets to not get shoveled. It is the easiest problem in the world to postpone.  In Omaha, I would not like to change the promises that have been made to the people who work publicly. So I think we should probably tax more. But that won't work in many municipalities or states. The problems are too big relative to the tax base. You can't tax enough in Detroit to pay the pensions that have been promised. They have gone too far.  What do you think we should do, or should we do something about the offshoring of U.S. jobs, and U.S. corporations not paying taxes on goods they are producing and selling to Americans?  It has just gotten way out of hand because tax rates are so low in certain countries. And there are some companies, particularly when you are dealing with intellectual property, where you can set up a rationale to say your earnings are taking place in Ireland or Bermuda or something like that, when they are really originating in large part here. Those companies pile up huge cash balances overseas, and then they say, Give us a tax free period and we will bring it back. But that would of course just induce them to do more of that over there once they find out they can get away with it. It's a crazy situation, but it has developed over the years. That part of the tax code has really got to be looked at hard at some point.  At last year's annual meeting, you said you were concerned about the Federal Reserve's exit from quantitative easing and their monetary stimulus. How do you think the Fed has done exiting it, and are you still concerned about what might happen?  Well, I said it's a really interesting movie because the stakes are high and we don't know the ending. But I would say that's still the situation. But so far we haven't seen any big problems associated with it.  So are you less concerned about the end of QE?  No. It's still an interesting movie. I don't know how it comes out. That's why I find it so interesting.
In a Fortune interview, Buffett defends high CEO pay, says his successor is a 'he' and says it's time to reexamine the corporate tax code.