Many are the tales of chief executive officers who don’t earn a salary greater than one dollar each year, but there aren’t many of those legendary CEOs, and there’s a wide variation between how much money they actually receive.
Back in 1978, Chrysler’s then-CEO Lee Iacocca formed the concept of having the top C-Suite guy’s pay linked directly to the success of the company, and thus gave birth to the $1-salary chief executive officers. Although the concept has been around for more than 30 years now, the breed remains rare. Some iconic names have been among the group, including former Apple (NASDAQ:AAPL) CEO Steve Jobs and former Yahoo! (NASDAQ:YHOO) CEO Jerry Yang, though their replacements did not take such little pay.
The number of CEOs currently taking salaries as low as $1 a year is estimated at less than 10. For CEOs on the S&P 500, the average salary was $1.o9 million in 2012, before bonuses, options, retirement benefits, and perks were included. It’s no surprise that executives at big companies make a lot of money, but it may be more surprising that a lot of the CEOs claiming to make $1 a year are making quite a different amount…
Urban Outfitters (NASDAQ:URBN) CEO Richard Hayne had been away from the company for 5 years before he returned in 2012 with the aim of turning it around from a position of falling profits because of excessive discounting. As part of the gig, he accepted a salary of $1 a year. Of course, as the company’s biggest shareholder, with a 20 percent stake, he has benefited greatly from the 30-percent gain the company’s stock has made since his return.
Similarly, Hewlett-Packard’s (NYSE:HPQ) Meg Whitman joined the company in 2011 to assist in a turnaround story and accepted a $1 salary. But the company hasn’t turned around — instead its shares have fallen 10 percent — and Whitman hasn’t been paid just $1. For the company’s fiscal 2012, Whitman received a total compensation of $15.4 million, which included stock, options, non-equity incentives, and other compensation. This highlights the trend for executives to accept a $1 salary, but receive substantial compensation otherwise.
Capital One (NYSE:COF) CEO Richard Fairbank, Duke Energy Corp. (NYSE:DUK) CEO James Rogers, and Oracle (NASDAQ:ORCL) CEO Larry Ellison all receive salaries of no more than $1, but they receive far more behind the scenes. Fairbank took no salary, but earned compensation of $22.6 million, with $20 million of that in stock awards and options. Rogers followed the lead of Paul Anderson — his predecessor — with no salary, but earned $8.7 million in compensation, and had $365,000 allocated for personal use of the corporate plane. Ellison made $1, but that quickly jumped to $96.2 million when options awards and extras were included…
Citigroup’s (NYSE:C) former CEO, Vikram Pandit, took a salary of $1 in 2010 after the company experienced major losses in the previous 2 years. But he was removed from the board for mismanagement of operations and on charges of damaging the company’s credibility. On top of that, he didn’t receive a compensation package in 2011 and had to forfeit millions in retention awards in 2012.
Despite some CEOs taking $1 salaries just for appearance’s sake, others are the real deal.
Kosta Kartsotis is an 11-percent shareholder and CEO at the watchmaker Fossil (NASDAQ:FOSL). He has held his position with a $1 salary since at least 2008, and the company issues no dividends. All of the value he gets is from his shares. Since taking charge of the company, he has driven sales gains consistently from 1991 until now, except for 2009 because of the economic crisis. Between 2002 and 2012, sales quadrupled from $663.3 million to $2.86 billion, benefiting Kartsotis and investors alike, as the $1-salary system was meant to operate.
Kartsotis is not alone. Kinder Morgan (NYSE:KMP) CEO Richard Kinder, who was the chief operating officer of Enron, only earns a dollar from the company each year. On top of that, he reimbursed it for parking and healthcare expenses, and took taxis instead of limousines. Under his leadership, the company decided not to pay for first-class airfare or cars and doesn’t have a corporate jet…
Google’s (NASDAQ:GOOG) co-founder Larry Page is also among these CEOs, earning just $1 in 2011 and 2012. However, it’s not exactly clear where he falls in the spectrum, as he could be receiving substantial compensation behind the scenes like many other CEOs.
While there are clear benefits to companies having CEOs whose income is deeply linked to a successful performance, Alan Johnson — founder of the compensation consultancy Johnson Associates Inc. — said that paying CEOs so little makes it so that there’s little reason to discuss their performance. Similarly, paying CEOs too much can be bad for business.
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