$1 salary club: Why do many CEOs take a $1 salary?

While many CEOs are criticized for taking excessive pays, others are completely different. Some tax-smart billionaires themselves take a $1 salary. Here’s everything about the $1 salary club.

Why is the $1 salary club a thing?

The $1 salary is an alternative compensation which is much more beneficial than the regular salary. The CEOs take a $1 salary because they can afford to. They’re extremely wealthy and most of them are on the list of the richest people. This way, they can retain a higher equity stake in their firm compared to what they would if they took a salary.

History of the $1 salary

This CEO Lifestyle has origins leading to World War II, a time when keeping the American economy in motion was a top priority. Philip Reed from General Electric and William S Knudsen of General Motors offered their services to the government at no cost. However, volunteering was not allowed. Hence, they settled for $1 instead and were called the dollar-a-year men.

CEOs who are a part of the $1 salary club

Mark Zuckerberg earned a salary of $770,000 excluding bonuses. However, he requested an annual wage of $1 in 2013 making him the lowest-paid Facebook employee. He’s not the only one doing this. Others include Larry Page and Sergey Brin from Google, Oracle’s Larry Ellison, and even Meg Whitman from HP. Even Steve Jobs slashed his pay to $1 a year for over a decade. Other bigshots taking a $1 salary include:

• Elon Musk, CEO and CO-founder of Tesla
• Richard Hayne, the CEO of Urban Outfitters
• Richard ‘Gas Man’ Kinder
• Jack Dorsey, CEO of Twitter
• David Filo, the founder of CEO of Yahoo!
• Robert Duggan, the CEO of Pharmacyclics
• Evan Spiegel, CEO, and CO-founder of Snap Inc.

Benefits of taking just a dollar as salary

Despite its humble origins, the meager salary is no longer selfless. According to a study of 50 CEOs, when an average $1 CEO gives up about $610 in salary, they gain over $2 million in other means. However, the ‘other’ means are equity-based compensations. “We find evidence consistent with the view that $1 CEO salaries are a ruse hiding the rent-seeking pursuits of CEOs adopting these pay schemes,” reported the study. It also highlighted that “rather than being the sacrificial acts they are projected to be, our findings suggest that adoptions of $1 CEO salaries are opportunistic behavior of the wealthier, more overconfident, influential CEOs.”

For example, Steve Jobs took a salary of $1 every year from 1997 to 2011. However, during this time his stocks increased from $17.5 million to $2.2 Billion. “For most public-reporting companies who have gone down this route, the CEO’s base salary is a rounding error on the company’s balance sheet. Reducing pay to a dollar is symbolic, not a cost-saving mechanism, as it is for bootstrapped start-ups,” said Wendy Moore, a law firm partner who advises on the executive competition.

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