Sunday, December 8, 2019 Why some of America’s top CEOs take a $1 salary A number of high-profile execs have reduced their paycheck to a single dollar. But the gesture isn’t as altruistic as it seems. BY ZACHARY CROCKETT In the last few decades, a curious trend has emerged: A small but growing number of prominent CEOs have reduced their cash salary to $1. That’s about 93 cents after taxes or 4 cents in bi-weekly paychecks. The ranks include some of Silicon Valley’s most visible figures, including Mark Zuckerberg(CEO, Facebook),Evan Spiegel(CEO, Snapchat),Jack Dorsey(CEO, Twitter), and Larry Page, the recently departed CEO of Alphabet, Inc. This reduction in pay is typically symbolic, used by CEOs to broadcast an alignment of interests with shareholders during a rough patch. It’s also hailed as an altruistic act — a sacrificial, praise-worthy gesture that other employees should emulate. Truth is, the $1 CEO salary often isn’t as selfless as it seems. To understand why let’s start by taking a trip back to a time when business leaders made the bulk of their income from base pay and a salary cut actually meant something. The origins of the $1 CEO salary In the early 1940s, America was in the throes of planning how to keep the economy mobilized during WWII. Everyone was expected to do his or her part — and that included the nation’s top business leaders. A number of big-time execs, like GE CEO Philip Reed and General Motors President William S. Knudsen, offered their services to the government for free. But since the law forbadeWashington from hiring unpaid volunteers, these men were offered $1. They soon became known as the “dollar-a-year men.” Decades later, the concept was adopted by a new crop of CEOs in the private sector — not as a symbol of wartime sacrifice, but as a gesture to shareholders. The pioneer of this trend was Lee Iacocca, then-CEO of the ailing Chrysler Corporation. oil crisis, they were struggling to find the capital to address changing consumer tastes, demand for smaller cars, and increased competition abroad. Iacocca decided to ask the government for help. To show that he was serious about turning things around, the CEO slashed his salary to $1. When Chrysler secured $1.5B in federal loans and eventually re-stabilized, Iacocca was celebrated for “leading by example” and for exhibiting a “spirit of sacrifice.” And from then on, the $1 salary became the default PR move among wealthy CEOs looking to broadcast their willingness to cut back in tough times. During the dot-com crash of the early 2000s, a number of high-profile tech execs joined the $1 club. Steve Jobs famously slashed his pay to $1 shortly after rejoining Apple and kept it there for more than a decade. James Barksdale (Netscape), John Chambers (Cisco), Tom Siebel (Siebel Systems), and Larry Ellison (Oracle) soon followed suit. By 2006, it was so trendy for tech CEOs to take a $1 salary that the Los Angeles Times deemed the move “a new status symbol.” Today, a selection of the country’s wealthiest CEOs carry on the tradition. bulk of i twas in the form of a cash salary. By contrast, salary only makes up a tiny fraction of total compensation for today’s CEOs; modern executives’ riches come in the form of non-cash rewards, like stocks and options. Jeff Bezos, for instance, paid himself a salary of $81,840 in 2018, but his Amazon holdings increased by $24B, making him the only man on Earth with a 12-digit net worth. Though the $1 salary is often hailed as some kind of benevolent act, these alternate forms of compensation often make it more personally beneficial than it’s made out to be. The $1 salary ruse For starters, research suggests that many CEOs who take a $1 salary are rewarded with stock, option, or bonus packages that match — or even outweigh — the cash they sacrifice on a pay stub. One 2011 study of 50 executives concluded that the average $1 CEO gives up $610k in salary butgains$2m in other “not-so-visible forms of equity-based compensation.” “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,” wrote the researchers. “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.” A similar study gauged the pay of $1 CEOs against non-$1 CEOs and found that, while $1 CEOs make about $1.6m less than their peers in total cash payments, they end up earning $3.5m more in alternate forms of compensation. (Note: We adjusted the figures in this 2011 paper for inflation.) average$1 tenure lasting around 3 years. For example, Meg Whitman took a $1 salary as the CEO of HP in 2011, but by 2013, her salary was back to $1.5m. And remember Lee Iacocca? By 1983, he was the highest-paid exec in America, with a package worth $20.5m ($53m adjusted for inflation). 1% per month lower than those run by market-rate CEOs. The salary cut has little bearing on improving leadership in any meaningful way. Of course, CEOs have varying motives for taking a $1 salary. But it seems likely that personal gain plays a role in some cases. “They get their pot of gold at the end of the rainbow, not at the beginning,” an industry analyst told theAtlanta Constitutionin 2007. “They are more than willing to trade off short-term income in order to receive a longer-term share of the pie. That ends up being a hell of a lot more than the salary would have been.” Or, as Slate’s Daniel Gross put it in 2003, “It’s like a fat person who devours two pizzas a day forgoing the mushroom topping to cut calories.” $1 or 1%? Another rationale for taking a $1 salary,posits one researcher, is that it serves as an excellent publicity stunt and deflection tactic. In recent times, taking a smaller salary has become a way to “camouflage” any association with wealth inequality. Since 1978, CEO pay has grown by 940%. In that same time period, the rest of us have seen a gain of only 11.9%. The average CEO in America now makes278xthe average worker. law passed by Congress, performance-based pay can be deducted from the firm’s taxable income. When CEOs take a tiny salary and transfer the bulk of their compensation to options, taxpayers are effectively subsidizing their gains. So the next time your grandpa gives his stump speech about how “$1 won’t get you anything these days,” tell him he should’ve been a CEO.
TLDR: For starters, research suggests that many CEOs who take a $1 salary are rewarded with stock, option, or bonus packages that match — or even outweigh — the cash they sacrifice on a pay stub.
It is no difference than gov't workers receiving substantial non-taxable benefits while whining how low their pay is.
@ElCubano THIS article may have been the same as the original discussion we were having, IDK. The 12% appears to be some sort of annualized percentage increase, where 1000% CEO increase may be some sort of aggregate. IDK, TLDR. No matter, as I stated previously, in 1978, the highest 5th of "workers" had income of 26K and higher. Breaking down further, in 1978, MEDIAN income was less than 18K, 17,730 according to the US Census. Page 2 in... https://www2.census.gov/prod2/popscan/p60-121.pdf . Also as stated previously, no matter which figure you choose, the nominal current national wage for a "worker" is AT LEAST double that of 1978. The 12% increase you want to latch on to is misleading. And I will also state again, I do agree CEO pay has grown faster (and higher) than that of "workers". And here's my stance... If it's a business with shareholders, shareholders can vote on pay. Otherwise, the business can do what it wants with revenues, so long as the company operates legally, in compliance, ethically, etc. within the context of it's specific business. Also, regarding this thread, the Economic Policy Institute is linked in the OP article. Who are they?... "About EPI. The Economic Policy Institute (EPI) is a nonprofit, nonpartisan think tank created in 1986 to include the needs of low- and middle-income workers in economic policy discussions. EPI believes every working person deserves a good job with fair pay, affordable health care, and retirement security.To achieve this goal, EPI conducts research and analysis on the economic status of working America. EPI proposes public policies that protect and improve the economic conditions of low- and middle-income workers and assesses policies with respect to how they affect those workers." So while EPI states to be bi-partisan (apolitical?), their beliefs and projects are clearly biased. I also question "selected years" in the data tables in the liked EPI source. Also TL;DR. BTW... here's an interesting site for wage and price data... select-able by decade. https://libraryguides.missouri.edu/pricesandwages/2010-present
I don't think this is that complicated. Majority of the gains of a CEO of a major corporation come from capital gains. If you get a 20 million dollar windfall every year, have a golden parachute, and stock that never stops going up why take a salary? The fools will think you're honorable only being paid $1, but the reality is you're already making yacht money by just existing. According to CPI calculations the national minimum wage in 1978 was $2.65. That's $10.52 in today's dollars. If you treat this as a lower bound on wages it's much more bleak. The national federal minimum wage is $7.25, LOWER than it was in 1978. In other words, the bottom rung of workers today are losing money every year they work. The median income for 1978 is in the first sentence of the first paragraph of the write up in your link. The median household income in 1978 was $15,060 ($62,010.09 today). Today, it is $61,937. That is a net loss, compared to the average family in 1978. This would come up to (in today's dollars) around $16/hr. per earner, or around $31-ish/hr in for a single earner in 1978. The number has gone down, and down even further if you consider the distribution of income across single earners. I'm not sure where you are trying to make a point. Wages have stagnated and we make less than we did before. This much is obvious.
its pretty obvious,,the CEO pay no federal taxes, pay no payroll taxes duh! they don't pay gov't pensions, they are not really 'employees' but contractors. the gov't is smart should ban that crap okay. that is why nobdy pays 50% income tax bracket. vast majority of payroll taxes is paid by working average workers.. ceo are in 50% income tax bracket if they want salary. or 'wages' stock options especially if they are transferred to some offshore account, these ceo paying nothing in taxes.
%% That +most likely better tax planning; capital gains..........................................................................................................Besides; many of those options/bonuses are tied to stock price, as they should be.,