Wednesday, April 2, 2008

I'm an Executive With An Annual Salary of $1. Who am I?

If you're Steve Jobs with Apple or one of the top 3 Executives at Google then this describes you.

I just ran across this great article on Portfolio and honestly thought that it was part of an April Fools' Day joke...but then I realized it wasn't April 1st.

The title of the article is The 1$ Executive Club and today was the first time I had ever heard of this.

Check out this quote from the article...

What is the hottest status symbol in executive compensation?

It's not the private jet or huge buckets of stock options and restricted stock, or lots of little things like season baseball tickets or free dry cleaning. (Although those are always welcome, thank you very much.)

No, it's the $1 salary.

The three at the top of Google, Larry Page, Sergey Brin, and C.E.O. Eric Schmidt have affirmed their cachet in corporate cool by taking salaries of only $1, according to the
proxy statement the company filed on Tuesday evening.

So, what do you think? What's also interesting is that every year since this started in 2004 all 3 of the top Google Executives have been offered more market competitive salaries but have turned them down. Would you do this if you were in their shoes?

Don't feel too sorry for these Executives because I'm sure that their "other compensation" completely makes up for any amount of perceived loss of income. Remember that there is "other compensation" called stock options.

I also learned that Steve Jobs (Apple) is the most famous $1 annual salary recipient and he's been doing this since 1997. Bill Ford (Ford) has been doing this since 2005 and Richard Fairbank (Capital One) decided to try it for 2007.

Here's another quote from the article that sheds some light on some other advantages to Executives as well...

Taking no or little salary is often done for symbolic reasons: an executive trying to bolster employee morale at a company in need of an immediate turnaround. But there is a practical motive as well. Salary is taxed at rates as high as 35 percent, while capital gains from stock sales are taxed up to 15 percent. Cutting down the salary portion of an executive's compensation could help reduce the overall tax bill.

In reference to the first part of the above quote I couldn't agree more. If I was working for a large corporation that was going through some difficult financial times and our CEO, CFO, and COO decided to forgo an annual salary then I'd probably be impressed...but once I saw the obvious tax advantages I wouldn't be as impressed...

So, what's your take on this?


Jacob Johansen said...

I admire a $1 earner. More leaders should have compensation models tightly focused on pay-for-performance only; might teach a few some real leadership skills.

Michael Lee Stallard said...

I like it. Employees will feel like executives are on the same team as them. Large salaries and bonuses for executives make employees feel like they are on one team and executives are on another. The "us and them" mentality that develops is damaging to esprit de corps and employee engagement.

Joan Woodbrey said...

My new goal is to one day have a $1 Salary! Good for them!

Honestly, I know it gives them a tax break, but I think it also sends a message that they care about the company. Or, at least have enough faith in the future of the company that they don't need an extra salary, just in case. It should send a great message to the employees about the company they work for.