“The benefits to the company are likely less financial and
more likely intangible,” says Wendy Moore, Partner at law
firm Perkins Coie, who counsels on executive compensation.
“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.
Clearly not all CEOs would benefit from
switching to a one-dollar salary, especially
those who are not already financially
independent, but leaders who want to
demonstrate their commitment to the
long-term future of their company
would do well to consider this unique
compensation approach.UPS AND DOWNS
Former Hewlett-Packard CEO Meg Whitman is a prime
example of when a business leader is well-suited to take
a one-dollar salary. When Whitman became CEO of HP in
2011, the company she joined was in dire straits. Hewlett-
Packard had removed Whitman’s predecessor, Léo
Apotheker, after 11 months in his role due to falling sales and
a misguided decision to purchase a software firm called
Autonomy, which resulted is an almost US$9 billion write-off.
Whitman’s goal at Hewlett-Packard was to turn the
technology giant’s fortunes around, with a token US$1
annual pay cheque and stock options that couldn’t be
cashed out until Hewlett-Packard’s stock price reached 120
per cent of the then-share price. This showed stakeholders
that Whitman would only receive a major payout if she
produced substantial value for the company.
After improving the share price through cost-cutting and
redundancies, Whitman received a performance-related
bonus under HP’s Pay for Results scheme and saw her base
salary grow from US$1 to US$1.5 million in 2013.
SYMBOLIC OR PRACTICAL?
The decision to adopt a one-dollar salary goes beyond just
financial considerations, with many CEOs opting for the tiny
wage as a gesture of good faith. Mark Zuckerberg has been
a member of the one-dollar salary club since 2013 and
explained why he joined in a 2015 Facebook Q&A, saying:
“I’ve made enough money. At this point, I’m just focused
on making sure I do the most possible good with what
I have. There are lots of things in the world that need to
get fixed and I’m just lucky to have the chance to work on
fixing some of them.”
While CEOs who take a one-dollar salary can expect
to receive a positive response from the general public and
media, it’s more than just a good public relations move.
IS THE ONE-DOLLAR SALARY
A GOOD FIT FOR CEOS OF
SMALLER CORPORATIONS?
The vast majority of companies that
have implemented a $1 salary are
major, public businesses. But does
it make practical business sense for
small corporations and medium-
sized enterprises to move away from
large salaries and offer alternative
forms of remuneration?
“It really depends on the growth
profile of the company and its long-
term strategy. Paying in stock can
be a useful way for a smaller, fast-
growing organisation to conserve
much-needed cash and only
paying out if the planned growth
materialises,” says Simon Patterson,
Managing Director at Pearl
Meyer, an international executive
compensation consulting firm.
“Again, if the CEO is also a founder,
then they may be able to afford to
forego a fixed salary, but this won’t
work for everyone who has bills to
pay,” says Patterson.TECH COMPANIES
ACCOUNT FOR AROUND
60% OF ALL BUSINESSES
WITH A CEO WHO
RECEIVES A $1 SALARY.theceomagazine.com | 25Salary sacrifice | INSPIRE