The Other Side of the $1 Salary
A handful of CEOs earn $1 in salary but make millions elsewhere.
Dec. 3, 2008— -- The chief executives of the Big Three automakers might give up most of their salary if they get assistance from the federal government.
Ford CEO Alan Mulally, General Motors CEO Rick Wagoner and Chrysler CEO Robert Nardelli all pledged to earn $1 a year in salary as part of their respective companies' plans to remain profitable. That is, if the government helps them out and if they take that help.
This is in stark contrast to two weeks ago when Mulally and Wagoner rejected a suggestion from Congress that they slash their salaries to $1 a year.
Rep. Peter Roskam, of Illinois, asked the CEOs if they would cut their salaries in exchange for federal aid.
"I don't have a position on that today," Wagoner said.
"I understand the intent, but I think where we are is okay," Mulally said. Pressed further, he added: "I think I'm O.K. where I am."
Yesterday was a different story.
"The plan calls for shared sacrifice, including further reduction in the number of executives and total compensation paid to senior leadership," GM said in a news release. "For example, the chairman and CEO will reduce his salary to $1 per year. The plan also requires further changes in existing labor agreements, including job security provisions, paid time-off and post-retirement health-care obligations. The common stock dividend will remain suspended during the life of the loans."
What was unclear Tuesday was whether that $1 salary is for 2009 and whether the executives would still get stock options, retirement benefits and other perks.
These three CEOs aren't the first corporate bigwigs to forgo their salaries and they probably won't be the last.
The $1 salaries are meant to be a symbol to shareholders, employees and taxpayers that the bosses are doing everything possible to fix their companies' problems.
In the last year, the chief executives of 32 companies in the Russell 3000 took $1 or no base salary, according to executive compensation firm Equilar.
But this handful of executives still earned millions of dollars through stocks and other forms of compensation, according to data provided by the Corporate Library, a research firm that tracks executive compensation based on company filings with the Securities and Exchange Commission.
This $1 salary is nothing new for the automakers. Back when Chrysler was foundering in the late 1970s, Lee Iaccoca, the company's then CEO, accepted a $1 salary as the automaker pushed Congress for a bailout package, which it ultimately received.
When Mulally joined Ford in September 2006, he earned $1 as CEO. But he didn't go home empty handed that year. Mulally took in $7.9 million that year, according to the Corporate Library.
And Chrysler's Nardelli already gets a $1 salary and does not get any health care, insurance or other similar benefits from the company, according to Chrysler.
Then there is Apple CEO Steve Jobs. Since he rejoined the company in 1997, Jobs has taken a $1 salary.
But don't feel so bad for the man behind the iPod, iPhone, Mac and a host of other gadgets. Jobs has earned millions of dollars in stock options and his contract includes all sorts of other perks, including a company jet.
For instance, in August 2007, Jobs exercised a stock option on 120,000 shares that were awarded to him in 1997 and were about to expire. His gain: $14.6 million.
And there are plenty more shares of Apple stock at his disposal.
In the last decade he has accumulated nearly 5.6 million shares of company stock. At today's share price, that's nearly $500 million worth of stock.
Jobs was also given a Gulfstream V jet by the company in 2000. The cost: $90 million. And when Jobs uses the jet for business, Apple pays him for use of the plane. In 2007, those payments came to $776,000.
In March, Apple shareholders voted to gain a bit more control over the pay of Jobs and other executives. Shareholders approved a "Say on Pay" proposal submitted by the AFL-CIO Reserve Fund that asks the board to allow shareholders to vote on executive pay.
After the vote, Jobs said jokingly: "I hope Say on Pay will help me with my $1 a year salary," according to the San Francisco Chronicle.
Google CEO Eric Schmidt along with founders Larry Page and Sergey Brin -- now respectively president of products and president of technology -- each take home $1 a year in salary.
But, like Jobs, they each get large paydays through stocks and other bonuses. For 2007, Schmidt took home $480,561, according to the Corporate Library. The vast majority of that money from Google went for Schmidt's personal security team.
But Schmidt now has about 9.5 million shares of Google stock, worth $2.6 billion these days. Page and Brin also have a few billion dollars worth of stock.
Yahoo CEO Jerry Yang, who plans to step down shortly, rounds out the Silicon Valley executive $1 club.
But unlike his counterparts, Yang didn't get any other bonuses or stock options in 2007, according to the Corporate Library. As co-founder of Yahoo, he's already a billionaire; but because he is a major shareholder in the company, his wealth is directly tied to its health.
DreamWorks Animation SKG Inc. CEO Jeffrey Katzenberg also received a $1 salary but waived $11 million in stock options and awards. In 2006 he also took a $1 salary but had $5.2 million worth of stock and options from recent years vest. As a DreamWorks founder, he owns millions of shares in the company.
Kinder Morgan Energy Partners CEO Richard Kinder is also part of the $1 club. He did have a bit more than $1 million in stock options vest last year, according to the Corporate Library, but otherwise had no compensation.
Kinder has fared pretty well, considering that he used to be an Enron executive. But in 1996, Enron chief Kenneth Lay kicked his former college classmate out of the company. It was good luck, considering Enron's collapse. As a side note, in 1997 Kinder married Nancy McNeil, Lay's personal assistant.
Sales at clothing chain Gap have been slumping and CEO Glenn Murphy has also entered the no-pay club as he tries to fix his company. But, according to the Corporate Library, in 2007 he still was paid $268,102 in other compensation by the company.