Making Sense of One Dollar CEO Salaries
Sophia J. W. Hamm
Ohio State University (OSU) - Fisher College of Business
Michael J. Jung
New York University - Leonard N. Stern School of Business
Northwestern University - Kellogg School of Management
May 8, 2014
Contemporary Accounting Research, September 2015, Vol. 32, No. 3, pp. 941-972.
We examine the determinants and outcomes of Chief Executive Officers (CEOs) accepting a $1 salary, a compensation practice that occurs relatively frequently in high-profile firms and is debated by regulators, investors, and the media. Using a hand-collected sample of 93 CEOs from 91 firms between 1993 and 2011, we examine the triggers preceding the $1 salary decision, the factors associated with the decision, subsequent stock returns, and the outcomes for the CEOs. Our evidence is consistent with two explanations for the phenomenon: 1) it is a gesture of sacrifice by CEOs of firms in crisis, and 2) it is a signal of better future performance by CEOs of growing firms. Our analyses highlight the two different circumstances and shed light on an interesting debate that has thus far been supported only by anecdotal evidence.
Number of Pages in PDF File: 44
Keywords: One dollar salary, Executive compensation, CEO compensation, CEO salary
JEL Classification: M41, J33, G30, G32, G34
Date posted: March 27, 2011 ; Last revised: September 10, 2015
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