Charles A. Dice Center Working Paper No. 2011-7
47 Pages Posted: 18 Mar 2010 Last revised: 17 Jan 2014
Date Written: January 10, 2014
We study the motives and impact of $1 CEO salaries on firm performance and CEO compensation. We find that on average $1 CEO firms earn lower stock market returns relative to their peers following the adoptions of $1 salaries. The underperformance is especially pronounced for firms that adopt $1 CEO salaries for reasons other than restructuring, experiencing about 30% lower stock returns during the three-year post-adoption period. Meanwhile, CEOs in these firms are better off since they get more total compensation and larger equity grants in the second year following adoptions than the loss in pay in the first year.
Keywords: CEO compensation, CEO characteristics
JEL Classification: G30, G32, G34
Suggested Citation: Suggested Citation
Loureiro, Gilberto R. and Makhija, Anil K. and Zhang, Dan, The Ruse of a One-Dollar CEO Salary (January 10, 2014). Charles A. Dice Center Working Paper No. 2011-7; Fisher College of Business Working Paper No. 2011-03-007. Available at SSRN: https://ssrn.com/abstract=1571823 or http://dx.doi.org/10.2139/ssrn.1571823