51 Pages Posted: 27 Mar 2011 Last revised: 23 Jul 2017
Date Written: May 8, 2014
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.
Keywords: One dollar salary, Executive compensation, CEO compensation, CEO salary
JEL Classification: M41, J33, G30, G32, G34
Suggested Citation: Suggested Citation
Hamm, Sophia J. W. and Jung, Michael J. and Wang, Clare, Making Sense of One Dollar CEO Salaries (May 8, 2014). Contemporary Accounting Research, September 2015, Vol. 32, No. 3, pp. 941-972.. Available at SSRN: https://ssrn.com/abstract=1796403 or http://dx.doi.org/10.2139/ssrn.1796403
By Kevin Murphy