Making Sense of One Dollar CEO Salaries

44 Pages Posted: 27 Mar 2011 Last revised: 10 Sep 2015

Sophia J. W. Hamm

Ohio State University (OSU) - Fisher College of Business

Michael J. Jung

New York University - Leonard N. Stern School of Business

Clare Wang

Northwestern University - Kellogg School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: May 8, 2014

Abstract

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

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

Sophia J. W. Hamm

Ohio State University (OSU) - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-2529 (Phone)

Michael J. Jung (Contact Author)

New York University - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States
212-998-0193 (Phone)

Clare Wang

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847 491 2670 (Phone)

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