Making Sense of One Dollar CEO Salaries

51 Pages Posted: 15 Jan 2015 Last revised: 23 Jul 2017

See all articles by Sophia J.W. Hamm

Sophia J.W. Hamm

Ohio State University (OSU) - Fisher College of Business

Michael J. Jung

University of Michigan, Stephen M. Ross School of Business

Clare Wang

University of Iowa - Tippie College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 13, 2015

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 and Jung, Michael J. and Wang, Clare, Making Sense of One Dollar CEO Salaries (January 13, 2015). Contemporary Accounting Research, September 2015, Vol. 32, No. 3, pp. 941-972.. Available at SSRN: https://ssrn.com/abstract=2549340

Sophia 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)

University of Michigan, Stephen M. Ross School of Business ( email )

701 Tappan Street
Ann Arbor, MI 48109
United States

Clare Wang

University of Iowa - Tippie College of Business ( email )

108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
(319)335-1810 (Phone)

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