Making Sense of One Dollar CEO Salaries

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

See all articles by Sophia Hamm

Sophia Hamm

Tulane University - A.B. Freeman School of Business

Michael J. Jung

University of Delaware - Accounting & MIS

Clare Wang

University of Colorado at Boulder - Leeds School 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

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Michael J. Jung (Contact Author)

University of Delaware - Accounting & MIS ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States

Clare Wang

University of Colorado at Boulder - Leeds School of Business ( email )

Boulder, CO 80309-0419
United States

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