$1 CEO Salaries – Why Do They Do That?

$1 CEO Salaries – Why Do They Do That?
Image via Flickr by rychlepozicky.com

As of 2013, Facebook’s Mark Zuckerberg will receive an annual salary of $1 per year. Though this figure might seem small for the world’s largest social network, Zuckerberg isn’t the first noteworthy CEO to accept a $1 salary. In fact, it seems that more and more senior management leaders are accepting shockingly low pay rates. Whether it’s part of a public relations effort or faith in the company, over 50 notable CEOs have accepted a $1 salary.

Companies other than Facebook that pay $1 a year to their CEOs include:

  • Sears
  • Whole Foods
  • Oracle
  • Chrysler
  • Marvell Technology Group
  • Yelp

Even though not all senior management leaders are on a $1 pay rate, many have accepted substantially lower salary. Why is this?

Lower Taxes

Taking advantage of legal tax loopholes is one of the major reasons that top management leaders are willing to accept a $1 salary. Keep in mind that payroll taxes hit harder than capital gains taxes. In other words, someone earning $600,000 a year would be in the 35% payroll tax bracket. However, monetizing stock options would incur a 15% tax rate instead.

Eliminate Taxes

If you think lower taxes are good, imagine having no taxes at all! CEOs and other management leaders who accept the $1 salary could also choose to forego other earning and bonuses. If they also refuse to cash out on any of their stock options, this means that their income is literally $1 per year. Since they’ve already earned enough money to live comfortably for a while, they could eliminate taxes while their investments continue to accrue value.

Public Relations

Since most senior management officials own stock in their company, settling for a $1 pay rate showcases their commitment and faith in the growth of the company. As the greater public continues to struggle economically, a $1 pay rate builds goodwill among consumers while signaling the strength and expected growth of the company. It’s an effective PR maneuver to gain headlines and build trust.