In corporate America, few status symbols rival the one-figure salary.
As companies file their annual reports disclosing how much they pay their head honchos -- and inevitably ignite outrage about exorbitant executive salaries -- consider Google Inc.
Every two weeks, the three billionaires who run the Internet search giant get a paycheck for about 4 cents. Before taxes.
Googlers Sergey Brin, Larry Page and Eric Schmidt are part of an exclusive club of top executives who drew $1 annual salaries last year. No bonuses. No stock-option grants. Other members include Richard Kinder, co-founder of energy company Kinder Morgan Inc., Apple Computer Inc. Chief Executive Steve Jobs, DreamWorks Animation SKG Inc. CEO Jeffrey Katzenberg and his company’s chairman, Roger Enrico.
Of course, these executives -- most of them company founders -- have something else in common: They’re already filthy rich, thanks to ownership stakes in the companies they helped build.
In World War II, when the dollar-a-year salary gained currency, it communicated the importance of personal sacrifice in wartime. Now, the dollar sends a different message: The buck stops here. Because many of today’s corporate leaders own so much of the companies they run, their personal fortunes are tied to corporate success. They succeed when the company does.
“It’s a gesture to the shareholders saying ‘I’ve got more money than I could spend in 52 lifetimes -- just pay me a dollar and I’m happy enough,’ ” said Graef Crystal, an executive compensation specialist.
Google founders Brin and Page have cashed in $2.2 billion and $1.8 billion, respectively, in company stock since taking the company public in 2004, and CEO Schmidt has pulled in $645 million, according to Thomson Financial. The founders each hold nearly $13 billion in stock, and Schmidt’s shares are worth about $5 billion.
Jobs’ current Apple shares are worth $670 million. Kinder is due to pull in $84 million this year in dividends from his Kinder Morgan stock.
A. Jerrold Perenchio, chairman and CEO of Univision Communications Inc., passed on the buck. He draws no salary at all, but his ownership stake in the Los Angeles-based Spanish-language media company is worth nearly $1.3 billion.
“They’re not working for free,” said Tom LaWer, a Silicon Valley executive compensation lawyer. “Saying it’s a dollar salary doesn’t really get to the fact that they’re all fabulously wealthy.”
In 2005, the median CEO salary of big public companies surveyed by Mercer Human Resource Consulting was $975,000. With an additional $1.4 million in bonuses, the median CEO compensation (not including grants of restricted stock or stock options) rose 7.1% over the previous year -- double the raise of the average employee.
New York Mayor Michael R. Bloomberg, a former media-magnate, also works for a dollar but doesn’t cash the paychecks. One hangs in his ceremonial office on the first floor of City Hall. He has joked that at the end of his eight years in office, he hopes to have the city budget off by $8 -- a dollar for each check he didn’t cash.
The practice can be worth a fortune in good publicity.
“Once one person did it, it just sounded good,” LaWer said.
In the corporate world, the single-digit salary has largely been adopted by CEOs trying to restore shareholder confidence in their struggling companies, such as Lee Iacocca at Chrysler in the late 1970s.
When Silicon Valley companies withered during the dot-com bust, the practice flourished as executives tried to send shareholders a we’re-in-it-together message. The gesture was often undercut by corporate boards granting those CEOs hefty awards of stock options that could be sold with only a mild stock-market recovery. Buck-a-year chiefs who reaped stock-option windfalls include John Chambers of Cisco Systems Inc. and Tom Siebel of Siebel Systems Inc.
Larry Ellison of Oracle Corp. gave up his salary for 2001 through 2003, when the company’s stock was struggling, but he cashed in $706 million in stock options in 2001 and $41 million in 2003.
Katzenberg and Enrico each get a $1 salary at DreamWorks. While he was CEO of PepsiCo., Enrico collected bonuses and stock options, but regularly donated all but a buck of his million-dollar salary to a college scholarship fund for Pepsi employees.
At the other company he runs, Pixar, Jobs earns a dollar a week: $52 for each of the last two years. As of Feb. 15, he owned 49.8% of the company, which Walt Disney Co. is buying for $7.4 billion, meaning Jobs’ stake will be $3.7 billion.
Jobs has taken a $1 salary at Apple since 1998, not long after he rejoined the company he co-founded, earning him a place in the Guinness Book of World Records for lowest paid chief executive. But Apple paid him in plenty of other ways, including multimillion-dollar stock grants and bonuses, as well as a corporate jet in 1999 that cost the company $90 million.
Still, compensation experts say, it’s certainly better than CEOs who pull in high salaries and extraordinary pay packages, even as their companies struggle. According to the Corporate Library, Home Depot Inc. CEO Robert Nardelli earned $50.7 million over the last two years, although his company’s stock fell 19% over the last five years. Lucent Technologies Inc. has seen its shares plunge 82% during that period, but CEO Patricia Russo pulled in $17.3 million during the last two years.
Few people know it, but in California a $1 salary is against the law. State labor laws require full-time employees to make a minimum wage of $6.75 an hour. Assuming a 40-hour workweek, a $1 annual salary pays only about five-hundredths of a cent an hour.
“To be in full compliance, these CEOs who are getting a dollar-a-year salary should be getting at least minimum wage for every hour they spend on the job,” said Dean Fryer, spokesman for the California Labor Commissioner.
In fact, Fryer added, CEOs are exempt from overtime, which means they should be paid at least twice the minimum wage, or about $28,000 a year.
But the laws were created to protect employees, and these CEOs clearly don’t need much financial help.
“We’re not going to spend our time pursuing something like this unless we have a complaint filed on behalf of an employee,” Fryer said.
Even so, some government officials charged with enforcing the law found ways around it -- including California Gov. Arnold Schwarzenegger. Proving, however, that the private sector pays better than government work, Schwarzenegger makes nothing at all. Neither does Massachusetts Gov. Mitt Romney. While mayor of Los Angeles, Richard Riordan also refused his salary.
A Schwarzenegger spokesman said the governor’s legal team studied the issue after his election and found no problems with forgoing the office’s $175,000 annual salary.
The dollar-a-year practice can cause headaches for corporate payroll departments.
How, for instance, do human resources departments pay a $1 salary? Do they issue a relevant W-2 tax form for $1? And what do the executives do with it?
Google spokesman Jon Murchinson was coy, saying only that all full-time employees are paid semimonthly, that most have their checks deposited directly into their bank accounts and that all U.S. employees receive a W-2 form.
A few employment specialists suspected some companies simply wouldn’t bother. Said San Jose executive compensation consultant Tim Sparks: “It’s purely symbolic.”
Symbolic or not, Kinder gets the cash. The company cuts Kinder a single check for 93 cents, after taxes, at the beginning of each year.
Kinder owns stock worth more than $2 billion, and his 24 million shares will generate $84 million in dividends this year.
But he cashes the 93-cent check.
“Rich works hard for that dollar,” Kinder Morgan spokesman Rick Rainey said. “We expect him to spend it.”