The Ruse of a One-Dollar CEO Salary
Charles A. Dice Center Working Paper No. 2011-7
52 Pages Posted: 18 Mar 2010 Last revised: 12 Aug 2017
Date Written: January 10, 2014
We study the motives and impact of $1 CEO salaries on firm performance and CEO compensation. We find that on average $1 CEO firms earn lower stock market returns relative to their peers after the adoption of $1 salaries. The underperformance is especially pronounced for firms that adopt $1 CEO salaries for reasons other than restructuring and firms with entrenched or overconfident CEOs. Meanwhile, CEOs in these firms are not hurt since they get higher salary and bonus and gain more from stock holdings after the adoption of $1 salary. On the other hand, we find that CEOs of restructuring firms are granted fewer restricted stocks and options, earning overall significantly lower total compensation than their peers.
Keywords: CEO compensation, CEO characteristics, firm performance, restructuring, entrenched CEOs
JEL Classification: G30, G32, G34
Suggested Citation: Suggested Citation