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Making Sense of One Dollar CEO Salaries

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  • Sophia J. W. Hamm
  • Michael J. Jung
  • Clare Wang

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: (i) it is a gesture of sacrifice by CEOs of firms in crisis, and (ii) 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.

Suggested Citation

  • Sophia J. W. Hamm & Michael J. Jung & Clare Wang, 2015. "Making Sense of One Dollar CEO Salaries," Contemporary Accounting Research, John Wiley & Sons, vol. 32(3), pages 941-972, September.
    • Handle: RePEc:wly:coacre:v:32:y:2015:i:3:p:941-972
    DOI: 10.1111/1911-3846.12136
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    Cited by:

    1. Bedford, Anna & Bugeja, Martin & Ghannam, Samir & Jeganathan, Davina & Ma, Nelson, 2023. "Were CEO pay cuts during the COVID-19 pandemic merely symbolic? Shareholders' reaction and outrage," Pacific-Basin Finance Journal, Elsevier, vol. 79(C).
    2. Brown, A. & Fishenden, Jerry & Thompson, M. & Venters, Will, 2017. "Appraising the impact and role of platform models and Government as a Platform (GaaP) in UK Government public service reform: towards a Platform Assessment Framework (PAF)," LSE Research Online Documents on Economics 73864, London School of Economics and Political Science, LSE Library.
    3. Loureiro, Gilberto & Makhija, Anil K. & Zhang, Dan, 2020. "One dollar CEOs," Journal of Business Research, Elsevier, vol. 109(C), pages 425-439.

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