The following post comes to us from Sophia Hamm of the Accounting Department at Ohio State University, Michael Jung of the Accounting Department at New York University, and Clare Wang of the Accounting Department at the University of Pennsylvania.
In our paper, One Dollar CEO Salaries: An Empirical Examination of the Determinants and Consequences, which was recently made publicly available on SSRN, we examine a sample of 278 CEO-firm-years (87 firms and 88 CEOs) between 1995 and 2009 where the CEO’s salary is $1. First, we analyze the determinants of a firm’s (or CEO’s) decision to reduce annual salary to $1. We explore characteristics related to the firm, stock, market following, CEO and board of directors, and find that larger firms, higher growth firms, more heavily-traded firms, firms with greater leverage, and firms with lower lagged return-on-assets are more likely to have $1 CEO salaries. We also find positive associations with retail investor ownership in the firm, CEO ownership in the firm, and when a CEO is also the chairperson of the board. Overall, these findings suggest that relatively more powerful CEOs at visible firms with high retail investor ownership are more likely to set a $1 salary, particularly following poor firm performance.