مدیر عاملان یک دلاری
Abstract
1- Introduction
2- Theories and hypotheses
3- Sample and methods
4- Results
5- Discussion and conclusions
References
Abstract
We study the impact of $1 CEO salaries on firm performance and CEO total compensation. We find that, on average, $1 CEO firms earn higher total compensation and lower stock market returns relative to their peers after the adoption of $1 salaries. The effect on total compensation is mitigated if the $1 CEO firm is undergoing restructuring or the CEO is entrenched and aggravated if the CEO is overconfident. The stock market underperformance especially affects firms not under a restructuring process and firms with entrenched or overconfident CEOs.
Introduction
Though scholars debate whether U.S. CEOs are drawing excessive compensation (Aguinis, Martin, Gomez-Mejia, O’Boyle, & Joo, 2018; Frydman & Jenter, 2010; Sauerwald, Lin, & Peng, 2016; Wade, O’Reilly, & Pollock, 2006), some CEOs have settled for an annual salary of only $1. During the last financial crisis (2007–2009), the CEOs of all three major U.S. automakers pledged to work for an annual salary of only $1. This presumably sacrificial step is not unique to economic crises. Scores of CEOs-including those with thriving firms such as Apple-have also adopted this compensation arrangement since the early 1990s. Many of these firms are household names from a very wide variety of industries.1 Although the $1 CEO salary is not a common arrangement, or perhaps because of that, announcements of $1 CEO salaries receive great public attention.2 Besides all the publicity surrounding the adoption of such compensation schemes, little is known about their impact on corporate outcomes. Researchers have always considered the fixed salary as a main pillar of a CEO compensation package (Murphy, 1999, chap. 38) and one of the major components of reservation utility in compensation contract models (see, for example, Garen, 1994; Dittmann & Maug, 2007). However, to the best of our knowledge, no study in the managerial compensation literature directly examines how salary cuts would affect total compensation design (including equity pay) and firm performance.