Salary of 4 cents has status

Dollar-a-year man makes comeback in corporate America

May 03, 2006|By CHRIS GAITHER | CHRIS GAITHER,LOS ANGELES TIMES

In corporate America, few status symbols rival the one-figure salary.

Annual reports disclosing how much head honchos are paid inevitably ignite outrage about exorbitant executive salaries.But at Google Inc., the three billionaires who run the Internet search giant get a paycheck for about 4 cents every two weeks. Before taxes.

Two of the company's founders, Sergey Brin and Larry Page, along with Eric E. Schmidt, chairman and chief executive, are in an exclusive club of top executives who drew $1 annual salaries last year, with no bonuses and no stock-option grants.

Other members include Richard D. Kinder, co-founder of energy company Kinder Morgan Inc., Apple Computer Inc. chief executive Steven P. Jobs, DreamWorks Animation SKG Inc. CEO Jeffrey Katzenberg and his company's chairman, Roger A. 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.

"They're not working for free," said Thomas G. LaWer, a Silicon Valley executive compensation lawyer.

During 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 S. Crystal, an executive compensation specialist.

Brin and Page have cashed in $2.2 billion and $1.8 billion, respectively, in Google 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. Schmidt's shares are worth about $5 billion.

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 percent over the previous year. That's double the raise of the average employee.

New York Mayor Michael R. Bloomberg, a former media magnate, also works for a dollar a year 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 saved the city budget by $8 - a dollar for each check he didn't cash.

The gesture 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, as Lee Iacocca did 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 T. Chambers, CEO of Cisco Systems Inc., and Thomas M. Siebel, head of Siebel Systems Inc.

Lawrence J. Ellison gave up his salary for 2001 through 2003, when Oracle Corp.'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. Enrico, while he was CEO of PepsiCo, 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.

Jobs earns a dollar a week at Pixar Studios, the other company he runs - $52 for each of the last two years. As of Feb. 15, he owned 49.8 percent of the company, which Walt Disney Co. is buying for $7.4 billion. That means 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, and a corporate jet in 1999 that cost $90 million.

Some CEOs pull in high salaries and extraordinary pay packages, even though their companies are struggling. According to the Corporate Library, Home Depot Inc. CEO Robert L. Nardelli earned $50.7 million over the last two years, although his company's stock fell 19 percent over the last five years. Lucent Technologies Inc.'s shares have plunged 82 percent in that period, while CEO Patricia F. Russo pulled in $17.3 million.

Dollar-a-year salaries 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?

Said San Jose, Calif., executive compensation consultant Tim Sparks: "It's purely symbolic."

Symbolic or not, Kinder gets the cash. The company cuts him 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.

Chris Gaither writes for the Los Angeles Times.

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