Mark Zuckerberg has officially joined one very elite club. Facebook's most recent proxy statement, which was filed Monday, shows that the salary for the company's founder and CEO was just $1 last year.
While that may not seem like a club anyone would want to join, there are few clearer signs in the corporate world that an executive has made it financially — even by CEO standards — than when they join this rarefied group. Typically made up of company founders who have giant equity stakes in their companies, the list of $1-a-year CEOs also includes Google's Larry Page and Whole Foods' John Mackey.
A July 2013 data screen by Equilar, the executive compensation research firm, found just eight companies with annual revenues of more than $10 million that paid their CEOs a $1 salary. That list has yet to include Zuckerberg and any others added this year, of course, and some CEOs might miss Equilar's screen but have similarly nominal salaries. The club also has some notable alums: Yahoo co-founder Jerry Yang took a $1 salary when he came back to lead Yahoo, and Apple founder Steve Jobs' former $1 salary made him a member, too.
"What we're talking about here are exceptional ones—" says Aaron Boyd, Equilar's director of governance research, who notes that the move is particularly common among tech entrepreneurs, "founders who are valued in the hundreds of millions and have seen a huge growth in their stock."
Or in many cases, even billions. Facebook's proxy detailed that beyond the $1 salary, Zuckerberg received no bonus, no new stock options and no other new equity awards. In the filing, the company explained it this way: "our compensation committee believed that his existing equity ownership position sufficiently aligns his interests with those of our stockholders."
That's for sure. While he received no new awards, the filing shows that Zuckerberg scored a $3.3 billion gain by exercising stock options in Facebook last year and still owns millions of particularly powerful class B shares. It also showed that the company spent roughly $650,000 for his private jet travel.
Founder-CEOs typically set up $1 salary arrangements "for altruistic reasons with a little PR thrown in," says Paul Hodgson, an expert on executive compensation with governance research firm BHJ Partners. He says such $1 salaries carry the intended symbolism for shareholders only if the other big amounts in the compensation table (such as bonuses and new stock awards) are zero, or if a CEO doesn't hold a lot of company stock already and "everything is zero except for the at-risk portion of pay," such as stock options or restricted shares.
Where it looks less altruistic, Hodgson says, "is if the CEO is a founder, has a huge equity stake and is still having stock piled onto them." He points to Oracle founder Larry Ellison, who has received a $1 salary for at least the last few years, but still receives massive stock option hauls. In 2013, for example, Ellison received a $1 salary and declined an almost $1.2 million bonus, but was awarded stock options valued at nearly $77 million. An Oracle spokeswoman declined to comment on that decision.
While most CEOs who are part of this club started their companies, there are a few non-founders in the mix who choose to take a $1 salary as a way to better align themselves with shareholders. Hodgson says this is typically done in a turnaround situation, or when a company falls on tough times. "The message is 'I'm not getting paid until the shareholders get paid,'" he says. Former Citigroup CEO Vikram Pandit offered to reduce his salary to $1 temporarily during the financial crisis. Meg Whitman, who was brought in to lead Hewlett-Packard after a lot of turnover at the top of that company, also has a salary of $1, though the value of her compensation package last year, which included equity awards, topped $17 million.
Still, for founders and non-founders alike, it's rare to be part of this group. "These are people who are outliers, and their companies are outliers, and their pay is certainly an outlier," Boyd says. "These are not your middle-class guys."