The Elite Circle of $1 CEOs

Apple's Steve Jobs and Google's Eric Schmidt are just two of the CEOs who work for a buck. Why do top executives give up their salaries?

by Moira Herbst

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Richard Kinder, chief executive of Houston energy transportation and storage company Kinder Morgan, is not a poor man. But since he founded the company with Bill Morgan in 1997, he has drawn a salary of $1 and left his cabinet clear of any bonuses, stock awards, or option grants. He doesn't use a corporate jet or chauffeured cars. He even cuts a personal check for his contribution to the health insurance plan.

To be sure, he lives more than comfortably off the dividends from his approximately 24 million shares in Kinder Morgan (KMI); annual payouts from his shares top $60 million. The value of the shares has also risen steadily in the last decade, closing on May 9 at $106.95. "I'm not saying I'll need to get on the welfare line," says Kinder. "But all my pay comes from the performance of the company. I'm opposed to guaranteed salary, stock, options, and the rest of it. The philosophy is that senior management does well when the company does well."

An Exclusive Club

In an era of skyrocketing CEO pay and growing shareholder angst about it, a handful of chief executives are opting to draw a $1 paycheck or none at all. Eight CEOs in the Standard & Poor's 500-stock index were paid $1 or less in 2006, along with eight smaller companies, according to executive compensation research firm Equilar. Among the most well-known are Steve Jobs of Apple and Eric Schmidt of Google, who will both face shareholders at their respective annual meetings on May 10. (Click here for a Web cast of Google's meeting. Apple's gathering will not be Web cast.)

The others are James Rogers of Duke Energy (DUK), Richard Fairbank of Capital One Financial, and Terry Semel of Yahoo (YHOO). The latest CEO to agree to a token base salary is John Mackey at Whole Foods Market, whose $1 salary took effect in January. Jerrold Perenchio of Univision Communications and William Ford Jr. of Ford Motor (F) also received no salary as CEO until 2006, when each stepped down to take the post of chairman.

The common characteristics among this varied cast of characters? A strong belief in personal responsibility, a passion for the business, a penchant for risk-taking—and a healthy dose of ego. "With this gesture the executive is calling him or herself an 'employee-in-chief,' and saying he or she will fall with the fate of the company," says Dr. Kerry Sulkowicz, founder of the Boswell Group, a consulting firm that advises senior executives on psychological issues. "Of course, it can be a double-edged sword, since in doing so they're inevitably pointing to their own wealthy status—that effectively as far as pay is concerned they can take it or leave it."

Taking One for the Team

The current crop of low-salaried CEOs isn't the first. Lee Iacocca set the precedent in 1978, when he was chairman of Chrysler. Realizing the automaker was in dire financial straits, Iacocca fired executives and pushed the United Auto Workers to accept salary and benefit cuts. In an effort to lead by example, Iacocca lowered his own salary to $1 a year. Five years later, with a helping hand from the government, the company was restored to financial health.