Instances of Alternative Compensation
While many executives who take a one-dollar salary also choose not to take any other forms of compensation, a number earn millions more in bonuses and/or other forms of compensation. For example, in 2010/11 Oracle Founder and CEO Larry Ellison made only $1 in salary, but earned over $77 million in other forms of compensation.
In some cases, in lieu of a salary, the executives receive stock options. In the United States, this approach impacts personal tax liability, because although stock and option grants are taxed at federal income rates, they may be exempt from some portion of payroll taxes (typically around 15%) used to fund Social Security and Medicare.
Executives argue that remuneration through stock instead of salary ties management performance to their financial benefits. The assumption is that stock prices will reflect the actual value of a company, which reflect the management performance of the company. Detractors argue that this incentive may drive short-term planning over long-term planning.
Read more about this topic: One-dollar Salary
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