$1 a year? The 9 absolutely lowest-paid CEOs
Getting paid millions of dollars a year seems to be the given right of most CEOs. But a few can't even scratch together five quarters with what they were paid last year.
There are nine current CEOs at companies in the Standard & Poor's 1500 index, including Kosta Kartsotis of watch and accessory maker Fossil (FOSL), John Mackey, co-CEO of Whole Foods Market (WFM), Larry Page of Alphabet (GOOGL), who were given compensation packages valued at $50,000 or much less in fiscal 2015, according to a USA TODAY analysis of data from S&P; Global Market Intelligence. Three of these CEOs earned $1 and two were paid nothing.
Tiny compensation packages for CEOs are the rare exception. The median pay package of current CEOs in the S&P; 1500 that have reported their data, which includes small companies in addition to the very largest, hit a median of $5.4 million during fiscal 2015. The median pay of CEOs of larger companies is usually more than twice that. There are even at least 11 CEOs who have busted through the $30 million-a-year barrier.
11 CEOs bust through $30M-a-year barrier
CEOs who accept lower salaries show employees and investors they are running the company for the long haul, not with a short-term, quarter-to-quarter mentality, says Brian Connelly, the McWane Family Professor of Management at Auburn University. "When the CEO takes a low salary, they send a signal to investors, communicating with them about their commitment to the organization and its employees," Connelly says. "The money itself does not do a whole lot, but the signal it sends to investors could be deeply meaningful."
When it comes to sending a message, it's hard to undercut the two CEOs who were paid nothing in 2015: Fossil's Kartsotis and David Liniger, CEO of real-estate brokerage firm RE/MAX (RMAX). Kartsotis has received no pay for at least the past three fiscal years, sending a message that the 61-year old CEO since 2000 is in it for more than just the pay. The vote of confidence comes at a critical time for the company as it faces an existential threat from new wearable devices such as smartwatches. Fossil's revenue fell 8% to $3.2 billion in its fiscal year ended Jan. 2016 and net income fell 41% to $221 million.
Just because a CEO isn't paid much doesn't mean investors will benefit: Shares of Fossil lost two-thirds of their value in fiscal 2015. Kartsotis shared the pain, too, though, since he owns six million shares, or 12.5% of shares outstanding. Fossil wasn't the only company with a low paid CEO that delivered losses for investors. Five of the nine companies with the lowest paid CEOs delivered stock price declines during the same year.
Consider Whole Foods' Mackey, who has been paid $1 a year for the past three straight years. Prior to that, he was paid just $69,019. The stock was down 17% in fiscal 2015 ended in September. The company's net income also fell 7% to $536 million during fiscal 2015.
Many of these low-paid executives have other ways to get paid despite their low salaries. Lawrence Page, the CEO of Alphabet, has been paid next to nothing for years, including $1 a year for the past five straight fiscal years. But don't feel too sorry for him, as he owns more than 42 million shares of the online advertising company. That gives Page a 6% stake in the company making him the biggest single investor and a big beneficiary from the stock's nearly 50% rise last year.
Seeing executives take low pay reassures long-term investors management is committed to the organization, Connelly says. Academic research has shown CEOs with low salaries also "are less likely to engage in misconduct" with illegal stock option manipulation, big financial restatements and even class-action lawsuits, Connelly says.
Short-term investors, though, are less impressed. "They are not interested in a CEO who is committed to long term success and they certainly are not interested in a CEO that is committed to his (or) her employees," Connelly says. "They want results, they want them now, and they don’t care who gets stepped on along the way."
Follow Matt Krantz on Twitter @mattkrantz
LOWEST PAID CEOS IN THE S&P; 1500
CEO, Company, Symbol, Fiscal 2015 pay, Fiscal 2015 stock price ch. %
Kosta Kartsotis, Fossil Group, FOSL, $0, -66.9%
David Liniger, RE/MAX, RMAX, $0, 8.9%
John Mackey, Whole Foods, $1, -17.4%
James Truchard, National Instruments, NATI, $1, -7.7%
Lawrence Page, Alphabet, GOOGL, $1, 46.6%
Clarence Werner, Werner Enterprises, WERN, $12,250, -24.9%
Jayson Adair, Copart, CPRT, $18,001, 7.9%
Strauss Zelnick, Take-Two Interactive, $20,914, 16.1%
Richard Hayne, Urban Outfitters, URBN, $44,310, 34.4%
Sources: S&P; Global Market Intelligence, USA TODAY
Follow Matt Krantz on Twitter @mattkrantz