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The final months of 2008 have witnessed massive layoffs, an imploding financial system and an unprecedented housing crisis in the United States. In November, consumer spending dropped 3.8 percent – one of the largest one-month declines in recent history. Financial giants including Lehman Brothers have gone under, while others such as AIG (American International Group) Inc. have received billions in bailouts from the federal government in a desperate attempt to keep the U.S. economy afloat. Even CEOs of major corporations are hurting, conceding to $1 yearly salaries.
Or are they? While many executives have made the public gesture to rescind their annual paychecks, these corporate leaders are hardly in the poor house. Stock options, company perks and other intangible forms of compensation are still common for these CEOs, no matter how badly their companies are doing.
Regardless, the fact that — according to executive compensation research firm Equilar — CEOs of at least 32 companies took $1 or no base salary in the past year is certainly creating a buzz. Here’s a rundown of the most notable salary-less executives:
Baby You Can Drive My Car — PLEASE
The three major U.S. automobile makers — Ford Motor Co., GM (General Motors) Corp. and Chrysler LLC — have been hurting for some time. While overseas competitors, most notably Toyota Inc., have been investing in and producing small fuel-efficient cars during the past decade, the Big Three have continued to roll out gas-guzzling SUVs despite skyrocketing fuel prices. Now foreign manufacturers are sitting pretty while the American auto industry is on its knees, begging for a bailout.
Rick Wagoner, GM: After graduating from Harvard Business School in 1977, Wagoner joined GM as an analyst. He was named the CEO in 1992 and oversaw a 96 percent drop in GM’s stocks from June 2006 to November 2008. Initially balking at Illinois Rep. Peter Roskam’s suggestion that Wagoner give up his salary to save his company in November 2008, he and the other Big Three CEOs have now agreed to a $1 yearly paycheck in exchange for federal assistance.
Robert Nardelli, Chrysler: Nardelli got his start in business as a manufacturing engineer at GE (General Electric) Co. in the early 1970s. By 1995, he was president and CEO of GE Power Systems, after which he became the CEO of Home Depot USA Inc. in 2000. While heading the home-improvement retailer, Nardelli saw Home Depot’s stock freeze at a standstill as its leading competitor’s, Lowe’s, doubled. He became the CEO of Chrysler in August 2007.
Alan Mulally, Ford: Before becoming the president and CEO of Ford in 2006, Mulally served in a variety of executive, managerial and engineering positions at The Boeing Company and its subsidiaries. Once at Ford, he revived the Taurus — one of the manufacturer’s leading sellers — which lead to the company’s first profitable quarter in two years. Mulally also oversaw Ford’s sale of Jaguar and LandRover to Tata Motors, an India-based car company. Despite these prudent economic decisions, Ford hemorrhaged money in 2008, forcing Mulally’s salary to drop to $1 per year in exchange for government loans.We’re Totally Not in the Money
Financial tycoons are notorious for their exorbitant salaries. After flushing the US economy down the toilet this year, however, these folks deserve anything but outrageous compensation.
Edward Liddy, AIG: Liddy has been around the block in the financial world. Currently the CEO of AIG, he was formerly the president and CEO of Allstate Corp., the CEO of GD Searle & Co. and a board member of investment banking firm The Goldman Sachs Group Inc. In return for a federal $85 billion bailout deal, Liddy is now receiving a $1 yearly salary, though he will likely receive millions of dollars in retention benefits next year.
Paula Rosput Reynolds, AIG: Reynolds is the vice chairman and chief restructuring officer of AIG. Like Liddy, Reynolds joined AIG in the fall of 2008 but will receive no salary for her work this year.
Richard Fairbank, Capital One Financial Corp.: Fairbank is a financial mastermind. A graduate of Stanford Business School, Fairbank revolutionized the credit card industry by building a tool that compiles purchasing behavior information which can be used to predict individuals’ upcoming buys. Faribank co-founded Capital One in 1988 and serves on the board of MasterCard International. He has a nonexistent salary but has earned $249.42 million in stock options, according to Forbes.com.Just Doin’ It for the Fun of It
These CEOs decided to receive $1 per year salaries well before the recession hit this year. A publicity stunt or true altruism? It’s hard to say. Either way, these executives are still doing well with stock options and other executive perks.
Steve Jobs, Apple Inc.: Jobs has been earning a $1 per year salary since rejoining his pet company in 1997. That doesn’t mean he’s been in the poor house, however. Eight years ago Apple gave Jobs a Gulfstream V jet worth $90 million dollars. The company also pays him for use of the plane, which came in at over $700,000 in 2007 alone. That year Jobs additionally gained $14.6 million in stock options that were due to expire.
Sergey Brin, Larry Page and Eric Schmidt, Google: The Google dream team might have developed the most popular Internet search engine ever, but their $1 yearly salaries are nothing to be impressed by. That doesn’t mean they aren’t taking home the dough, though. According to Corporate Library, Schmidt earned $480,561 in 2007 alone. And Page and Brin each have a few billion dollars worth of Google stock.
Terry Semel and Jerry Yang, Yahoo!: Both of these former Yahoo! CEOs received a mere $1 yearly salary while working at the Internet titan. Semel, however, was more than adequately compensated with stock options; over the past three years, he has sold 18.1 million stocks for a gain of $450 million. Yang didn’t do too badly either — according to Portfolio.com, he still has a $1.4 billion stake in Yahoo!.
John Mackey, Whole Foods Market: Only a fantastically wealthy person can say that he or she “no longer want[s] to work for money,” as Mackey stated in early 2007. Since that announcement, Mackey has received no compensation from the health-foods supermarket company he founded in 1980.
Jeff Katzenberg, DreamWorks Animation SKG Inc.: Not only did Katzenberg receive only $1 in salary last year, but he waived $11 million in stock options and awards. His finances, though, are more than secure considering that he owns millions of shares in the film-production company.What do you think of CEOs earning just a buck? Leave your thoughts in the comments box below.
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GM and Ford build and sell lots of small fuel efficient cars in Europe but they can't afford to build them here because they lose money on them in the US. They are stuck paying healthcare costs for hundreds of thousands of retirees. GM alone pays these "legacy" costs for over 400,000 retirees in the US, Toyota which has operated manufacturing plants in the US for only a couple of decades? About 700.
All manufacturers make money on larger higher profit margins vehicles in the US. Given their druthers Toyota would rather sell you a Tundra than a Corolla or a Prius too. All manufacturers have fought tooth and nail against higher CAFE standards with the full complicity of the Republican party and MI Democrats.
It's not a productivity problem,
American owned car plants are every bit as efficient as Japanese transplants and more efficient than Korean. It's not wildly inflated union wages, there's only about $3/hr difference at the top wage scale, and besides labor cost makes up only 10% of anyone's vehicle. And it's not stupid engineering or marketing decisions or any lack of foresight.
It's the legacy costs, healthcare for retirees that have been making US car manufacturers and all US manufacturers less competitive.
The real crunch that's dragging down the market these days is the frozen credit market. Nissan announced the other day they were cutting production of another 78,000 vehicles this year along with the 225,000 they've already chopped. Toyota's new Prius plant in MS has been put on hold because sales of that model are down 48% from 11/07 to 11/08. The best selling models in the US this November were the F-150 and Silverado pick ups.
We can't leave the car companies to the tender mercies of the marketplace. With oil prices whipsawing this year it's no wonder they don't know what to do.
It's obvious we need to build and buy smaller more fuel efficient cars for economic, environmental and nat'l. security reasons. We need real leadership in DC that raises CAFE standards on all vehicles, restablishes a serious gas guzzler tax on low MPG vehicles, demand any bank getting a bailout use that cash for loans, and a total overhaul of our healthcare system that relieves American business of our competitive disadvantage.
You do that and Ford and GM can start building those fuel efficient models they make in Europe here and actually make money.
That's way too much to expect by the end of March. Obama isn't going to be able to repair decades of drift via dimbulb ideological governance in three months.
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