Rise of the $1 CEO: The Misleading Nature of CEO Pay

Larry Page, CEO of Google, gets $1 for his annual salary. Ditto Edward Lampert, CEO of Sears, and Mark Zuckerberg, CEO of Facebook. Of course, there's a lot more to total compensation than just salary -- especially for chief executives.

Monopoly man 

(Photo Credit: ToGa Wanderings/Flickr)

For this reason, when PayScale compiled its Putting CEO Pay in Perspective data package, the methodology used to determine CEO pay included salary, bonuses, profit sharing, and any other forms of cash earnings -- in short, the most similar metrics to the ones used to calculate employee pay data. Not included? Stock options, retirement benefits, health care, etc.

Even with those other perks off the table, CEOs at top companies in the US often make hundreds of times the total compensation of the average worker at their companies. One-dollar CEO salaries are less about pay equity and more about showing the employees that the top guy (or, occasionally, woman) is invested in the work.

"The dollar salary really for them is meant to signify that they have large stakes in their company. The value they're going to receive -- the compensation they'll earn -- is coming solely from their stock," says Aaron Boyd, director of governance for Equilar, in an interview with Forbes. Equilar, a company that researches executive compensation, released the annual 100 CEO Pay Study that provided comparison data for PayScale's report. "You're not going to question whether or not Larry Page is interested in growing a company's stock as a shareholder. As one of the largest shareholders, he's all in."

In other words, as you look at even the smaller CEO-to-worker pay ratios in PayScale's report, remember: the chief executive at a top-100 company doesn't need to make many times your pay in salary, in order to outearn you in total compensation. Everything is different at the top.

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