Tesla revealed today that CEO Elon Musk took home $0 in salary last year. He was actually offered their minimum salary of $35,360, but he never cashed the check.
Musk, a self-made billionaire entrepreneur, isn’t the only CEO that has forfeited his annual salary. Also doing the same are Whole Foods CEO John Mackey, Google co-founders Larry Page and Sergey Brin, Facebook founder Mark Zuckerberg, National Instruments co-founder and CEO James Truchard, and Kinder Morgan co-founder Richard Kinder, all of whom were given $1 paychecks last year that may or may not have even been cashed. Former New York Mayor and billionaire Michael Bloomberg made it a point to never cash his $1 checks from the city.
Oracle founder and billionaire Larry Ellison, billionaire activist investor Carl Icahn, Sears CEO Eddie Lampert, HP CEO Meg Whitman, and Urban Outfitters CEO Richard Hayne also make either $0 or $1 in annual salary.
Many CEOs, especially founders of companies, forfeit their annual pay because, well, they are already millionaires or billionaires. Yes, they still receive millions of dollars a year, but not in cash.
This year’s highest paid CEO (so far) is Nick Woodman, the 39-year-old founder and CEO of GoPro, who was awarded restricted stock units valued at $284.5 million at the end of 2014. His entire fortune is tied to his company, so his value only goes up if he can heighten his company’s value. The same goes for the rest of the CEOs — their pay is purely based on the performance of their companies and the value of its shares.
American Airlines CEO Doug Parker announced today that he would no longer accept a salary. Parker explained in a letter to his employees:
“I believe this is the right way for my compensation to be set — at risk, based entirely on the results achieved, and in the same currency that our shareholders receive.”
Not taking a salary doesn’t make these CEOs saints, of course — they still pay much lower taxes. Income over $413,200 is taxed at 39.6% (the highest federal tax bracket), but capital gains (stocks) are taxed at only 20%. Since they don’t take home huge piles of cash to be taxed each year, their company fortunes — as well as their own — take less of a beating.
Steve Jobs was one notable exception to executive salary. Jobs, though still a billionaire, made most of his money when Disney bought out Pixar (about $4 billion). While at Apple, he held only half a percent of Apple’s total outstanding shares (still valued at $2 billion at the time of his death) but only took a $1 salary with no bonus or stock grants.