Why Does Larry Page Pay Himself a $1 Salary?

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A:

Co-founder and current chief executive officer (CEO) of Google Larry Page has been paid an annual salary of only $1 every year since the company went public. Though the practice of limiting the top executive's salary is not widespread, Page is not alone. His long-time partner and Google co-founder Sergey Brin also earns a $1 salary, as do Oracle Corporation's Larry Ellison, Hewlett-Packard's Meg Whitman and Facebook founder Mark Zuckerberg.

Despite his virtually non-existent salary, Page has profited immensely from his company. His net worth is estimated at around $44 billion.

CEOs such as Page typically have such large stock holdings that they can afford to make the largely symbolic gesture of accepting only $1 as a paycheck. In most cases, cash compensation, or salary, is only a small component of overall executive compensation packages. More profitable elements of compensation take the form of stock, stock options and performance-based awards.

Large stock compensation is intended to incentivize performance. Page's foregoing high pay in favor of holding a large equity stake suggests that he is looking out for shareholders. Since his wealth increases only if the stock's value increases, his interests are more aligned with the company's success.

Taking pay in the form of equity in the company, options and stocks, though, provides personal benefits to Page. It also carries lower tax liability. Income tax rates are around 35%, whereas capital gains taxes usually are around only 15%.


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