One of the best pieces of folklore surrounding Steve Jobs is his $1 per year salary. Naturally, he doesn’t rely on his salary from Apple to live on as rich as he is. The key is actually in the stock options, which as Valleywag points out are more volatile than other industries.
Tech stocks are more volatile than the market as a whole, which means that stock options are worth more than in other industries; they form the bulk of an executive’s compensation; the salary is an irrelevance. The token salary looks good in the press briefing; even if the rest of the package is obscene, it’s too complex for reporters to arrive at a shocking headline figure.
What makes matters worse is that the tax implications also make stock options a more popular, palatable option. Stock options get taxed as capital gains at 15% while salaries are taxed at 35%. You do the math. Steve makes out like a bandit for two independent reasons, so let’s not celebrate the $1 salary.
Valleywag's argument would be quite a bit more compelling if the industry practice were to choose to pay a CEO either by stock options or by salary. However, the industry standard is to give CEOs both. Accordingly, instead of getting an obscenely large paycheck augmented by obscenely valuable stock options, Jobs just goes the stock options route, foregoing millions in pay. Unless Valleywag can show that Jobs gets a substantially higher than average stock options package, I find their logic flawed.
Actually, Jobs doesn't have any options. He traded in his options in March 2003 in favor of a 10 million share stock grant. He then sold about a third of those shares to pay taxes when the grant vested in March 2006, implying that it was not taxed at the capital gains rate, but rather the marginal rate. Valleywag needs to read Apple's proxy statement. Jobs has received no compensation other than his $1 salary in the last three years. Of course, his remaining stock is now worth about $6 BILLION, so he's probably getting by.
If I know anything about Steve Jobs, the key point of his $1 salary is that he is tying his success to the success of Apple. He wants to go up and down as he makes the stock go up and down.
Of course, much of this is about the public perception that he IS doing so; he's unlikely to go broke no matter what. But he is at least making that commitment.
These articles are pointless. Excepting criminal circumstances proven in court, how much somebody is legally compensated is nobody's business.
Unless we're livng in an age of jealousy and envy.
leodavinci: I agree that these articles are sensationalist and frequently get the facts wrong. However, stockholders are entitled to know how much the top executives of the companies we invest in are making, Apple or any other company. Trends in executive compensation can give valuable insights into what management is thinking.