Ourview | A dollar’s worth

Ourview | A dollar’s worth

Few companies have had the precipitous fall from grace that Canada’s Research In Motion (RIM) has had over the last few months. From being synonymous with smartphone addiction and the globe-trotting corporate lifestyle, in recent months the brand has blundered through a series of poor product launches and public relations fiascos and displayed a stubborn inability to understand or react to the smartphone market.

Faced with a barrage of bad news, the co-CEOs responded by announcing, during an analyst call, that they were slashing their salaries to a figure of $1 a year. Balsillie said they were doing this to “demonstrate our passion, alignment and commitment to RIM’s long-term success."

The $1 salary is by no means a new gimmick. From Lee Iacocca to Steve Jobs, many CEOs have played the one-buck card to show their commitment to nurture their companies through troubles.

The move should be taken with a huge pinch of salt. Few CEOs, especially American ones, draw the majority of their compensation in the form of salary. American laws tax components such as stock at lower rates than cash. In fact Fortune magazine, in June, quoted a study by Ohio State University that rips this empty gesture to shreds. The researchers found that between 1992 and 2005, 50 CEOs of publicly listed companies drawing $1 wages actually made as much money as their peers. On average, the CEOs gave up $610,00 but made $2 million in options.

The research has even worse news for RIM. On average, stock in companies with $1 CEOs did significantly worse than peer companies after three years.

Is the decision of RIM co-CEOs to slash their salaries just a gimmick? Tell us at views@livemint.com