It’s not especially uncommon to hear of some wealthy individual accepting an annual salary of $1 for a political office or executive-type job: Steve Jobs at Apple and Micheal Bloomberg as the Mayor of New York are the first examples I could think of.
I don’t hear of people doing the equivalent thing for $0, which leads me to suspect that there are some important legal or tax concerns that make that dollar’s changing hands crucial. I couldn’t put a finger on what, though. Is it as simple as some agency’s definition of “employment” that requires nonzero compensation? (While allowing vanishingly small compensation…)
I tried searching, but came up with nothing. Apologies if this has been discussed before.
Thanks. I understand that there are certainly other ways to compensate these guys (the business execs, at least - not so sure about elected officials) so that they are actually getting substantial jingle for their efforts.
What I’m really curious about is why they even bother with the token $1. Why not nothing at all in salary?
I know I didn’t answer the question 100%, but I do not think it would have anything to do with taxes, as they still have to declare their profits from their stock options.
If they were paid ‘zero dollars’, they would not be collecting a salary. At least they are a paid employee since they are collecting that simple buck. My answer is not definite and I will not take it personal if proven wrong.
IANAL, and even more so, IAMAUSL. However, I am sure all those dudes are bound by non-disclosure agreements and various other contractual agreements. Every time I signed an NDA at my employer (I’ve signed several) I received a miniscule sum of money (actually, they were generous at the end; I actually got C$5!) in exchange for signing that piece of paper (of course, if I hadn’t, I would have been out of a job in addition to being out $5, but that’s a different issue). As Exapno said, there has to be an exchange of something of value for a contract to be valid. Presumably the $1/year is in exchange for signing the various NDA’s and other legalese.
I never got any compensation for signing an NDA. They were always presented to me as a condition of employment. (So the “consideration,” I guess, was that they were giving me a job in exchange for the NDA.)
No worries, man. Didn’t mean to offend. I was trying to be funny. That’s why I used the emoticons. I’m still new here. I have a bit to learn, I guess. Sorry.
I always assumed that the consideration of the NDA itself is simply getting to see whatever information is covered by it. The fact that you need that information to do your job is just a happy benefit. This makes sense to me because, if you signed the NDA but then lost your job, you’d still be bound by the NDA (I assume), whereas if the consideration of the NDA were having a job, and you didn’t get to have a job anymore…
Ok, so people agree to work for a business @ a$1/year for some consideration, usually Stock options etc,
What about Government? I know there are stories of folk that did that, but howcome the $1/year bit. My guess is that it was done so that the individual could be covered under a sovereign immunity clause. This is the idea that as long as a government worker acts within the Law he or she can’t be sued as an individual.
Having spent my Friday evening reading contract law (and with 32 more pages to read before I sleep), I’m ready to answer this. According to Restatement 2nd of the Law: Contracts, the bible of contract law,
Let’s say that an employer and a potential employee agree that the employee will be receive virtually all of his compensation in the form of stock options. But one of the things about options is that, as their name says, they are only optional. The employee never has to exercise the option if he doesn’t want to. But if the employee never exercises the option, and thus the employer never gives any compensation to the employee, no enforceable employment contract would exist. The employee could just not show up for work, or could quit in the middle of an important project, or worse, go work for a competitor. That’s bad for the employer. He wants an enforceable work contract.
So, to make a valid contract, there must be some “consideration” by the employer. This can take the form of a one dollar salary payment.
The Restatement 2nd of Torts says, “Ordinarily, therefore, courts do not inquire into the adequacy of consideration. This is particularly so when one or both of the values exchanged are uncertain or difficult to measure.” The value of stock options are indeed often uncertain or difficult to measure, depending on the fortunes of the company’s stock between when the employer offers the stock option, and whether and when the employee exercises the option and buys the stock.
One thing that will go a long way toward understanding this place is to realize that a lot of folks here ask questions based on pure intellectual curiosity, rather than practical need for the answer.
For somebody like Michael Bloomberg, it is purely symbolic.
Personally, he has more money than God, and the $195,000 salary as Mayor of New York would barely be a rounding error on his tax return. By turning down the salary (or only taking $1), he is making a symbolic statement that he is doing the job out of a desire for public service, rather than because he is a professional politician. It also limits the possible criticism of someone so rich taking money out of the cash-strapped City government.
In addition, he has declined to live at Gracie Mansion, preferring his Upper East Side townhouse (when he isn’t taking his private jet to Bermuda for the weekend). Soon after he decided not to live there, the city received a large “anonymous” donation for a major renovation which could, conveniently, be done when the mansion was unoccupied. On the other hand, he maintains a down-to-earth image by taking the subway to work and personally answering his listed home telephone.
