A colleague and I were debating about CEO compensation. We were actually talking about the music industry and my colleague suggested that the decrease in revenues could be mitigated if the CEO took a pay cut.
My response, and I am confident that I am right about this, was that a cut in the CEO's salary would have little effect on any companies' overall profit picture. I offered him, and now I offer you dear reader, this challenge: Find me a CEO that makes in salary more than 0.1% of the companies' revenue.
In fact, I'll even give you a head start. This page on the AFL/CIO website lists CEO salaries. Once you have that, you can find the companies' revenue by searching the company name and "annual report".
I am willing to bet though that all CEO salaries will be well below the 0.1% of revenue. In fact, I looked at one random company today and found that the CEO was making 0.03% of revenue.
With salaries this low as a percentage of revenue, cuts to their salaries will not help with budget problems. If the company sees a decrease in revenue of 3%, having the CEO work for free will only cover 1% of that gap. Therefore, even that big cut will only be symbolic.
Now, that isn't to say that symbolic gestures are meaningless. I do believe that symbols can be very important. A salary that is 0.03% of revenue can still be considered obscene and a big cut can send an important message. So I am not suggesting that it shouldn't happen in a company in difficult times. I am just saying that it will do very little for the companies fiscal problems.
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