An article "After Rejecting Pay, Some CEOs Find Less Can Be More" by George Anders in today's Wall Street Journal delves into this question and asks whether it represents "a publicity stunt or an act of bravery". The cases of the particular CEOs described in the article suggest it could be either.
The author begins with the story of Steve Appleton, the CEO of Micron, a Boise, Idaho semiconductor company. When Micron was hit by an industry downturn and had to make major layoffs in 2001, Mr. Appleton announced that his salary of $800,000 would be dropped to zero until such time as Micron returned to profitability. As the author tells it:
Over the next two years, Micron posted more than $1 billion in losses. Mr. Appleton and his lieutenants were working on a turnaround plan that involved diversifying into a new line of chips. Progress was fitful, as new gains were undercut by continuing red ink from Micron's traditional product line of DRAM chips.
Mr. Appleton went for more than two years without a salary. He got new stock options, but with Micron's stock sagging, they had no immediate value. Most of his personal wealth was tied up in Micron stock, and he didn't want to liquidate any. So he started raising cash the only way he could: He sold his vacation home. He sold several small planes he had bought for recreational flying. And he told family members to cut back on credit card use.
In December 2003, Micron returned to profitability, and Mr. Appleton begain drawing a salary again. Since then, Micron has been in the black. Its stock currently trades at about $11 a share, up from a low of about $7 in early 2003. Mr. Appleton says the struggle to get Micron and his own income back on track made him a better boss. 'I was deeply motivated, and people knew it,' he recalls. 'We needed to get a new product developed, and there was a lot of resistace. This way, we made change happen at a faster pace.'
The author contrasts Mr. Appleton's story with that of the former CEO of American Airlines.
Don Carty, former CEO of American Airlines, won acclaim for going without pay in late 2001. It was part of a bailout of the airline industry. Things soured in early 2003, when financially strapped American negotiated more than $1 billion in pay, benefit and job cuts with its unions. The package unraveled when the company disclosed that it had contributed $41 million to pension plans for top executives, including Mr. Carty. He was criticized for the pension deal and resigned soon afterward.
The answer to this post's title, by the way, appears to be "yes". Wall Street Journal Online readers had the opportunity to vote in response to the question "When a company is struggling, should the CEO take a pay cut?" As of mid-afternoon, when I am posting this, out of the more than 2,200 readers who voted, 91% said "YES" and only 9% said "NO"!