Zuckerberg for a Dollar: Nothing New Around Here

Jacob Harper |

The financial news went aflutter on Tuesday when regulatory filings showed Facebook Inc. (FB) CEO Mark Zuckerberg took in just one dollar in salary for the 2013 fiscal year, down from roughly half a million in 2012. On one side, you had Bloomberg and its ilk reporting this matter-of-factly a common Silicon Valley trend. On the other you had Gawker spawn Valleywag taking the populist route, calling the move “misleading boardroom propaganda,” apparently conflating SEC filings and PR releases.

The truth, as it is with most things, is rather mundane. And in the world of mega-cap companies, merely smart business.

First, it merits mentioning that this “news” isn’t really news; Zuckerberg has been public about his plan to only make a dollar a year since February 2012, when the plan was announced in conjunction with Facebook’s IPO. But I digress.

Concerning the story, Bloomberg is partially correct, in that the “CEO makes a dollar” trend has its roots in Silicon Valley, with Apple Inc. (AAPL) co-founder Steve Jobs first popularizing the tactic, and Google Inc. (GOOG) co-founders Sergey Brin and Larry Page following suit. But the practice goes back to before Jobs was even alive – at least to the 20s, if not earlier.

Massachusetts governor Alvan T. Fuller was of the first famous men to take a high profile job for a buck. Jason Wilson McConnell, the publisher of the Montreal Star, likewise worked for just a dollar a year. Both men were already wealthy, as were Jobs, Zuckerberg, and the other Silicon Valley CEOs who have done the buck a year plan.

But more than being a sign of altruism, the buck a year plan is just smart business. Tech, more than almost any sector, grows on reinvestment, especially in R&D. This is why tech stocks that are looking to grow usually shouldn’t pay a dividend. Extra cash should be sunk into research, not shareholder’s pockets.

Same goes for CEO salaries. Zuckerberg is a multi-billionaire. Of course his salary is peanuts to him. But it’s not a PR move, or just Zuckerberg following in the footsteps of Jobs. It’s a move to keep cash in the company, to once again make his social media company a growth investment. Of course Zuckerberg is still rich. But that’s not the story.

The story is, how’s Facebook going to spend that extra half a million dollars to make not just Zuckerberg rich but Facebook’s investors as well? 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
FB Facebook Inc. 116.69 -0.74 -0.63 11,912,294
AAPL Apple Inc. 109.54 0.43 0.39 14,974,526
GOOG Alphabet Inc. 760.47 -2.05 -0.27 890,566
ETIVF Electra Invst Tr Plc 51.85 0.00 0.00 0

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