Monday, October 5, 2015

CEO of Twitter paid a $0 Salary

Jack Dorsey, who has been the interim CEO of Twitter, will drop "interim" from the title and become the permanent CEO of Twitter.

The Huffington Post reports:

"Twitter on Monday named Jack Dorsey its permanent CEO ... Twitter has faced some problems in recent months. Its user base is fairly stagnant ... and advertisers haven't been thrilled with the platform's direct-response ads ... Twitter's operating officer is optimistic that Dorsey can reinvigorate the platform ... Twitter stock, which hit an all-time low in August and has remained volatile over the last several weeks, rose nearly 3 percent in pre-market trading following Monday's news."

* Note for later in this post: On that news, the stock went up.

(Below) The latest stock price for Twitter via Google Finance shows it's down over a third since January 2014 — down from $69 to $27 a share with over 674 million outstanding company shares.

Stock price Twitter

Besides Twitter, Jack Dorsey is also the founder and CEO of the company Square.

Forbes reports that Jack Dorsey is giving back 10% of his Square shares to the company. Mr. Dorsey owns approximately 30% and he is giving back about 3% of the company’s equity. The shares Dorsey is returning are worth between $100 million and $150 million based on estimates.

The last paragraph in the Forbes article says: "Mr. Dorsey should get a basis increase in his remaining Square stock. And that should mean when he eventually sells it, he has a much higher basis. A delayed tax benefit, after all, is always better than no tax benefit at all."

That's much the same as when a corporation buys back their own stock, so as to increase the value of the remaining outstanding company shares, which in turn, increases the value of stock options that company executives are often paid in lieu of cash salaries. When the stock options are sold, they earn capital gains income.

Another advantage is, this capital gains income is not only taxed at a lower rate than regular wages, but this income is also exempt from Social Security taxes.

Business Insider reports that, as the CEO of Twitter, Jack Dorsey's starting salary is $0. Many CEOs work for $0 in salary — but they are usually compensated in other ways, such as stock option grants and other company perks (private jets, lodging, limos, meals, etc.).

Maybe Dorsey will eventually get "paid for performance" at Twitter with stock option grants if he can turn the value of Twitter stocks higher (and maybe without the company buying back its own stock — or by "giving" stock back to the company.

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