We're all aware how A-list actors such as George Clooney and Brad Pitt usually make about $20 million up front and then 10% of the back-end to appear in a new motion picture. But if a performer really believes in their ability to bring people into theaters, the smart ones take far less, sometimes even zero dollars for a role and instead upgrade their back-end compensation.
That's the way it's gone for years, most famously perhaps with Jack Nicholson, who took $6 million instead of his usual $10 million salary to play The Joker in 1989's Batman and traded the difference for a bigger cut of DVD and merchandising revenues that eventually gave him a $60 million payday. No one begrudges these actors for taking more back-end rewards, and we never judge a new Pitt or Clooney deal based on the past riches they've already garnered.
Hollywood's elite is filled with actors who took massive pay cuts and instead gambled on future earnings. There's Bruce Willis, who made $120 million from The Sixth Sense, taking a chance on working with a first-time director with an unusual script. Tom Hanks made $70 million from Forest Gump, sacrificing half of his $20 million paycheck in exchange for 10% of the movie's gross revenues. The list goes on and on.
The way I see it, that same formula should apply to a CEO. Sure, a top executive can draw a salary that pays millions of dollars up front. Another way is to take little, or no compensation up front and plow that money back into the company so it can grow the firm by hiring superstar employees, inventing new products and making smart acquisitions. I'm currently the CEO of my third company, RadiumOne, I've formed out of scratch. I take a bi-weekly paycheck, and every other Friday afternoon I open my envelope and smile when I see the amount payable comes out to zero point zero. Unlike many, if not most of my peers, I'm a zero-dollar CEO.
I'm 31 years old and sold my first two online advertising businesses for nearly $350 million. My latest enterprise—RadiumOne—arguably marks the most ambitious and important move in my career. After four years, Radium One is my biggest project thus far in terms of size, the number of employees, revenues, and every other metric. Having two very successful outcomes in the past has only served to reinforce my belief that taking no money up front for my services is the proper way to go.
Starting a successful company is dependent on three words: Return On Investment. We all know about CEOs who have come in to a great, historic company only to systematically destroy it through bad deals. Then they leave with golden parachutes priced at $50 million or $100 million dollars. It's happened so many times over the past decade—a company gets trashed and loses billions, while one person walks away with a fortune. What's the ROI in that? A CEO should earn their salary, not merely get it as a reward for merely showing up.
I look at Mark Zuckerberg, Larry Page, Michael Bloomberg, and the late Steve Jobs as men who have taken no money or perhaps a single dollar per year in salary—these great executives are all about building and creating and innovating things, spending 80 hours a week or more focusing on the best way to achieve new heights. When I look at my own paycheck and see the zero dot zero mark, I'm completely fine with it. The money I could make in salary is far better off being reinvested into creating new jobs. I feel much better about the shareholder equity being created, compared to simply having a larger bank account with my name on it.
Compare that to the greed you see on Wall Street. There, it's all about making your short-term, quarterly numbers and very little is tangible or part of any future growth. I've always been a big believer in looking far ahead—if you focus on short-term things, not a lot actually happens. Indeed, greed is not good, despite what Michael Douglas's character Gordon Gekko said in the movie Wall Street, in what's given that industry a bad name.
Of course, the typical response from naysayers would be, "Well, you can afford to take no money because you're already rich." The same might be said for Clooney or Pitt. No one begrudges their decision, but in actuality the one-dollar actor and the one-dollar CEO come from exactly the same place. They both know that forgoing a paycheck upfront means a better product down the line and, ultimately, better results for everyone involved.
Every executive has a choice to make. For 99.9% of all CEOs, there's a nice salary dangled before their eyes. You can suck it up like I did when I was 16, take nothing, and then create a multi-million dollar company with hard work. If you've had prior success with other businesses and already have enough to live on, you can double-down. Why not be the zero- or one-dollar CEO who creates more jobs that, in turn, creates more equity in the company? Have some skin in the game. Align yourself with the greater good.
It usually comes down to a simple question: what motivates you? If it's fast money and greed, then you'll negotiate a salary that guarantees you can squeeze the most money out of the job, whether you do well or not. But if you're more interested in the greater good of your company, you'll align yourself more closely with its long-term growth and success. You can't optimize for the short-term; you've got to optimize for the long-term.
As I said earlier, every executive has a choice to make. Taking no money upfront isn't always easy. You've got to have great intuition, a strong heart and—above all—lots of guts to turn down that bi-weekly bundle of cash. But if your business is truly dependent on ROI, and you intend on spending every waking hour to make your company the best that it can be, you won't miss a single dime.
—Gurbaksh Chahal is CEO of RadiumOne, an enterprise advertising platform based in San Francisco.
[Image: Flickr user Plaits]