Interestingly, Peter Thiel wrote that Startup success is correlated with CEO pay (or the lack there-of)
http://techcrunch.com/2008/09/08/peter-thiel-best-predictor-...
http://techcrunch.com/2008/09/08/peter-thiel-best-predictor-...
That is absurd, they don't deserve to be investors. You receive money in exchange for equity. The money is used to run the company and build value for the investors. Providing salary to everyone who is engaged in building value must be part of the equation. Otherwise if you think about it, in extreme case you will give away your entire company to build value for investors and you will get nothing in the end.
Thus, a CEO who doesn't treat their cash as the valuable resource it is, is just putting an unnecessary burden on their company.
Peter Thiel isn't advocating paying yourself nothing. His point (and data[1] backs this up), that CEO's making a high salary is a pretty good indicator of Startup that will fail.
If you need a high salary, then being a Founder/CEO probably isn't the right move. You're putting a burden on the company because of your life style choices.
Conversely, if you don't pay yourself anything, you're going to spend too much time dealing with the pain of not making ends meet, instead spending your energy growing your company.
[1] http://blog.startupcompass.co/73-percent-of-startup-founders...
Often paying yourself nothing makes things look better than they are which can be a bad thing. A slightly profitable 3 person company that pays it's founders nothing is not actually profitable.
In the end what you make as CEO is often more important from a signaling standpoint than a survival one. Investors often have the mindset where they don't invest in companies where the CEO makes more than X or less than Y.
If I had investors and free business cash flow, I'd pay myself only enough to break-even on personal expenses. The reason is that I'd also own equity in the business, and any money invested in the business could presumably earn a bigger return than if I took that money out of the business and invested it elsewhere. If that assumption doesn't hold, I have no business being an entrepreneur, because it is more economically rational for me to take a fat-paying job at Google or in finance, and then stick my excess savings into index funds.
However, in aggregate the serious performers outweigh the losses from the 99% failure rate.
So given that I am about to give 5 years of my time to something that is most likely a failure I'd like some compensation for my time, just like every VC takes 2% to flush the LPs money down the toilet, and 20% when they return.
If you're going to bother founding a startup, you should have some reason to believe that you are in the 1% that is going to be a success. You might be wrong in that belief, and that's why startup success continues to be fairly rare, but if you don't even have a reason to believe that much you might as well pack up the startup, get a good-paying job, and invest the money you earn.
You don't need the thousands of investors who want you to work for free, you need one who believes in the business enough to think the CEO is worth being paid. If the CEO isn't worth being paid the startup isn't worth investing in.
Don't forget it's not just the clueless, neurosurgeons and CEO's also do start-ups.
Investors put money into businesses to grow the business, not support a formerly wealthy CEO's standard of lifestyle.
This is also why I think basic income would be so great for a startup CEO. If there is a sensible government system for guaranteeing my survival, I can put all the business revenue back into the business. I'll grow more quickly.
If you have $5+m in the bank, you're probably post-A, which means you have the funding to pay the founding team salaries, perhaps below market.
If you have 5m in the bank and you're paying yourself 200k a year, I sincerely question the logic of the board, and the CEO. That extra $80-100k can go to hire another person.
What is going to benefit the company more?
I agree with your overall point that it's a red flag if the CEO demands lots more than they need (and they should be prepared for questions about why they're asking for a certain salary), but drawing a specific line does not work.
What is your point?
Compare successful Authors and find making 200k/year is far from the top. Why? Because sometimes highly productive people doing the same task are less than 10% as efficient as others. Dentists, Athletes, Programmers, Lawyers, Sales People, Architect, and most other complex jobs have a huge range of talent once you cross highly productive.
EX: JK Rowling made well over 50 million per year working on HP. 1% of that is 500k which is still extremely high for an author.
5+ months of highly talented programmer is SIGNIFICANTLY more valuable than anything the CEO can do with the extra $100k in their pocket.
Pay yourself what you need, but don't go overboard.