Mr. [Rich Kinder] believes his low-cost approach to executive compensation helps boost investors' rewards, too. Kinder Morgan had total shareholder return of 43% last year and a whopping 373% return from July 1, 1999, to Dec. 31, 2003. He explored his innovative pay practices during a wide-ranging chat at Kinder Morgan's modest headquarters, down the street from the Enron skyscraper. Excerpts follow:

We have no supplemental retirement plan for executives [at Kinder Morgan]. We have no special health-insurance plans for our executives. We don't pay for country-club memberships. We don't have corporate jets. We don't even pay for luncheon-club costs.

MR. KINDER: I can't think of anybody we talked to who didn't want to come because we don't pay enough in salary. Some people may think the overall package is not enough to get to.

THE NAME of the billionaire leader at Kinder Morgan Inc. says it all: He's Rich.

But Rich Kinder will never get richer from his paycheck. He collects only a dollar a year. No bonus. No stock options. No restricted shares. He may be the lowest-paid chief executive of any major U.S. corporation.

Nor has the co-founder of the Houston pipeline company ever sold any of his roughly 24 million shares, which represent about a 20% stake. He thinks taking additional shares as compensation would be like "throwing money out on the highway. There is just no rational reason why I deserve anything more."

Mr. Kinder also caps senior management's base salaries at $200,000. And he hates executive perks so much that he ripped out the private bathroom when he moved into his corner office. An executive john "sends the wrong signals," the 54-year-old chairman and CEO explains.

Trained as a lawyer, Mr. Kinder was general counsel at several concerns and eventually became president of Enron Corp., the failed energy giant. He quit in late 1996, before Enron got into trouble, because he yearned to run his own show. The next year, he and college buddy William V. Morgan acquired certain Enron assets to form Kinder Morgan Energy Partners LP, a publicly traded energy partnership. A 1999 merger with KN Energy Inc. created Kinder Morgan, which now controls the original partnership.

Mr. Kinder believes his low-cost approach to executive compensation helps boost investors' rewards, too. Kinder Morgan had total shareholder return of 43% last year and a whopping 373% return from July 1, 1999, to Dec. 31, 2003. He explored his innovative pay practices during a wide-ranging chat at Kinder Morgan's modest headquarters, down the street from the Enron skyscraper. Excerpts follow:

THE WALL STREET JOURNAL: At the outset of your tenure as Kinder Morgan CEO, you decided to accept nothing but a dollar salary. Were you already a billionaire?

MR. KINDER: I was a multimillionaire. But I certainly had no more money than a lot of other CEOs.

We announced the merger in July 1999. I got about 20% of the newly combined entity, renamed Kinder Morgan Inc. [or KMI]. [It] has gone from $12 a share to $63.13 a share [Editor's note: as of April 8]. That's a compound annual return of about 41%.

When we started [Kinder Morgan Energy Partners, or KMP], it had an enterprise value of $300 million, $150 million equity and $150 million debt. Today, the total enterprise value of KMP is about $13 billion. KMI's total enterprise value is about $11 billion.

Early on, we realized this is a cash business. Cash is a great discipline. We decided we will be cheap, cheap, cheap. Our philosophy was to walk the walk. We would start the process at the top.

Our goal is getting everybody to think, "How would I spend the money if it was my money?" Most CEOs try to sell that message to their people. But if you are out in the field trying to get them enthused about watching costs and they see you get into a chauffeur-driven limousine back to the Kinder Morgan jet, they are going to just laugh you off. If they knew you stayed at Red Roof Inns, it begins to have some impact.

I and my partner, Bill Morgan, both had big equity stakes. We decided that we would be on an equal footing with shareholders. At some companies, shareholders have not done well, but the CEO in good times and bad times seems to do very well. That's what infuriates people.

This disconnect is what we have tried mightily, not always successfully, to correct. There is no incentive to grow revenues here. We don't care how big we are. We just want to make money [for the shareholders]. A lot of compensation for CEOs and senior management is done by so-called experts, who take into account revenues, number of employees, size of the company, etc. [and say], "Gee, we made an acquisition, so the CEO needs a 30% increase in pay."

Whatever I do, if it is good for shareholders, it is good for me and vice versa. The approach leads to long-term management. I have never sold a share of [Kinder Morgan]. Because I am not selling today or tomorrow, I have no options [and] I am not going to get any bonus -- it puts the incentives in the right place.

If a CEO doesn't have this kind of stock interest in the company, the salary should be a reasonable one that he or she gets regardless of performance. Beyond that, everything ought to be attached to shareholder returns.

You may have a 45-year-old CEO wannabe who is absolutely the sharpest person to take over the company. He has got three kids in college. He never had a big payday. He can't afford to work for only equity. What he can afford to do is take a $200,000-a-year salary and an annual bonus if he meets predetermined targets. And then some sort of equity kicker that is very long term.

I am not opposed to options. They are really important with the rank and file, to give everybody a piece of the action.

At the senior-management level, restricted stock is probably the best thing we have for retention. It is a two-way elevator, going up and down. It makes more sense than a lot of options.

People do what is in their own economic self-interest. If you have them incentivized the right way, that is going to go a long way toward guaranteeing the kind of performance you want for your shareholders.

WSJ: Are you handed a dollar bill every year as your salary?

MR. KINDER: I get a check. They withhold seven cents. They pay me in advance -- in January.

WSJ: You're paid before you deliver results!

MR. KINDER: The first couple of years I framed them. They kept having a check that never cleared. So this year, I deposited the 93 cents.

WSJ: Did your board oppose your $1 salary?

MR. KINDER: They were happy to have a fool like me who will work all year for a dollar. They clearly have my interest because I own 20% of the company, [and] 90% of my net worth is tied up in this company. Where does it benefit the shareholders to give me options or restricted stock or a bonus?

I am not going to work any harder if I own 24.5 million shares than if I owned 24 million. Would I like to have another 500,000 shares? That would be nice. But that starts undercutting my thesis that my interests ought to be the same as shareholders'.

WSJ: Why have your long-term shareholder returns been so strong?

MR. KINDER: We have this low-cost philosophy. We stick to our knitting. We are religious on how we allocate capital.

WSJ: Your $1 salary and sizable stake also benefit shareholders because they reinforce your long-term focus. But how does this give shareholders a bigger bang for their buck? Most aren't long-term holders.

MR. KINDER: I am looking at where I think this company ought to be in five to 10 years. There will be some years when we deliver better value. Other years, we have a bad year and the stock does well. Rising tides lift all boats.

You have to deliver year in and year out. With the bursting of the bubble and the corporate scandals, there is more appreciation for hard assets and long-term value for a stock.

WSJ: Your stake presently is worth about $1.5 billion. Unlike you, chief executives with significant stakes usually get stock options, too. What if you paid business leaders only in options?

MR. KINDER: If that's his total reward, you have to give him the opportunity to cash out those options. You are asking for an almost Zen-like goodwill to have him say, "I have a million options vesting next year. And I am counting on those options to build my new house. But I am not going to run up that stock price next year. I better not do that deal because five years from now it will be a lot better for shareholders." It is counter to human nature.

You have to pay senior executives a working salary. I like cash bonuses. We try to pay our executives at the 50th percentile. We certainly have performed at the 90th percentile or better.

We cap salaries at $200,000. So that means senior people can get very good bonuses if we have a very good year.

This past year, we did restricted stock for our 10 senior people. After three years, 25% of the shares are vested, and after five years it is 100% vested. There are performance triggers, but they are not Herculean. If the company meets its targets in any one year, they are 100% vested.

WSJ: What influenced your decision to offer restricted shares? And have you repeated the companywide option grant made in October 1999?

MR. KINDER: This past July, we gave an annual grant of options to all employees below management. We gave senior people restricted stock [because] it was better for them to have skin in the game. If they stay for five years and the stock does well, they potentially have a big payday. Enough to keep them from wanting to go to another company or retire. Stock options are only a one-way street.

WSJ: Then why give options to everybody else?

MR. KINDER: If you had gotten into restricted stock for everybody, the grants at the lowest levels would have been too small to provide enough upside to be really meaningful.

WSJ: How else would you fix the disconnect between rewards for CEO and shareholders?

MR. KINDER: People are very resentful of the perquisites disconnect between the CEO and employees.

We have no supplemental retirement plan for executives [at Kinder Morgan]. We have no special health-insurance plans for our executives. We don't pay for country-club memberships. We don't have corporate jets. We don't even pay for luncheon-club costs.

At many other companies, if the company does badly, employees' retirement plans do badly. We find out the CEO had a special trust and is going to get $400,000 a year for life out of that trust. That's the kind of stuff that sticks in the craw of every employee and every shareholder.

WSJ: How rigid are your executive-perks limits?

MR. KINDER: Everybody stays in a pretty cheap hotel. That kind of stuff sends more signals to the people that we are managing this company the way you manage your own money.

WSJ: Any executive dining room?

MR. KINDER: Are you kidding? Our executive dining room is in the tunnel underneath the building where you can get hamburgers.

WSJ: Many businesses insist their CEO be chauffeured to work for security reasons. Who drives you?

MR. KINDER: I drive myself to work. I am not worried about my security. Who the hell knows who Rich Kinder is? And who cares?

WSJ: Are management prospects turned off because Kinder Morgan has so few perks?

MR. KINDER: It excites people that we are running the company the right way. I am a 20% owner. But this company does not belong to me. It belongs to all shareholders.

WSJ: Does your salary cap keep you from attracting star executives making twice that much elsewhere?

MR. KINDER: A lot of them could make twice that much. I would hope that because our stock has done so much better than our peers, they feel like they are part of a winning team.

WSJ: Yet your share price isn't much higher than two years ago.

MR. KINDER: We were $56 two years ago and we are $63-plus now. We got hit after the various energy-company meltdowns.

WSJ: Since your share price may have nothing to do with how well the company is run, how do you retain senior management? Their restricted shares may not pay off and they can't win raises beyond the $200,000 mark.

MR. KINDER: So far, we have kept one of the best management teams in the energy business.

WSJ: Ever lost any candidates?

MR. KINDER: I can't think of anybody we talked to who didn't want to come because we don't pay enough in salary. Some people may think the overall package is not enough to get to.

WSJ: Why did you pick $200,000 in capping executive salaries? Who decides when to increase it?

MR. KINDER: Some say I am a benevolent dictator. But we do have an office of the chairman. Every year, we talk about whether we want to raise it. So far we have not decided to.

In 1999, we had five people at the $200,000 cap. I thought that was a very fair living wage that people could live on. [Editor's note: Eighteen of the 5,500 staffers earn the maximum today.]

WSJ: Unlike some companies, you don't force anyone to hold the shares they acquire through option exercises or restricted-stock grants.

MR. KINDER: We do not. Some senior people have retained big chunks of their stock. [Editor's note: The four highest executives below the CEO owned 1.1 million shares altogether, or about 1% of the company, as of Dec. 31, 2003.]

We felt it was too punitive to say, "OK, you may make $5 million finally at the end of five years. But you have to keep $4 million of that in stock."

Mark me down. I have wrestled with this. I obviously want to keep these superb employees as long as possible.

WSJ: Yet you're contradicting your philosophy of running this company by shareholders for shareholders. Without stock-ownership requirements for top management, how can everyone else share the attitude you bring to work every morning?

MR. KINDER: These are sizable restricted-stock grants. And they will not get any more for five years. They have a tremendous incentive to manage for the long term.

WSJ: No, they have an incentive to manage no longer than five years -- when the restrictions fully lapse and they can sell those shares.

MR. KINDER: It is better to have restricted stock that vests way out in the future in terms of them making sure that they and this company will be performing well over many years. I concede it is not perfect. But I am balancing a whole bunch of things.

If you are a shareholder, the person you really want in the boat with you is the CEO. It would be too draconian to demand of my people that they get this one payday and they've got to pay taxes on it. Now, all of a sudden, we are going to force you to keep whatever you didn't use to pay taxes.

This model doesn't mean we are going to make everybody money or that everything we do is right. That's the worst thing in the world -- to get cocky. We make mistakes every day. But by golly, we won't destroy shareholder value by spending it on the wrong things.