Maybe its going down like this...

His pay is going to be cut. Either by the board, in bankruptcy, or as a show of good faith to get employee pay cuts. So before that cut happens, why not raise it?

Start at $425k/yr. Raise pay to $675k/yr. In the future, take a pay "cut" to $500k/yr. Then he can go around saying "Even I'm doing it! I just took an almost $200k/yr paycut, now its your turn!"... while still making more money than he started off with.