
Yahoo's COO Walks Out With $20M Stock Bonus, Plus $40M For 15 Months' Work - ibsathish
http://www.sfgate.com/technology/businessinsider/article/Yahoo-s-COO-Walks-Out-With-20-Million-Stock-5146449.php
======
argonaut
The rationale for these kind of severance packages is that this is what it
takes to hire a top executive away from a top company and into a entirely new
role at a riskier company. When an executive leaves a _top_ job to join a new,
undefined, _risky_ role at a riskier company, they do so knowing: 1) they will
not get that (relatively safer) top job back, a job that represents all the
years they spent ascending the org chart, 2) they might not survive in their
new job, especially if it comes with performance targets [1], and 3) getting
fired for poor performance will permanently tarnish their (previously
skyrocketing?) reputation. With that in mind, these executives will always get
a golden parachute in their contract.

[1] I'd be interested in seeing data on how many executives do survive in
these situations. I wouldn't be surprised if the data showed that a large
(~40%) proportion do not hold onto their positions.

~~~
NickSharp
I'm try to imagine, as a founder, saying this to a VC:

"In order to start this new company, I'll need to leave my current job. which
pays very well and where I've spent years moving up the org chart. This new
company is very risky. We might not hit our performance targets. So... I'll
need a golden parachute, ya know, just in case I can't cut it."

I don't need to tell you what the VC's logical response would be. Too bad that
logic doesn't apply to "top management".

~~~
vidarh
As a founder, you take a gamble and the potential payoff is your shares. As an
incoming exec hired afterwards you are likely to get options only, for a far
smaller portion.

That said, not a golden parachute and certainly not the kind of amounts in
this article, but I have insisted on clauses related to salary increases in
agreements with VC's in the past. In my first VC funded started, we'd all
agreed on a fairly low salary to keep costs down initially, but I pointed out
it was not sustainable and that I wanted a clause in to put a floor on our
salary adjustments at a specific point (I don't remember if it was 6 months or
12 months).

They tried to pull the "oh, sure, I'm sure we can adjust salaries later, it's
just a minor thing, no need to put it in the agreement". But they yielded when
I then came back with a two line amendment to the agreement and told them
"since it's such a small thing, you won't mind if I insert these two lines,
will you, since I'm sure you were serious when you agreed we'd be able to do
the raises?"

I don't think they particularly liked me afterwards, but I'm glad I insisted
given what I saw from one of the VC's afterwards.

------
r0h1n
With De Castro's exit Mayer has 'aided' a massive transfer of wealth from
Yahoo! shareholders in less than 2 years to people who appointed her, as well
as people she appointed.

Dan Loeb, who helped appoint Mayer as Yahoo! CEO, made a killing on his
investment thanks to Mayer: [http://www.theverge.com/2013/7/22/4545072/yahoo-
dan-loeb-lea...](http://www.theverge.com/2013/7/22/4545072/yahoo-dan-loeb-
leaving-marissa-mayer-profit-flip-third-point)

Then there's De Castro, who Mayer handpicked as one of her early and critical
hires. He apparently made $109 million, not $60 million:
[http://www.bloomberg.com/news/2014-01-15/yahoo-chief-
operati...](http://www.bloomberg.com/news/2014-01-15/yahoo-chief-operating-
officer-de-castro-to-leave-web-portal.html)

One almost thinks his compensation was designed to maximize his earnings were
he to fail in the shortest possible period of time!

~~~
mtrimpe
Marissa was appointed to achieve the near impossible task of turning around a
massive behemoth which seemed dead-set on a course towards oblivion.

The only key asset that still gave Yahoo significant leverage was its war
chest and rather than let it dwindle she decided to invest it in a number of
bold steps to achieve a dramatic shift in corporate culture.

While some of these steps are indeed turning out to have been mistakes I find
I hard to argue, keeping Occam's razor in mind, that her actions did not keep
the best interest of the shareholders in mind, especially given Yahoo's
performance on the market.

------
krick
If you followed the other links on that page it becomes a little clearer (
[http://www.businessinsider.com/after-only-15-months-
marissa-...](http://www.businessinsider.com/after-only-15-months-marissa-
mayer-fired-her-first-major-hire-2014-1) [http://www.businessinsider.com/how-
yahoos-new-coo-got-his-62...](http://www.businessinsider.com/how-yahoos-new-
coo-got-his-62-million-pay-package-in-7-simple-
steps-2012-10?utm_source=hearst&utm_medium=referral&utm_content=allverticals)
and [http://www.businessinsider.com/yahoo-coo-henrique-de-
castro-...](http://www.businessinsider.com/yahoo-coo-henrique-de-
castro-2012-10) ). By the way I recommend you to watch that 2-minute video
fragment in the last one. It really helps to get grasp of what is he like.

So, first off it isn't that surprising that he gets all that money after all
(it's kinda natural because he is fired). Also, as he _is_ fired, his work at
Yahoo obviously wasn't worth that kind of money.

But while these money aren't disaster for Yahoo, just to think of it — it's
huge. I wonder what he was actually _supposed_ to do to somebody (Mayer) would
like to pay him that kind of money so he would work for Yahoo. I mean, yeah,
we all know that operating business like Yahoo isn't kids game, but just think
of it: why nobody gives _you_ that money so you would work for them?

~~~
Jare
If I was an investor and someone introduced me to our new COO with that video,
I think I'd run out of the room screaming "To the boats!"

------
Drakim
So that's a million dollars every week.

I have a really difficult time imagining that this person was overall
profitable to the company.

~~~
colechristensen
No human being has ever been or will ever be worth a million dollars a week.
The collective dilution that this is anything but criminal is the source of a
significant set of problems our society faces.

~~~
grey-area
Well this depends on how you define 'worth' I suppose.

Certainly individuals can make or lose more than a million in a week for a
company - for example the CEO of Ratners, Soros, the London Whale or other
traders who make millions in one trade (or lose it). Likewise a salesperson
might manage to seal a deal worth 100s of millions in future revenue over a
couple of meetings. As someone on the creative side, this galls me somewhat,
but it is nonetheless true - some positions do potentially bring in far more
money for a company than others.

You may question whether they _should be_ or _need to be_ paid that much,
particularly if other workers in the same company are paid very little, but I
think it's indisputable that individuals can influence profits to that degree
in some positions.

~~~
kabouseng
Only problem is that the salesperson closing the multimillion dollar deal,
isn't actually by himself bringing in all that money. He still needs the
engineers (or whatever) to actually deliver on the contract...

So is it really a case of the salesman bringing in all that money, or the
combined effort of the entire team?

~~~
grey-area
I'm not saying it applies to every salesman, but say a company with an
existing product makes a new sale - the money from that is mostly down to the
salesperson who closes the deal. I'm sure it depends on the situation. Anyway,
the point was more that it is _possible_ for one person to be worth say 10
million USD to a company at a particular time, even if it is quite uncommon.

This is just an expression in the difference in scale between a single
person's resources and those of a corporation - if any individual has access
to the leverage and resources of a large corporation, they could easily
make/lose a lot of money for that company very quickly, sometimes down to dumb
luck, sometimes down to skill at their particular niche.

Of course the society which allows the limited liability company to exist
might want to redistribute some of that wealth more evenly, because capitalism
is pretty unfair and brutal in its raw form, but an individual can certainly
be _worth_ lots to a company in monetary terms, because they can make a lot.

------
NickSharp
But wait, there's more!

According to Bloomberg, he's also receiving $64.6 upon termination, for a
total of $109 Million from Yahoo!

[http://www.bloomberg.com/news/2014-01-15/yahoo-chief-
operati...](http://www.bloomberg.com/news/2014-01-15/yahoo-chief-operating-
officer-de-castro-to-leave-web-portal.html)

 _Since arriving at Yahoo in November 2012, de Castro’s salary, bonuses and
equity grants totaled $44.8 million ... Upon his termination, de Castro will
also receive $64.6 million, including accelerated equity grants, in accordance
with his contract_

~~~
adventured
Yahoo's stock is up over 150% since he arrived. That no doubt has massively
inflated the pay package beyond how rich it already was.

------
puranjay
I'm a little naive about these things. HNews, how is this possible and why
would a company accept such terms?

Also, are good executives really worth the money, or is this something that's
just become accepted practice and companies have no recourse but to follow
along? I know a lot of high-performance people, but I've never known anyone
I'd give $60M for 15 months of work.

~~~
pbreit
Clearly the guy is a good negotiator. And I'm not sure if you're serious
regarding "$60m for 15 months of work". The idea was that he would work at
Yahoo for a much longer time.

~~~
brazzy
If that was the idea, why the hell would they agree to a contract that lets
him keep all of it after working for them only a fraction of the planned time?

~~~
pbreit
I'm sure you can figure out both the cynical and the correct answers.

------
hkmurakami
You know, sometimes I think that the people who play the startup game to
strike it rich (a minority, but they do exist) have got it all backwards.

~~~
checker659
No idea what you're talking about. The number of people 'playing the startup
game to strike it rich' is a minority? I mean, yeah, people want to change the
world but I'm sure they want to get loaded as well in the process.

------
001sky
"We use equity grants to align the interests of employees and shareholders;
without such compensation, they wouldn't take the risks they do."

Wait, what?

~~~
evincarofautumn
Well, granting stock gives some pretty serious incentive to increase the value
of said stock, as an employee. Stock options aren’t quite as compelling.

~~~
bhickey
Executive incentives are negatively correlated with company performance.
There's a body of literature on this.

For example:
[http://online.wsj.com/public/resources/documents/CEOperforma...](http://online.wsj.com/public/resources/documents/CEOperformance122509.pdf)

~~~
evincarofautumn
Hah, that’s actually the reason I edited to hedge with “as an employee”.

------
xacaxulu
I'm not gonna hate on the dude for making money. It doesn't look like he did
anything illegal. If anything I'd like to have a coffee with the guy just to
learn from him.

~~~
collyw
The debate seems to be more whether he earned the (imho outrageous amount of)
money he made, or just turned up and received it.

------
area51org
Please tell me again how Marissa Mayer is an effective CEO.

~~~
_pmf_
> Please tell me again how Marissa Mayer is an effective CEO

She's from, like, Google, which makes her ultra effective.

For some reason. Apparently.

------
verytrivial
Executive compensation committees are stacked with people lining other
people's nest on the expectation that they themselves will be moving in soon,
if not to the same position, some another that has a compensation level that
has similarly drifted into the stratosphere.

------
Kequc
The amounts of money that float back and fourth in america's top 1% is
excessive. I'm not sure if this issue fits here but lately it feels like it
fits everywhere. Start voting for people that will do something to fix wealth
disparity.

------
ilovecookies
This is only news because it has to do with a major tech company and not a
minor one.

It's probably some of the google stocks the company had that's the stock
bonus. Comparing to the income CEOs in the tech industry this is actually
nothing special at all, unless we talk about major companies, like yahoo. Four
of the lower CEOs at google got about 128 million this year.

CEOs of other major tech companies are billionaires in NETWORTH but at least
they now the PR value of not giving their CEOs this much money. Examples of
billionaires that have a relatively low pay, Sergei and Larry (1$), Steve
Ballmer (1 million $) and the amazon CEO (about 50k $).

------
moca
He is really good at negotiating offer letter.

~~~
davedx
And if we raise taxes, all our expert offer negotiators will move to another
country, ruining our C-level-bonus economy! :(

~~~
moca
We can also raise exodus tax. :P

------
hartator
Only 15 months, as you can do something that valuable in 15 months. Maybe this
guy is a genius with a deep expertise in something precious or maybe he
doesn't really have taken any risks by himself since the beginning (cf:
[http://www.crunchbase.com/person/henrique-de-
castro](http://www.crunchbase.com/person/henrique-de-castro)). Impressive CV
though.

------
swframe
Instead of wondering why he was paid that much, we should be discussing how to
get from where we are, to where he is? What does it take? Why is it that so
few of us are doing that?

~~~
truthteller
mostly luck

------
michalu
Wow, corporate parazites. This is why I simply struggle to be anything else
than entrepreneur. It sickens me to see how these "managers" screw
stockholders and employees.

------
rightprice
To all the people who call this irrational, theft, etc. This is a "free"
world. You are also able to work your way to the COO level and get such
bonuses.

------
auctiontheory
Many Googlers called this even as he was offered the job.

------
peg_leg
This is nothing more than legalized theft, nothing more.

------
ronilan
Outgoing personality. It pays ;)

