
Yahoo's Marissa Mayer could get $55M in severance pay - bane
http://www.latimes.com/business/technology/la-fi-0429-tn-marissa-mayer-severance-20160429-story.html
======
adriand
It's easy to criticize Mayer but I think the expectations of what she could
have achieved were pretty wildly out of whack. I'm reminded of Daniel
Kahneman's dissection of CEO performance and the book "Built to Last", in his
book, "Thinking Fast and Slow":

> The basic message of Built to Last and other similar books is that good
> managerial practices can be identified and that good practices will be
> rewarded by good results. Both messages are overstated. The comparison of
> firms that have been more or less successful is to a significant extent a
> comparison between firms that have been more or less lucky.

> Because luck plays a large role, the quality of leadership and management
> practices cannot be inferred reliably from observations of success. And even
> if you had perfect foreknowledge that a CEO has brilliant vision and
> extraordinary competence, you still would be unable to predict how the
> company will perform with much better accuracy than the flip of a coin. On
> average, the gap in corporate profitability and stock returns between the
> outstanding firms and the less successful firms studied in Built to Last
> shrank to almost nothing in the period following the study. The average
> profitability of the companies identified in the famous In Search of
> Excellence dropped sharply as well within a short time. A study of Fortune’s
> “Most Admired Companies” finds that over a twenty-year period, the firms
> with the worst ratings went on to earn much higher stock returns than the
> most admired firms.

Mayer wasn't lucky. But I bet she's far more competent than most of us.

~~~
hueving
This is just as much an argument in support that she doesn't deserve to get 55
million. Just because you took the helm of the titanic as it was hitting the
iceberg doesn't mean you deserve to make 250 times what a regular engineer
makes.

~~~
tn13
You are not qualified to judge what others deserve. Steph Curry's net worth is
$44M and I don't think anybody deserves $44networth for being good at throwing
balls through hoops.

But it is market that often determines these numbers and we simply do not
possess the information to look at all those variables.

~~~
nihonde
His net worth isn't based on being able to throw balls through hoops; it's
based on his ability to attract and retain a huge audience for advertisers.

~~~
tn13
Doesn't matter. I dont think advertisers should pay that much money to him.

Case in point is that worth of Mayers might depend on far too many factors
which we cant comprehend and we must not judge her.

~~~
nihonde
Advertisers are notoriously poor at proving ROI, so you could be right in your
assessment of his worth to them. Anyway, if putting a ball through a hoop was
a bankable skill, this guy would be a billionaire:
[https://www.youtube.com/watch?v=oG_DQXEK764](https://www.youtube.com/watch?v=oG_DQXEK764)

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nikcub
This story is being misreported, a little. Here is Yahoo justifying her
compensation in their latest annual filing:

> It’s important to understand that Ms. Mayer’s performance-based equity award
> values in the Summary Compensation Table reflect the significant
> appreciation in our stock price between when the awards were originally
> approved by the Compensation Committee and when the applicable annual
> performance goals were subsequently set (the accounting measurement date).
> For example, our stock price increased 178 percent between July 16, 2012
> (the date on which Ms. Mayer’s recruitment awards were originally approved)
> and March 6, 2015 (the date on which the recruitment option’s 2015 tranche
> was valued for reporting purposes). That option tranche had an original
> approval value of $3 million in 2012, and a reported value of nearly $20
> million in 2015, due to our intervening stock price appreciation (which
> benefits executives and shareholders alike).

The exercise price of the options is not lower than the stock price on the day
the options/RSU's were awarded

You could argue that the scheme was poorly designed since she is being
rewarded for the performance of BABA, rather than the performance of YHOO.

The second part is that the severance pay portion is only paid out if Mayer is
fired after a change of control event _on the main entity_. This excludes the
sale of Yahoo internet assets that are currently being negotiated, but takes
effect if there is a takeover of the main entity.

It looks more like a poison pill, or insurance from being fired too early for
Mayer, rather compensation that is intended to be paid.

In related news, Yahoo just finished up a long battle with Starboard (who got
4 new members onto the board - including 3 onto the compensation committee
(which is now at 5)) who took issue with compensation - but I don't think
there is much they can do right now.

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underwater
The defense of hundred million dollar CEO paychecks in this thread feels like
some bizarre Stockholm syndrome.

~~~
pfarnsworth
I chalk it up to the fact that everyone here believes they are going to be the
CEO of their own multi-billion dollar startup, and when that happens, they
want their own $100M/yr pay package as well.

~~~
refurb
Or it could be people thinking "just because someone has more money than I
doesn't mean they took it from me. Good for them."

~~~
newjersey
But they absolutely took it from me when they are being paid by a publicly
traded company.

I am more convinced every day that the marginal income tax above a certain
limit (my proposal is 100 * 2000 * minimum wage per hour, I'm willing to go
lower to build consensus) above which the income shall be taxed at 90% of the
additional income. It is the right thing to do. I want companies to go to the
executives and say "look, it costs us too much to give you any more money.
Please try to cooperate."

It is the right thing to do.

~~~
refurb
It only your money if you own stock in that company.

If you do own stock, then get enough shareholders together to vote on
executive compensation.

That's the proper mechanism. If you can't get enough shareholders to change
things, then I guess it's not that big of a problem to most.

The other option is just don't own stock. That's your choice.

~~~
newjersey
I don't know how a small investor or an individual with a retirement plan can
do that. Corporations accepted the controls when they decided to play in the
big kids pool.

I understand not every decision can be made in a centralized manner but I
think a progressive personal income tax is the right thing to do.

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aaroninsf
In the cold light of history, executive pay in this epoch is going to shock.

Executive 'severance' shall not be comprehended at all.

Something is very, very, very wrong in our culture.

~~~
Gratsby
The pool of people who are capable of leading a company the size of Yahoo
isn't that big to begin with.

Add to that the fact that Yahoo had a recent serial history of hiring then
firing CEOs before they brought in Mayer, and the pool of potential people to
fill the spot shrinks again.

Yahoo had no pathway to success and was likely to fail spectacularly -
especially given the way the board was behaving - which signified to any
potential hire that it might be their last job. The pool of potential CEOs
shrinks again.

Of course the incoming CEO would negotiate a well-beyond-market severance
package. They shouldn't even want to hire someone who didn't have the
foresight to do so.

~~~
dikdik
The "elite" are not actually elite, they are just a wealthy mediocrity. Much
more capable people than Meyer are likely sitting around in a cubicle right
now, but due to their lack of 'correct' connections/pedigree/experience they
will never have even 1/100th the opportunity as Meyer.

~~~
Gratsby
If you're on the board of directors for a billion dollar search engine, who do
you hire as CEO? A guy in a cubicle, or a Stanford grad who was employee #20
at google that spent a career in charge of Search, User Experience, and
Location?

You're acting like they just hired Paris Hilton off the street, when the
reality is that she busted her ass her entire career in a field that few women
have had major success in.

The last CEO to hold onto the job at Yahoo as long as Mayer has is Terry
Semel, and he got booted in 2007.

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gkoberger
Marissa was the 5th Yahoo CEO between 2011 and 2012. Yahoo had a habit of
hiring CEOs and then firing before they had a chance to make progress.

She didn't want to be fired 6 months into the job. Yahoo is a big ship, and
Marissa wanted time to turn it around and see results. I assume she negotiated
a large severance pay not as a way of making lots of money, but rather to
incentive the board to give her a chance.

~~~
remarkEon
-> I assume she negotiated a large severance pay not as a way of making lots of money, but rather to incentive the board to give her a chance.

The game theorist in me says this is probably correct. I suppose it would be
helpful to think of severance pay as a hedge against the downside risk of
failure. Still, it does _sound_ kind of awful that she'll get this much money
with the company itself having, essentially, negative value.

~~~
woodman
If the other player accepts your poison pill, then you should reconsider its
effectiveness. The only rational conclusion you could draw from such a move
would be "Gee, they're willing to spend at least 55 million to fire and hire
as they please."

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nihonde
The thing that really baffles me is that she will be hired by another company
after this for similar comp. Either that, or she'll make a credible run at
political office. It's amazing how little America holds these people to
account for poor performance. It literally does not matter how well they do in
their job.

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fizixer
When she was hired I asked (and what I imagined she probably would've asked),
what is Yahoo!'s business model, how much fierce is the compeition, and how
willing it is to seek other markets (that can serve as low hanging fruit).

I see tech companies business models (very broadly) as being one of a few
kinds:

\- serving masses and revenue-through-ads (the social media model)

\- serving masses and selling a product

\- serving big businesses

it looks like Yahoo! was in the first category at that time and there was
already market monopoly by Google, Facebook, Twitter, and so on. So continuing
what they were doing already but better meant taking those companies head on,
and that was an uphill battle.

So I was of the opinion that the best way forward IMO would be to seek new
markets and low hanging fruit, maybe explore creating a product, maybe get
into hardware, maybe serve big businesses.

Over the years I never heard Yahoo! do something radical, or go into a new
direction, or even seek some safe investment. I might not be fully-informed
though, but if that's really the case then the CEO is clearly to be blamed for
it. So TBH I'm not surprised Yahoo! is still not doing well and has to be
sold.

Looking for corrections/more-info/thoughts in response to my comment. Thanks!

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HappyTypist
Stock compensation to executives should be in the form of options with a
strike price around market value.

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jasonwelk
I guess I will never understand the business model employed by most large
companies that involves paying executives such enormous sums, even in cases
where the leadership failed (I say this in general, not because I think Mayer
failed). It seems there is a big disconnect between performance and
compensation when you get to a certain level of leadership.

~~~
bmmayer1
At that level, in general, boards pay CEOs that much money to leave, because
the cost of them staying on to the shareholders is often many times more. The
severance usually sounds like a lot compared to what you or I make, which is
why it gets such bad headlines, but compared to the often billions of dollars
it could cost shareholders to retain a bad CEO instead of finding a new one;
it's a no brainer.

~~~
dikdik
Wouldn't it be cheaper to fire her and not give her an insane severance
package?

Have the "elite" somehow made it illegal to get rid of them without multi-
million dollar packages? Or is this just an example of, we do it because it's
always been done this way?

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netcan
Executive pay is something I haven't heard convincing arguments about. It's
obviously gone up a lot in recent decades, why?

The incentives seem to be of the heads-I-tail-you-lose variety, for all the
complex performance pay that it is nominally made up of. Most arguments you do
hear seem to apply equally in 1950 or 1980, so why the trend?

The common sense argument that a CEO is so impactful on a company so big, that
CEO pay is always worth it inasmuch as it has any kind of meaningful effect on
performance. 3% improvement in Yahoo's value is $1bn and you'd imagine the 1st
choice CEO is worth at least 3% more that the 2nd. I reckon that kind of
thinking plays a big role here.

This kind of money, and the way so many of these packages seem to come with
weird ways (eg severance pay) to add 7, 8, 9 figure sums in certain cases
seems dangerous. Self interest is naked once these sums are in play and the
room for cynical, self interested choices is very wide for a CEO.

~~~
Erikun
Planet money did an episode on this. As often is the case it starts with a
change in regulation.
[http://www.npr.org/sections/money/2016/02/05/465747726/-682-...](http://www.npr.org/sections/money/2016/02/05/465747726/-682-when-
ceo-pay-exploded)

------
inthewoods
What I find amazing is that Mayer failed to articulate any real strategy for
how Yahoo was going to succeed in the future. To me, that was her only job -
get in, and find a way for Yahoo to move forward. Then execute on that
strategy (hiring/firing/acquisition/etc).

~~~
dforrestwilson1
She was too indecisive, shifted gears too often, and tried to take too many
pages from her past employers.

She did everything a good executive should not do. She tried to acquire her
way to growth when she couldn't stabilize the core business. She hired
consultants to reaffirm things she already knew, and she spent lavishly on
silly things. She was a great middle manager who was never going to be a good
CEO.

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resist_futility
Maybe someone here can explain but why would another large company such as
Verizon want to buy dying brands such as AOL and Yahoo? The user base of such
sites is drying up. They could be replaced by Google tomorrow if people just
stopped using them and went elsewhere for the same information and services.
The brands themselves are losing value everyday as a new generation grows up
without ever knowing what they were.

~~~
mifreewil
Yahoo has basically 3 things that are still valuable and are actually pretty
good: Sports, Finance, Mail. I occasionally use Yahoo Finance myself.

~~~
WalterBright
Yahoo's finance site is far, far ahead of any other that I've tried. I'll be
sorry to see that go. When I try another site I feel like grabbing the collar
of its developers and demanding to know what is wrong with them.

Example:
[https://finance.yahoo.com/quotes/BABA,BIIB,FB,QQQ,UPS,VHT/vi...](https://finance.yahoo.com/quotes/BABA,BIIB,FB,QQQ,UPS,VHT/view/v1)

I.e. with one click I can get a custom snapshot of whatever basket I'm
interested in, with everything there and links to drill down for more.

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randomsearch
Can someone give an example of a similar situation where the CEO was male? Ie
an outsider brought in to save a big tech company that looked doomed and
indeed was.

Jack Dorsey is almost that, but he had previous involvement at the top of
Twitter so maybe not quite the same thing.

The reason I ask is I think Marissa has received an awful lot of particularly
aggressive criticism, and it'd be interesting to see if men in her situation
receive the same treatment from HN, the tech press, etc.

It would be interesting to find a good comparison.

~~~
moonshinefe
Considering most CEOs are male by far, I'm sure there are dozens of cases
historically where it's happened. This isn't the first time a company has been
failing and they fire the CEO and hire someone else, only to fail in the end
anyways.

~~~
randomsearch
Sure. But a specific example from tech in say the last decade?

~~~
moonshinefe
Well, I didn't down vote you because I didn't think it was a terrible
question. I am not well versed in business CEO history though, so I can't
point out specific examples. I just was saying that given the thousands and
thousands of businesses that have existed in history, this situation isn't
unique.

I also am not sure how you'd distinguish she was getting criticized due to her
gender as opposed to it just being an extremely iconic company from internet
history that has steadily gone down the tubes. It's a bad situation and tons
of people have lost their jobs, I'm not sure how one could speculate
accurately that the criticisms are because she's female vs. the other dozens
of issues.

cheers

~~~
randomsearch
I don't disagree.

If you could find an example of a guy in a similar situation who has received
a similar level of criticism, then I think you could at least conclude that
gender wasn't the primary factor in motivating criticism.

If you couldn't find an example, then not much could be concluded.

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heimatau
I was hoping Yahoo would've went private like Dell. So that she'd have the
time to turn the company around. She did a great job improving the tech behind
their company but...Yahoo was like a 1960's abandoned nuclear silo. To
reinvent their company it would be costly and with stock pressures, they
weren't able to do the impossible.

I personally hope YellowPages buys out Yahoo, I think they'd be able to best
handle the transition to making Yahoo change into what it needs to be.

~~~
biot
YellowPages? The joke is they can transition Yahoo into irrelevance?

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rdl
I'm curious what she'd do next. She obviously wouldn't _have_ to work, but I
can't imagine her just retiring.

~~~
sqldba
Destroy another company.

~~~
gscott
You call it destroyed she will put on her resume she doubled the stock price
and found a successful acquisition of the company with a complimentary
partner.

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remarkEon
I know it's been asked before, but is there a critical function Yahoo! serves
right now that would have to be replicated immediately if they went away? I
honestly cannot think of anything that couldn't be reproduced by other tech
and media companies rather quickly.

Disclaimer: I use no Yahoo! products other than Yahoo! Fantasy Sports for
fantasy hockey.

~~~
heimatau
Most don't realize it but Yahoo Small Business and their storefront/hosting
efforts generate a lot of revenue for them. But most of their revenue is from
ads.

~~~
skuhn
Yahoo already indicated that they don't care about that product. It was their
pick to get spun off along with the Alibaba stock as Aabaco:
[https://www.aabacosmallbusiness.com/](https://www.aabacosmallbusiness.com/)

Since the actual spinoff seems to have fizzled, Yahoo does still own them, but
I can only presume they did serious damage to its user trust by leaving it in
this limbo state. They also claimed revenue of $50 million a year when they
announced the spinoff, which is not exactly big money for a place Yahoo's
size.

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ryan606
Every journalist who reports on what they believe to be excessive executive
compensation (or even what they believe to be shareholder-friendly pay) should
be clearly identifying (a) the members and Chair of the Board's Compensation
Committee, and (b) the Board's Compensation Consultant. Although the whole
Board is responsible for CEO pay, the Compensation Committee and the Board's
compensation consultant are primarily decision-makers and influencers,
respectively.

In Yahoo's case, Maynard Webb, Jr. is Chairman of the Board and member of the
Compensation Committee. Jane Shaw (Intel) is Chair of the Compensation
Committee. And Fred Cook is the Board's Compensation Consultant. Regardless of
whether you think her package excessive or reasonable, these are the people
who ought to receive credit or blame.

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moonshinefe
So she lasted like 4 years before the company failed? Somehow I don't feel
particularly sorry for her with $55M in the bank from that job. How obscene.

~~~
0xmohit
> So she lasted like 4 years before the company failed?

Took 4 years for the company to fail, you mean?

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sbardle
Yahoo replaced its native internet pioneer culture with a corporate culture
too early in its development.

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newscracker
I hope Google buys Yahoo and makes something out of the pieces that are
somewhat valuable. Like for example, Yahoo mail is somewhat good and widely
used, but can be made a lot better by Google moving that into the Gmail
platform.

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cerebrum
Don't forget, she gave Yahoo a new logo :-)

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Gatsky
This is just about signalling. You negotiate a package to signal your value,
and the severance signals your value to the next company that will hire you.
As a counterpoint, if she offered to run yahoo for free, there is no way they
would have offered her the position.

~~~
dforrestwilson1
Highly doubt that any corporation would hire her as CEO after Yahoo. I'm not
blaming her for the mess it was in when she joined and she did OK, but lots
and lots of talented people can be an OK CEO.

------
refurb
People seem to forget that companies compete for CEOs. If you want someone to
be your CEO, you need to pay a very high salary regardless of how your company
is doing.

~~~
maxerickson
What is the thing they are competing for? There's a whole lot more people than
there are CEOs, so it seems you need more explanation than _If you want
someone to be your CEO, you need to pay a very high salary regardless of how
your company is doing._

I think they don't particularly know what they are competing for and that this
works out nicely for CEOs. Obviously there are people that can add a great
deal of value to certain situations. I don't think there is a good method of
identifying them. If there was such a method, pay would be lower (or we'd have
many more great companies).

~~~
refurb
_What is the thing they are competing for?_

They are competing for people to run their company? Relevant experience and
skill set? Just like any other job?

My point is, if you have two companies, A and B. A is on a downward slope for
the past few years and needs a turnaround. Company B is on the uphill slope
and is going to be a unicorn.

Just because Company A is doing poorly, doesn't mean they can pay their CEO
less. Why? Because the potential hires could always just go to Company B.

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naivepiano
That's a google lot of money.

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LAMike
Nice, she can throw a few more of her famous parties

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known
Heads I Win; Tails You Lose;

