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Yahoo! Mayer’s Potential Severance Package Draws Significant Attention
December 9, 2015
With investor engagement continuing around what exactly
to do with Yahoo
, media outlets have turned their attention to Marissa Mayer’s potentially large change-in-control payout
in the case that the company were sold and she were terminated. According to the company’s 2015 proxy statement,
that figure stood at nearly $159 million, which was reported in
USA TODAY (and elsewhere) in recent days.
Of course, change-in-control packages are highly dependent on stock price (as is all executive compensation).
In Yahoo’s case, the company’s stock had fallen significantly from fiscal year end to last Friday, when its
meetings with activist investor Starboard Value about the future of the company concluded.
In response to several media inquiries on the subject, Equilar crunched the numbers on Mayer’s current potential
payout, and found it to be vastly different than reported earlier this year—a measly $59.3 million*.
When we shared those figures, we received many questions on how this could be so strikingly different.
So here’s the breakdown.
First and foremost, many things have changed for the company since December 31, 2014—when Yahoo had
just reported mobile ad revenues for the first time and
many were optimistic
about its prospects in that massively growing area of the advertising business.
Since then, the stock has dropped approximately 33%, from more than $50 at FYE to $34.91 at market close on
December 4, when we ran our analysis. With such a large pay package as Mayer's—recall that she was the
14th-highest paid CEO
at all U.S. public companies in 2014—any meaningful change in stock price will have a definitive effect on equity.
Just accounting for the stock difference with no other changes would bring her potential CIC payout down to just
over $100 million in and of itself.
Because Mayer’s
change-in-control plan includes a provision to accelerate all equity to vest immediately, anything that
already vested and paid in 2015 would no longer be included in the potential CIC payout. As such, the biggest
difference from December 2014 to now is that she received a large, one-time retention grant at hiring, which
vests over 5 years. Therefore, as she gets further away from her hiring package and each year of that award
vests and is paid, her CIC package will get smaller. To illustrate the size of this award, if that one-time
retention grant were excluded from the December 4 calculation, her CIC payout would total $21.6 million.
Change-in-control payouts are all about timing, in that they literally shift from day to day based on the market.
As Mayer’s shows, they can also vary widely from year to year even if all things in the stock market are equal
depend on particular equity packages. The bottom line is that she was given some very large awards at signing,
and several of those vested throughout this year and were not replaced, and therefore are no longer included
in her potential CIC payout.
* We know this is figure is by no means measly. In fact, if Mayer’s CIC were to occur as of Friday, it
would have been the 10th largest of any change-in-control payout at companies with more than $5 billion
in revenue over the past 10 years.
For more information on Equilar’s research and data analysis, please contact Dan Marcec, Director of Content & Marketing
Communications at
dmarcec@equilar.com.