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 firstname.lastname@example.org.