By Hoang Nguyen – Senior Research Associate
On July 16th, 2012, Yahoo! Inc. announced the appointment of Marissa Mayer as President and CEO and member of the board effective July 17th, 2012. Ms. Mayer was one of the first employees at Google, Inc. and most recently was Vice President of Local, Maps, and Location services. The media has labeled her a “celebrity CEO” and an examination of her employment contract would appear to confirm that she is being paid like one.
According to the company’s SEC filing, Ms. Mayer will receive an annual salary of $1 million and a target bonus of 200% of base salary. The 2012 bonus will be pro-rated. She will also receive a $12 million equity award for 2012. Half of the award will consist of restricted stock units (RSUs) that simply vests over three years and half will consist of performance-based stock options that will vest over 2.5 years. While it might be expected that these awards alone would retain her for three years, the board decided to grant her an additional one-time retention equity award worth $30 million, consisting of time-vesting RSU’s that vest over five years and performance-based stock options that will be granted in November 2012 and have both time- and performance-vesting requirements over 4.5 years. In a somewhat surprising decision, given the committee’s need for independence, the Compensation Committee will establish the performance-vesting criteria after consulting Ms. Mayer. According to the company’s most recent proxy statement, performance-based equity awards that vested in 2011 were based on the company’s annual financial performance. If this will be the case for the performance-based stock options, then the company will continue to lack meaningful incentives tied directly to the company’s long-term success.
In addition to these already substantial awards, Ms. Mayer is also receiving a “make-whole” award of $14 million in RSUs that will vest through 2014 to compensate her for unvested equity she is relinquishing by leaving Google. If she is terminated without cause, any outstanding and unvested “make-whole” RSUs will fully vest upon such termination, nor do these awards appear to have performance conditions. The company will also reimburse her for legal fees incurred in connection with entering into the employment agreement and up to $50K of security expenses per year.