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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

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.

thethimble 13y ago
From Yahoo's perspective, was the investment worth it?
- ilovecookies 13y ago
  Considering the stock went up 150% would say so, from a PR point of view, definitely not.
  - markerdmann 13y ago
    At least as of July 2013, the appreciation in the stock price was due to the increase in the value of Alibaba and Yahoo Japan. "But Yahoo’s turnaround remains very much a work in progress. Although Yahoo’s stock price has soared by a whopping 73% since Mayer become CEO, that gain is almost entirely attributable to investments the company has in two Asian companies, the Chinese e-commerce giant Alibaba and Yahoo Japan. Yahoo’s core advertising business remains sluggish amid intense competition from rival Internet giants like Google and Facebook." http://business.time.com/2013/07/16/yahoo-ceo-marissa-mayers-one-year-report-card-the-clock-is-ticking/#ixzz2qYNSfRHR http://business.time.com/2013/07/16/yahoo-ceo-marissa-mayers...
    - jackgavigan 13y ago
      Besides, stock price isn't a good measure of de Castro's performance. Advertising revenue is better. Over the past year, Yahoo!'s advertising revenue has declined while its competitors' have grown. Facebook took the #2 spot in US digital advertising revenues (Google is #1) from Yahoo! last year. If Yahoo!'s advertising revenue had grown increased at the same rate as, say Google's (up 15% over the past year), revenue would have been ~$600m higher. It's interesting that de Castro started out at McKinsey. The book 'Dangerous Company' portrays McKinsey consultants as Powerpoint jockeys who are great at formulating high-level strategy but not so good at actually running businesses. Perhaps de Castro benefited from a rising tide at Google but lacked the turnaround skills required at Yahoo!
      - NickSharp 13y ago
        Heh. I bet his Powerpoint slides are impeccable.
NickSharp 13y ago
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".
- argonaut 13y ago
  Key difference: de Castro was (presumably) poached by Marissa. This is pure speculation, but one way for her to have done it would be to offer downside protection.
- vidarh 13y ago
  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.
- soneca 13y ago
  Before making any conclusion, compare the ratios of your founder salary/your startup's revenue and of De Castro salary/Yahoo's revenue. I would guess the conclusion is that even that "$25k/year" may be too much and De Castro was ok. Unfair to compare absolute values of both parachutes but not both companies sizes.

thethimble 13y ago

From Yahoo's perspective, was the investment worth it?

ilovecookies 13y ago
Considering the stock went up 150% would say so, from a PR point of view, definitely not.
- markerdmann 13y ago
  At least as of July 2013, the appreciation in the stock price was due to the increase in the value of Alibaba and Yahoo Japan. "But Yahoo’s turnaround remains very much a work in progress. Although Yahoo’s stock price has soared by a whopping 73% since Mayer become CEO, that gain is almost entirely attributable to investments the company has in two Asian companies, the Chinese e-commerce giant Alibaba and Yahoo Japan. Yahoo’s core advertising business remains sluggish amid intense competition from rival Internet giants like Google and Facebook." http://business.time.com/2013/07/16/yahoo-ceo-marissa-mayers-one-year-report-card-the-clock-is-ticking/#ixzz2qYNSfRHR http://business.time.com/2013/07/16/yahoo-ceo-marissa-mayers...
  - jackgavigan 13y ago
    Besides, stock price isn't a good measure of de Castro's performance. Advertising revenue is better. Over the past year, Yahoo!'s advertising revenue has declined while its competitors' have grown. Facebook took the #2 spot in US digital advertising revenues (Google is #1) from Yahoo! last year. If Yahoo!'s advertising revenue had grown increased at the same rate as, say Google's (up 15% over the past year), revenue would have been ~$600m higher. It's interesting that de Castro started out at McKinsey. The book 'Dangerous Company' portrays McKinsey consultants as Powerpoint jockeys who are great at formulating high-level strategy but not so good at actually running businesses. Perhaps de Castro benefited from a rising tide at Google but lacked the turnaround skills required at Yahoo!
    - NickSharp 13y ago
      Heh. I bet his Powerpoint slides are impeccable.

NickSharp 13y ago

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".

argonaut 13y ago
Key difference: de Castro was (presumably) poached by Marissa. This is pure speculation, but one way for her to have done it would be to offer downside protection.
vidarh 13y ago
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.
soneca 13y ago
Before making any conclusion, compare the ratios of your founder salary/your startup's revenue and of De Castro salary/Yahoo's revenue. I would guess the conclusion is that even that "$25k/year" may be too much and De Castro was ok. Unfair to compare absolute values of both parachutes but not both companies sizes.