Marissa Mayer’s Payday
fortune.com
fortune.com
Shareholders want near zero executive risk, and so they are willing to pay top dollar for proven executives...
That way, if things do fail, they can be confident that scrimping to save a few million in comp wasn't the reason they lost billions.
We overpay for quality in many areas of the economy. Neurosurgeons are one example. Roughly 0.5 people from each of the the graduating classes of the top 10 medical schools becomes a neurosurgeon. Supply is very, very small because the bar is so so high. Why? Because when someone is doing surgery on our brains we are completely fine with having a 10x overqualified doc doing the surgery.
This is similar to how the price of achieving each additional "9" of reliability is exponentially greater than the last one.
Yet systems with 99.99999% reliability still fail, some neurological procedures fail, and some highly paid CEOs do not lead their companies to glory.
Yahoo's shareholders decided to hire Marissa instead of many other, cheaper options. Nobody was duped, fooled, or scammed. Kobe misses the winning three pointer to lose a game now and then. Mayer is the closest thing the valley had to a sure bet for a company in need of product execution, so it's hard to fault Yahoo for wanting to recruit her.
It's too bad it didn't turn out, but let's hope she does something risky with all the money :)
It was the Board of Directors who hired her, the shareholders are asked to approve (essentially a rubberstamp)
She was far, far from a zero-risk hire. She had only worked for one company, had zero executive experience at the level required at Yahoo.
Enough with the celebrity cult we shower on CEOs - leave it to reality TV starlets.
She'd also helped create and shape Google's culture and arguably brought with her to Yahoo several billion dollars worth of Google's trade secrets and operational strategies, not to mention her knowledge of key players inside google who Yahoo might be able to poach to accomplish specific initiatives.
Yahoo had already tried a media exec and its own founder, neither of whom could figure out a recipe for success.
Could it have been the entire team(very good) she worked with at Google that made her seem like such a superstar?
Major successes take a great team and a fair bit of luck and good timing. This is (I think) why very few highly successful people manage to do it again when starting from scratch (even with the advantages of lessons learned the first time).
I think one problem with human society is that we want so badly to respect success and put individual people on a pedestal, which creates an unfair expectation of genius, when in fact it was likely partly luck and partly timing.
In leadership roles, where the development of a cult of personality is helpful (Mayer, Trump, Clinton, etc.) the name brand of the leader is part of the value proposition, but it reinforces the idea of genius which is usually not remotely true. But it can work because of the desire of humans to align behind chieftain and themselves avoid risk of failure.
I personally think the "leader as servant" model would have been most useful for Mayer, but instead she immediately ended some perks and reined in remote workers. This suggests that she fell into the trap of feeling like she was entitled to authority she (as a leader) hadn't yet earned.
2. Her poaching Google stars? She hired and, 15 months later fired, Henrique De Castro, whose "severance package, estimated to be more than $60 million, was one of the largest golden parachutes ever given to a terminated executive" [1]
3. >neither of whom could figure out a recipe for success
Steve Jobs turned around Apple after a couple of disastrous CEO before him (Sculley, Amelio, etc)
1. She is getting rewarded even though her performance as CEO of Yahoo! was way less than expectations. Expectations being the salvation of Yahoo! as an independent company.
2. She is being rewarded for selling Yahoo!
People are focusing on #1, but that is really past performance and past stock grants. She has plenty of previously granted stock based on previous performance, but she did not achieve everything she could have: This past year, Mayer had to forfeit just over 400,000 of those performance shares.
Once the "for sale" sign went up, her incentive became "sell Yahoo!", not "save Yahoo!" because that is what her incentive (severance package) aligned with the moment the "for sale" sign went up.
I expect that the Board understood this very well when they created her severance package.
> Yahoo is also paying to help Mayer land a new job. During her period of transition, Mayer will presumably need office space, and someone needs to pay for it. The company will put up $15,000 for 24 months of outplacement services for Mayer.
> Mayer is entitled to receive her base salary, which in 2015 was $1 million, for two years after she leaves the company.
Clearly she set the same "you get your salary for 2 years after leaving" + office space package up for all the developers in the company...
The people complaining about Mayer probably have more in common (and have more empathy towards) the employees than the shareholders, so they should show disapproval.
perhaps the value is she could have possibly got $5 million per year for 2-3 years after leaving, so this is a net return of $8-$10 million to the company after she's gone?
This is just to many a new exemplary example of it.
And she is only singled out because she chose to be high-profile.
> Despite generating roughly $5 billion in annual revenue and drawing 1 billion monthly users, Yahoo's core internet business is valued at less than zero by the public market.
> Instead, most of its value is ascribed to its ownership stakes in Alibaba and Yahoo Japan, which together outstrip the value of Yahoo's $35 billion market cap.
What she did isn't illegal, nor is it particularly unexpected these days. But it is selfish and slightly grandiose. No one is questioning how much she was paid during her tenure, just this fluffy extra crap at the end that makes it seem like she was royalty. While it shouldn't be made illegal, it should be shamed to a degree. Because if not, then where does it end?
I need to up my negotiation game. :)
Plus, 2k a month? I can't even imagine what amazing Super Platinum plan she must have.
Surely you can get much higher than $2k/m in silicon valley.
somewhat OT, but ... is there any value in billionaire's having 'health insurance'? When you are worth more than some smaller insurance companies... what value is there in buying insurance? Aren't you already self-insured? There may be procedures that the insurance company wouldn't fund anyway, but you can just pay for it yourself?
EDIT: Just looked up family of 3 - higher end "blue cross" in CA may be $1200/month. Other companies are cheaper (wow, must be nice to have so many options! in NC, I have 2 options, and only 1 the year before, that's it).
Throw in a dental plan, and that might bring you to ~$1300/month. Add in expected increases over the next 2 years and.. $2k/month is probably still on the high side, but perhaps not by too much? http://www.coveredca.com/news/PDFs/CoveredCA-2017-rate-bookl... shows that there's an expected 13% average increase in 2017.
Under the ACA the maximum ratio between insurance rates for old and young is 3:1, but the Society of Actuaries estimates that healthcare costs for the elderly are roughly 4.8 times as expensive[1].
1: Referenced here on page 22: https://www.cbo.gov/sites/default/files/114th-congress-2015-...
I'd have thought, for example, if there's a lifetime cap of $10m on services from my insurance company, and I have, say, $50m in an account just for my medical needs, I'm more than self-insured compared to what I'm protecting myself from with insurance. It seems 'lifetime caps' are largely gone for most services now.
EDIT - thanks for your reply.
I would question the motives of anyone describing this as unusual or especially egregious. Are you upset about how business is structured now, or do you have a specific vendetta against Mayer?
Paying her salary for two years AFTER she leaves, including her health insurance, AND office space for her to find a new job. Is completely ludicrous.
Yes, the company is down $2.4 billion because the core Yahoo! business was spending $400MM/quarter more than it was taking in -- on the backs of those investments. After 4 years of trying to turn that around, they sold off that money pit for $5B cash, which is more than that $2.4 billion the company is down. Sounds like a pretty good outcome for YHOO's board and owners.
Dealing with that board and owners, attempting to maximize the shareholder return on those investments you mentioned, was as large a part of her job as trying to maximize the return from the bleeding tech business. She spent much of late 2014 and early 2015 trying to spin off the investments into a separate company to minimize tax liability, ensuring Yahoo!'s shareholders get as much value as possible if Yahoo! eventually sells some of those shares for cash. You can't write off her stewardship of the value of the BABA and YJP holdings, and their contribution to YHOO, just because they were initially purchased before she took the job.
Instead of competitiveness and productivity seeking, we get pump and dump:
- pump the stock price up (workforce reductions, stock buybacks, mergers and acquisitions)
- cash out
- let the company crash and burn.
Rinse and repeat.
I was asked to look at a role at Hibu (ex Yell) in the Uk and I told the recruiter id want a serious premium and some very good share options to even consider it.
http://www.independent.co.uk/news/world/americas/highest-pai...
http://www.independent.co.uk/news/world/americas/highest-pai...
If you're not, it's not your money, so why would you accept it or not?
So there is a legitimate question to be answered about poor corporate governance when you tell people that they need to invest their money in stocks to ensure their comfort in later life.
They don't have to, they could buy bonds if they feel uneasy with the risks associated with stocks.
To expect better or different behavior is naive. Expect corporations (particularly publicly traded ones) to behave in ways which frequently benefit the heads, and often hurts the laborers.