Mayer $23M golden parachute as Yahoo names post-Verizon deal executive team
cnbc.com
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Nobody in the tech community would have categorized Yahoo as "ready for a turn around". Companies that large that have been mismanaged for so long are filled with middle managers that are better at internal politics than driving initiatives. The odds of yahoo turning around were extremely low. They had to put a deal together to entice someone who had a good reputation from a leading tech company to put their name on the line to go try and sort out a giant mess.
If your gripe is the difference between her salary and the lowest paid then I understand. That doesn't mean you bash Mayer for playing by the rules that society has set up. Good for her for getting paid. That makes you no different than the middle manager who isn't helping their team push forward but instead is sitting in meetings taking pot shots at everyone else.
Support a law that says the top executive can't make x times the total comp of the lowest paid. Of course every law like that will create incentives to structure companies to maximize payments to execs. those conversations would add more to our discussion than just throwing rocks.
Could you provide sources for this? What opportunities were available to Mayer better than being an executive of a multi-billion dollar giant like Yahoo?
Edit: I'm seeing a lot of speculative replies but none that demonstrate an 8 to 9 figure payday from 5 years of sitting in place. Does anyone have an example of an alternative that would've yielded her this much wealth?
edit: by "executive", I was including the whole C-suite – should have clarified.
Running a department of a large company is not the same as being CEO of even a much smaller one.
I figure the only reason she was given a shot was that the Yahoo! board hoped the Google magic had somehow rubbed off on Mayer and that that alone would make the difference. Other than that I don't see what would have gotten her a CEO spot, especially not in a growing company at the multi-billion $ level.
Yahoo! did not have that much to lose at that point in time.
If she had stayed at Google and had some equity comp she would have netted more money. Absolutely.
Ironically, now she does but now any such companies would likely not hire her.
Do you think that Yahoo's board decided to grant Mayer the golden parachute out of kindness, or out of sympathy to a fellow member of the nobility?
Mayer and Yahoo's board negotiated the terms of her contract. The parachute is meant to lure an executive who would normally not want to risk taking the helm of such a high risk company.
With respect to the complexity of running a multi-billion, it still seems a little absurd to phrase out that way. To me, real personal risk is losing your house or dying.
She's also been implicated in some of Yahoo's more embarrassing missteps during her tenure.
So it's important to weight the parachute against her annual salary in a "safe" job for 3-5 years. It may still seem overvalued (or undervalued) but the price was reached through negotiation.
This is kind of rude and condescending and I don't see how prepending it to your comment improves the discussion.
Apologies. No condescension was intended. I was amused by the insinuation in the comment that Mayer was chosen for wholly irrational reasons by the board. I removed the mention of my chuckle from the comment.
Do you think that Yahoo's board decided to grant Mayer
the golden parachute [...] out of sympathy to a fellow
member of the nobility?
Bebchuk and Fried's "Pay without Performance" attribute this to the fact that boards routinely approve pay packages that serve the CEO rather than shareholders, instead of bargaining with the aim of maximising shareholder wealth.
They identify several factors underlying this - shareholder inactivity bears a big part of the blame - but one factor is essentially yes: It's in the interests of people who are at the top of business to approve high pay for people who are at the top of business.
I think a simpler explanation is supply and demand.
If you want to hire as CEO someone who has worked in a close competitor's most profitable business unit and is credited for much of its success and culture, the pickings for Yahoo were quite slim. Also, Yahoo had brought in several other highly successful CEOs, including its original founder, who had all failed miserably. Mayer was clearly a last-ditch attempt to salvage the company.
> pay packages that serve the CEO rather than shareholders
You are describing incentives that do not simply reward share price growth? If so, and if you think supply and demand for qualified executives has nothing to do with it, what kind of pay package do you think Yahoo should have offered?
I'd argue that there has to be a time bias in the package. Share price growth is fine if the board is OK with Mayer taking 30 years to grow the company into a bigger valuation just before deciding to retire. But if more action in the near term is desired, and behavior other than the typical private equity style fat trimming is desired, what options are left?
You get one shot at a job like this. The company making the offer had to make it worth her while to
A. Leave Google, and while she wasn't the top dog at Google any more, she was still extremely well respected, and incredibly well compensated, and--perhaps most importantly--very, very safe. What would it take for you to leave a job like that?
B. Spend her one shot at the ultra-big time at a company near death, where it was likely that she couldn't save it, regardless of what she did.
Yahoo had to offer her the big bucks for to take a risk like that, and one part of reducing the risk to her is to give her a golden parachute, where regardless of whether the venture succeeds or fails, she is still better off than at her old position.
And you have to make all the numbers risk-adjusted.
All of this negotiated _before_ you know if she is going to succeed or fail.
Yahoo wanted her that badly and spent what it took to get her.
Re: well respected and very safe, not really. Worked during that time in Maps. Cracks were starting to show.
She wasn't that well respected in engineering circles. Maybe in product management she was, I don't have much visibility into that.
Also, her safety was in question. She already got shunted to a position with less authority and a further degree of separation from Larry Page. She wouldn't have gotten fired, but a slow stripping of responsibilities and transfer into a ceremonial role probably wouldn't have been out of the question.
There was certainly a group of engineers who didn't respect her, but there was also a very large contingent who did. On the product level, many credit her work on the look and feel of early Google products with a broad portion of Google's early success. (And indeed, one reason she was shunted aside because Google had decided to abandon her vision of Google's look and feel.)
Your last paragraph is pretty much pure speculation. It's pretty clear she was unhappy at Google, but what would have happened if she hadn't taken the Yahoo job? She could have bided her time until a better situation came along. Google wasn't going to fire her.
I don't know of a single engineer who respected her who worked directly with her. The ones who didn't work directly with her were sort of indifferent, and I tended to discount those data points.
Of course, YMMV, plural of anecdote is not data, but the informed engineering sentiment was neutral to negative.
> Your last paragraph is pretty much pure speculation.
It depends on your definition of "safe". She was in no danger of getting fired, as I pointed out. She also was in no position to be taking on more responsibilities or product areas - the fact that she had much of geo taken away from her is a indication of lost faith.
Internally, geo was not considered an especially well run organization for multiple reasons. The chances of recovering from that in an organization is low to none, in my experience.
Or support a law that means that you get paid for as much as you work. That makes more sense, no?
I'm not sure why my comment was downvoted, especially without explanation. I thought it's quite reasonable for a person to be paid as much as he or she works.
I know I'd like $23 million for getting fire, but I'm just a regular person. I thought she would get significantly more.
http://www.recode.net/2017/3/1/14783686/yahoos-lawyer-ousted...
Wrt joining other tech companies, it is debatable whether she could get a CEO role of $30B+ tech company given she never had such an accreditation before.
Wrt your excuses on why she failed, those are exactly that - excuses. If it is such a common knowledge that middle managers are political centers, why didn't she do anything about it? There wasn't a single round of layoffs at Yahoo in her first 2.5 yrs when everyone was asking why Yahoo needs 12k+ employees to support $4B in annual revenues. She failed to figure out what was wrong with Yahoo and take adequate steps to fix it. In essence she completely failed in her duties as ceos.
I think a lot of frustration here is not that CEOs earn that much. I, for one, am totally fine if Satya Nadella earns $100M+ for all the great work and transformation he has done over at Microsoft. So I don't agree with your proposal on fixing the salaries of CEOs based on a multiple. I think what is frustrating here is that here is a CEO who clearly failed across the board and did nothing noteworthy (and made huge costly mistakes such as hiring Henrique de Castro which cost Yahoo $100M) but still was seemingly unaffected in securing the CEO role and being paid handsome salary/bonuses.
That said, obviously it was possible to turn around Yahoo, and the investors, Mayer and the company would be better off if she succeeded. I believe she tried genuinely hard to fix it and I believe she failed harder. Obviously, Microsoft is in a much different position but Nadella has had such success there that you would expect Mayer could've at minimum kept the company from failing.
Yahoo was a capsized ship before Marissa came aboard. The fact that she got it into harbor at all is impressive enough for me. I always assumed there was a near-zero chance that she would save it from complete collapse.
Making bets that don't pay off is par for the course for a CEO (Bezos & Satya are both great at this), some just have the luxury of huge profit centers to point at when investors come knocking. Marissa made her bets — some worked, others didn't. She managed to get an asset that, for a time, was negatively valued in the market[1] sold for parts. How she is compensated for the feat is, I assume, based on her employer's evaluation of that result.
1. http://www.investopedia.com/stock-analysis/070215/why-yahoos...
Also you didn't know about Henrique de Castro catastrophe? Here read this: https://www.google.com/amp/s/www.forbes.com/sites/jeffbercov...
If Yahoo was a capsized ship, why did they have to hire a very expensive exec for the death march? Obviously, the expectation was that Marissa can bring about some improvements.
Apologies for being snarky in this comment as I had a difficult time appreciating your ignorance.
Any response to selling something for money which was, for a time, of negative value according to the market?
Edit: I just realized the first source is an op-ed with as much conjecture as your original post. Nice.
She no longer reported to Larry directly, she reported to Huber who took over all of Geo, which subsumed maps.
Internally, I don't think many people liked working with her. She had a coterie which did her bidding, but most people were not impressed, and there was much rejoicing when she joined Yahoo.
It wasn't a death march, it was hail mary to see if Yahoo could be saved. The majority of her compensation was tied to stock price.
The snark doesn't bother me, but people want to hang the failure of Yahoo on Mayer. She did not take a vibrant, innovative, and successful company and drive it into the ground.
The stake in alibaba helped Mayer give her a windfall of cash she wouldn't have had otherwise. Her incentives were tied to stock price NOT performance. Start bashing the board for tying her compensation to the wrong metric.
Many people don't realize that you can increase share price by "killing" a company if you can either let shareholders come out ahead as a result, or even just minimize their downside from what could have been a much larger loss.
For every CEO out there who makes hugely unpopular decisions that don't appear to be doing what the masses consider to be "the right thing" to get the company back on track...ask yourself if the board might have given direction that led down this path. Ultimately they are the ones the CEO reports to.
All that comes to mind for her tenure is overpaying for a bunch of acquisitions and then destroying what's left of them.
Did she turn a valueless asset into a hundred billion dollar company? No. No one _expected_ her to, some may have hoped that she would but hope is different to expectation as is made clear from her compensation agreement.
"If you turn this company around we'll pay you loads of money. Money stacked so high you'll have trouble keeping them from toppling over. On the other hand if you _just_ make it worth a few billion, we'll _just_ give you a lot of money. The piles will not topple over."
On net her bets were of positive value to investors. That's the whole of the equation once the sale is closed.
Saying her bets won because she found a buyer is like inferring you got some correct answers because you passed a test. It doesn't answer which questions (if any) were actually answered correctly.
It's entirely possible the market had no appetite for Yahoo prior to her becoming CEO, she mismanaged the company but not enough for it to implode under her watch, and the market changed its mind to it in 2016/2017.
So "don't hate the player, hate the game"?
I've never agreed with that idea. The "players" are adults who are perfectly capable of taking responsibility for their own actions.
[1] http://money.cnn.com/2015/12/07/technology/marissa-mayer-sev...
This is a great idea. I think if it looked like she'd take the position she'd get a call from Larry and Sergey asking her to do them a favor and not take the position so Alphabet would have a chance in that market.
They'd likely be willing to let her be CEO of one of the other Alphabet companies to discourage her from going to Uber.
In 2013, Bloomberg estimated that Yahoo's non-Alibaba worth was "as little as $4 billion" [0], so getting sold for $4.4 billion 3 years later isn't success, but it isn't abject failure either.
[0] https://www.bloomberg.com/news/articles/2013-10-16/how-much-...
Maybe the rest of the market was growing, but it didn't seem like Yahoo sans Alibaba was heading in that direction.
Precedent: http://www.politifact.com/truth-o-meter/statements/2015/nov/...
"In 1944-45, during World War II, couples making more than $200,000 faced an all-time high of 94 percent. Sanders said income tax rates under Eisenhower were as high as 90 percent. A look through the records shows that top earners in the eight years of Eisenhower's presidency paid a top income tax rate of 91 percent."
If you theoretically limited all compensation then you would distort the market in other ways - beyond a certain amount of cash and stock compensation (taxed at confiscatory rates), I would start to optimize for things like multiple secretaries, nepotism, a massive office, and other items which wouldn't necessarily help the business.
edit: and I realize I originally used the word "found"
So what I mean is that last time they had high marginal income tax rates holding shares would simply entitle you to a number of benefits, a famous one of which is Disney's Club 33. Lots of things were available though. Yachts, ski cabins, ... Needless to say, zero tax was paid on this.
So good luck with that 90% tax rate. Not going to happen.
I got caught in this when I turned 65 and signed up for Medicare Parts B and D.
This tax is the Income Related Monthly Adjustment Amount (IRMAA). The IRMAA tax is applied in increasing levels as your income goes over certain amounts. But it's not a marginal tax like income tax brackets where the higher rate applies only to your income over the bracket, and the tax rate doesn't change for income below that.
Instead, the IRMAA tax takes a hard jump of $1216/year as soon as your income goes one penny over the line. That one penny of additional income costs you $1216 in IRMAA tax. In other words, the tax on that penny is 12 million percent.
In my case, it wasn't quite so bad. I'm about $1800 over one of the IRMAA income levels. So that $1800 cost me $1216 in IRMAA tax, but I still have to pay federal and state income taxes on the extra $1800. Add it all up, and the total tax on that income is over 100%.
It is a strange thing, and I say downright evil, that my take-home pay goes down when my gross income goes up.
Imagine an income tax model where everything less than $200k was untaxed, and everything above $200k is taxed at 20%, and tax is always rounded down towards the next cent value.
Thus $200.04 pays 0 tax, and $200.05 pays 1 cent tax. That 1 cent is '100% taxed', but given that would exist no matter what values you choose, it's not a helpful way of describing the taxation.
What is your salary, btw? 60k for sitting in cubicle and browsing reddit is absurd for the rest 6-7e9 people, that live outside of our lucky wealthy western world.
BTW this has been tried before: https://en.wikipedia.org/wiki/Revenue_Act_of_1942
It was then, that the employers started giving free insurance to get around wage cap, and seedlings for present healthcare mess were planted.
https://www.ebri.org/publications/facts/index.cfm?fa=0302fac...
If you want efficient production, you don't tax production. You tax consumption. While I may personally think million dollar paychecks are silly, and that the value created doesn't align with the compensation, I'm not convinced that increasing taxes along with income (i.e. loosely correlated with production) is the way to go. Instead, tax consumption.
In other words, if you're going to get taxed all to hell to buy a pointless yacht and $250 million homes, you might not want to do that, quite as much, so you might not care as much about making an extra $20 million, so you might not negotiate such an obscene paycheck. (Maybe you'd even care more about the value you bring to the table and the humans in the picture.)
A better historical argument can be made that America should have never switched from a dividends approach to the stock market during the late 1970s. Our current system rewards quarterly gains for long term losses and this has lead to the various bubbles. I can easily argue we should return to Eisehower tax brackets and also a dividends approach to stock market gains and in doing so history is on my side.
Currently the effective rates are fairly close to the past for high wage earners, lower for low wage earners.
>...In 1958, approximately two million filers (4.4% of all taxpayers) earned the $12,000 or more for married couples needed to face marginal rates as high as 30%. These Americans paid about 35% of all income taxes. And now? In 2010, 3.9 million taxpayers (2.75% of all taxpayers) were subjected to rates that were 33% or higher. These Americans—many of whom would hardly call themselves wealthy—reported an adjusted gross income of $209,000 or higher, and they paid 49.7% of all income taxes.
>In contrast, the share of taxes paid by the bottom two-thirds of taxpayers has fallen dramatically over the same period. In 1958, these Americans accounted for 41.3% of adjusted gross income and paid 29% of all federal taxes. By 2010, their share of adjusted gross income had fallen to 22.5%. But their share of taxes paid fell far more dramatically—to 6.7%. The 77% decline represents the single biggest difference in the way the tax burden is shared in this country since the late 1950s.
http://www.wsj.com/articles/SB100014241278873247051045781516....
Most economists who say that are responding to incentives.
It's a rare economist who would admit in the same breath that this 'inefficiency' coincided (not coincidentally either) with the highest growth rate in recent American history.
[0] http://www.businessinsider.com/marissa-mayer-childrens-book-...
Who eventually is going to run the parts at Verizon (which will not be Mayer) is as of yet unknown I believe.
things are only getting worse.
http://www.motherjones.com/files/blog_ceo_pay_performance.jp...
Though if you're reasonably young and healthy you are in fact subsidizing others, but not because you're self-employed.
It's a public company. It's our business to investigate it and criticize it.
The problem is that CEOs get millions upon millions to fail whereas in an average americans life, a failure of comparable scale (that tanks your personal finances) is met with brutal harshness and almost no safety net. The cultural gap between what is acceptable for the rich and what is for everyone else is widening and causing serious problems in America, both economically and culturally.
The people who agreed to pay her obviously did not consider it obscene or they would not have approved it. They probably have similar compensation at their own companies.
On Hacker News anyone can discuss their opinions and beliefs -- without arguing about whether said opinions and beliefs "should matter."
"Literally none of your business" is expressly wrong if he's a shareholder. But even a non-shareholder employee in tech (or any industry) has a right to be concerned when one individual is compensated for being fired, at 200x the annual rate of a typical tech employee who performs well at their job.
Given that point of view, none of our opinions here matter, so why did you even bother commenting at all?
I don't think I have some right to change her compensation, but medium/long term I worry about a real breakdown in society when there are such gross displays of outsized rewards for failure.
And lots of people buying iPhones and new cars absolutely shouldn't be. Lack of fiscal responsibility is a very, very large problem in the US at the moment, not some imagining of the GOP or whoever else you're comparing to the old French aristocracy.
It's not like a CEO is a hundred times smarter than the people one level below. The reality is that any of the executives could do the same job. At larger companies, what the hell is the difference between managing a division of 500 people or the whole company of 2500? Once you get to numbers that big it doesn't make a difference.
If the CEO is wrong with their strategy, the company loses a lot more money than the CEO's compensation. If the CEO is right, the company makes much more.