Friday, September 11, 2009

Whose Money did Carol Bartz use to pay the tax man?

Bobbie Johnson of the Guardian wrote a balanced post below on the topic of Carol Bartz's $10mm Year One signing bonus.

I think the crux of it was the point he made about Bartz’ decision to use Yahoo shareholders’ money to pay her tax bill instead of her own accumulated wealth.

If she truly believed in the long-term opportunity of YHOO shares, why sell 200,000+ of her total "signing bonus" grant of 600,000+ shares for coming over from Autodesk to pay the taxman? If she paid instead with her nestegg money (which I assume would be substantial enough to cover it), she would still hold all those 600,000 shares from the grant at the end of 2009 – with all the upside that she’s presumably going to help her people produce as part of "her" turnaround.

Instead, she decided not to dip into her pocket. She dipped into Yahoo!’s pocket. And whose pocket is that? Roy Bostock’s nestegg? Ron Burkle’s nestegg? No, the shareholders’.

I don’t disagree with the InsiderScore guy who says “this is common practice.” Yet, does that make it right?

Frankly, I don’t know why more people don’t get more incensed at this "back the truck up" upfront compensation. Why couldn't Yahoo!'s comp committee have structured a back-end loaded deal, with Carol making lots after shareholders did (with clawbacks to boot)? Maybe the topic of executive compensation is too esoteric and people gloss over when talking about RSUs and vesting options.

Bartz is walking down a well-travelled road that many other insiders have figured out. She's not the first to structure deals this way -- and won't be the last. And it’s certainly not an easy problem (exec comp) to fix. Yet it should be debated.

Let's hope some in the media pick up on this and ask some tough questions, rather than fearing they'll lose access to ticked off executives.

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