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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InformationWeek: Yahoo CEO Stock Sale: $10M Bonus For First Year?

Posted by Bob Evans on Sep 11, 2009 10:26 AM

During her first half-year as Yahoo! CEO, Carol Bartz has sold more than 138,000 shares of Yahoo! stock for almost $2 million. That's all squeaky clean and above board, but shareholders deserve to know why their new CEO is selling what they're holding—and the excellent money manager Eric Jackson offers some compelling conclusions on guaranteed compensation versus performance-based compensation.

In Jackson's post at SeekingAlpha.com, he opens with a video clip of an interview with Bartz on CNBC. Jackson describes part of the exchange and zings the interviewer for glossing over Bartz's sale of almost 2 million Yahoo! shares shortly after taking over as CEO:

Carol Bartz, CEO of Yahoo! appeared on CNBC's Squawk Box Thursday morning talking about their search deal with Microsoft, that she would've taken the MSFT buyout offer at $33 or $34 ("you think I'm stupid?"), their investment in Alibaba, and the analysis I did last week the analysis I did last week which showed she sold $2 million in stock between Feb. 1 and June 30th this year.

Carol's response (at the very end of the video below) to Joe Kernan's question of "You're going to be there a while, I guess, huh? If you sell for tax reasons that doesn't mean anything, right?" was: "I didn't sell anything.... I bought this...." Joe's follow-up was: "You reacquired it, right?" Carol said: "Yeah." And, later, she said: "I'm around a long time." [Her comp plan says she'll be around for 4 years, by the way.]

What's the upside for any big media journalist (at CNBC or elsewhere) to pull a Mike Wallace and aggressively question Bartz? The risk is that you will lose access to her in the future. Therefore, I understand why big media takes a friendly approach. Nevertheless, Bartz -- and other CEOs -- deserve to be asked legitimate (even if they are uncomfortable) questions and they should be forced to answer them -- not laugh them off.

Jackson then offers links to relevant SEC filings about Bartz's transactions and offers this general conclusion: "What this means is that—at current prices—Carol will get about a $10 million bonus if she sticks around until the end of the year (before taxes)." And he says shareholders deserve more information than Bartz is giving:

*Did shareholders in effect give Bartz an after-tax signing bonus of $5M?
*What was her point in the interview about "I didn't sell anything. . . I bought this. . . "?
*Is this an example of insider executives negotiating for guaranteed compensation versus performance-based compensation?

Jackson's dead-center-perfect conclusion is that while he doesn't "begrudge Bartz making money for taking the job at Yahoo! and working to turn things around," he believes Bartz "should have been smarter and agreed to make her boatloads of cash down the road, after first making lots more money for shareholders."

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