Friday, September 11, 2009

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

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, 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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