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Yahoo! Insiders Cash Out: Activist





Sue Decker, Yahoo!'s former president who left the company when she was passed over for the top job for Bartz, was paid total compensation of $16.0 million, $14.8 million, and $15.4 million in 2006, 2007, and 2008 respectively. Over those three years, Yahoo!'s stock dropped 70% from $40.19 to $12.20. That's not pay for performance.

Some corporate governance advocates think a solution is letting shareholders have an annual "say on pay" where they vote in a non-binding way on whether they approve of the company's executive compensation. I'm not sure that will change anything.

If Yahoo! had a "say-on-pay" vote next year and shareholders disapproved of the current pay system, I don't think the current compensation committee members (Ron Burkle, Roy Bostock, and Art Kern) would give a hoot. Real change isn't going to come until these directors are tossed out of their cushy gig, which is why the new SEC proposal for "proxy access" whereby shareholders can nominate directors to run against incumbent directors is so important.

From where I sit the only way to change this ever-spiraling upwards trajectory of executive compensation is ensuring that a significant amount of total officer and director compensation is put at risk and only paid out over time.

These insiders should receive minimal base pay but generous equity and/or option grants that are triggered at pre-defined performance levels with claw-backs should the stock fall back. It's a model that works in the private equity world and it can work for public companies. The claw-backs would prevent excessive short-term focused risk-taking that could harm the company in the long run.

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