Bartz's Pay Package Egregious: Activist

Yahoo!(YHOO Quote) CEO Carol Bartz didn't get the "boatloads of cash" for her shareholders from Microsoft(MSFT Quote) as she vowed in May, but she'll take home a boatload of cash herself out of Yahoo! for her work in 2009.

A review of her total compensation plan reveals that Bartz is on track to make $20 million to $30 million this year in cash and stock (depending on if the share price rises 13% by December and stays there for the rest of the year or not); and $187 million for her first four years on the job, assuming the stock can get back to $25 by then.

In last week's Activist column, we shined a spotlight on the large amount of insider selling which has occurred at Yahoo! in the past two years (based on our study of the Securities and Exchange Commission filings leading to other media reports on this topic), including Bartz dumping $2 million in shares in March and June.

Since that column appeared, Bartz, Yahoo!'s PR SWAT team and Bartz's defenders have claimed that there was "no story here," as these were "routine" share sales made to pay taxes on generous Restricted Stock Unit (RSU) grants.

Bartz went so far as to say "I didn't sell anything" on television and there have also been vague references to her shares being "reacquired" again. They have not --as the actual Form 4 SEC filings show. They state only "disposals" of $2 million in Yahoo! shares, which of course immediately lower the company's earnings per share.

Contrary to what any public relations person says, these kinds of tax-related share dumps when RSUs vest may be common at lower levels of the company, but they are not at the highest level, where executives have more than ample means to pay their taxes out of their own pockets. Bartz made $45 million in 2007 alone just from exercising her Autodesk(ADSK Quote) options, so she easily could have scratched together $2 million to pay the tax man if she'd wanted to hold on to her Yahoo! shares.

It turns out that, when you start to peel the onion around Bartz's CEO employment contract, there are many interesting details that Bartz would likely not want discussed. Prior to negotiating with Yahoo! for the top job, Bartz hired an unnamed financial advisory firm to help her.

Later, when the deal was done, she got Yahoo!'s board to agree to Yahoo!'s shareholders paying "up to $150,000 for advisory fees" for her use of that savvy firm (which is outrageous, and she should immediately reimburse Yahoo! shareholders for that with interest).

That negotiated agreement is a good one for Bartz, as this analysis shows. Making reasonably conservative assumptions, Bartz should get $187 million for her planned four years of work at Yahoo!

One small part of that agreement is something Yahoo! calls the "Make-Up Grant." Because of "forfeiture of the value of equity grants and post-employment medical coverage from" leaving her old executive chairman job at AutoDesk, which has one-fourth of the market cap of Yahoo!, Yahoo!'s board said she was due $10 million.