For Yahoo! (YHOO) CEO Terry Semel, the wait was worthit.

The executive didn't get a bonus for 2003, even after Yahoo!stock more than doubled. But Semel won't exactly go wanting, either.

Semel waited until last month to receive 2.9 million stockoptions based on his performance last year, according to the proxystatement Yahoo! filed Friday and revised Monday. Because 900,000 ofthose options vested immediately, the recent run-up in Yahoo!'s stockgives the Yahoo! chief a $12 million paper profit on that optionsgrant -- a nice addition to Semel's base salary of $600,000.

Meanwhile, three other top executives at the Internet bellwetherenjoyed generous raises in 2003, in a further demonstration of howYahoo!'s financial performance and surging stock price havetranslated into executive compensation in Internet time.

Semel's options grant also spotlights the significant impact thatexpensing options will have on Yahoo!'s bottom line, should theFinancial Accounting Standards Board get its way in mandating howcompanies treat stock options grants.

Yahoo!'s shares, which leaped 16% Thursday following the releaseof shockingly strong first-quarter results, dropped $1.03 Monday to$55.18. The stock has more than tripled over where it was trading inJanuary 2003.

Redefining the Landscape

Clearly, options are a large part of the compensation package forSemel, a Hollywood veteran who took the helm at Yahoo! three yearsago. In 2003, Semel realized $25.4 million by exercising 1 millionstock options.

In granting Semel's new options last month, Yahoo!'s compensationcommittee said it took into account such 2003 achievements asYahoo!'s "redefinition" of its search business, the strengthening ofits core businesses, completed deals such as the acquisition ofpay-per-click search engine marketer Overture Services, and Yahoo!'s"enhanced financial performance."

The $600,000 cash portion of Semel's 2003 compensation, however,represents a decline from his year-earlier salary-and-bonus packageof $1.3 million. In Monday's revised proxy statement, which thecompany said it issued to correct clerical errors in the boardcompensation committee's report, Yahoo! said Semel's base salarywouldn't change from 2003 to 2004.

Semel wasn't the only top executive to have a nice set of paydayslast year. Chief Financial Officer Sue Decker, Chief OperatingOfficer Dan Rosensweig and Chief Technical Officer Farzad Nazem eachreceived 45,000 shares of restricted common stock -- 35,000 shares ofwhich vest in three years, and the balance of which are linked tocertain unspecified performance-based objectives. Fully vested, thoseshares were worth $1.9 million to each executive when they weregranted, and are worth $2.5 million at Monday's prices.

Paying Off
Yahoo!'s long rise

Decker, Rosensweig and Nazem each also received 125,000stockoptions. Those are worth $3.2 million to $8.2 million to eachrecipient, depending on whether one believes that Yahoo!'s stock willappreciate 5% or 10% annually over the 10-year term of the options.

The three executives all received salary and bonus raises aswell. Decker's salary and bonus, for example, went from $944,000 in2002 to $1.2 million in 2003.

Big Numbers

Among executive officers whose compensation was itemized in theproxy, Nazem distinguished himself by exercising the most options in2003, netting $48 million. (As with Semel's exercises, that numberrepresents the difference between the option's strike price andYahoo!'s share price when options were exercised, and doesn'tindicate whether or not Nazem sold any shares.) Semel held $199million worth of exercisable, in-the-money stock options at 2003'sclose, according to the proxy, while Nazem held $102 million worth.

Critics of lavish executive pay have taken aim at stock optionsin recent years, saying big option grants motivate executives tofocus on pushing the stock up now at the expense of the long term.Whether or not that has been the case with Yahoo!, the move toexpense stock options would have had a major effect on the company'snet income in recent years, judging from Yahoo!'s 2003 annual report.

Had Yahoo! used what is known as the fair value method, thecompany's reported 2003 net income of $237.9 million, or 37 cents pershare, would have been reported as $34.8 million, or 5 cents pershare, fully diluted. Yahoo!'s 2002 net income of $42.8 million, or 7cents per share, would have been converted into a $440.1 millionloss, or a loss of 74 cents per share.