Marissa Mayer’s time at Yahoo could be coming to a close, but the CEO could earn up to $37 million when she leaves, depending on how the next few months pan out.
There are two ways Mayer could be ousted: a sale of Yahoo! and removal of the whole board, or if activist hedge fund Starboard Value LP successfully ousts the entire board through a proxy fight.
Both options are possible, especially because Mayer hasn’t been able to turn the company around in her four years as CEO. When she arrived in 2012, Mayer was considered the best person to turn the struggling company around and help it compete against the likes of Google.
However, she hasn’t been able to pull off her major turnaround. Instead, Mayer has consistently been docked pay each year for the company’s poor performance. She made $42 million in cash and stock in 2014 but was docked $13 million for the company’s lack of success.
Yahoo also announced on Monday that it is in early talks to negotiate a sale with an unnamed company, according to CNN Money. Rumors suggest that this company could be Verizon or private-equity firm TPG Capital, both of whom have expressed interest.
Microsoft is definitely not an option since the technology company has only expressed interest in backing a potential deal.
If Yahoo sells and Mayer is forced out, she would get about $37 million in cash and stock. This money includes:
- $3 million in salary compensation
- About $9.5 million in stock awards that will vest over the course of 2016
- About $24.5 million in awards set to vest down the road
If a sale does happen, it would likely need to take place before the annual shareholder meeting in June or July if Marissa Mayer wants her big payout. If it doesn’t and she is ousted along with the rest of the board, then the CEO would receive about $12.5 million including:
- $1 million in salary
- A $2 million cash bonus
- $9.5 million in stock awards that will vest in 2016
Starboard has been pushing for changes at the technology company since 2014. The activist hedge fund owns 1.7% of the company and has expressed regular annoyance with Mayer’s performance the past four years. The CEO’s hefty pay package has also been criticized by other shareholders, who would likely back Starboard’s proxy fight.
The activist hedge fund’s relationship with Yahoo was already tense leading into a meeting between the two on March 10. Yahoo pushed tensions further when it announced at the meeting that it filled two vacancies on the board without consulting the hedge fund. The New York Times noted that the meeting was another bad omen for Starboard, which made good on its months-long threat last week to try and unseat the entire Yahoo board.
Starboard is running nine candidates to try and oust all the incumbent directors in the activist hedge fund’s biggest attempted corporate scalp to date. The slate is the strongest challenge to a board of a major American company in several years. The most prominent example is Darden Restaurants, which owns Olive Garden. Starboard led the charge and ousted the company’s entire board while accusing the company of insufficiently salting its pasta water and over-serving breadsticks, among other issues.
Starboard chief executive Jeffrey Smith released a public letter to investors Thursday, saying, “As you know from reading our prior letters, we have been attempting to work with Yahoo for the past 18 months.” Smith added, “Over this time frame, we have repeatedly requested an opportunity to work with the company, including offers to join the board and work constructively with the current directors. At every step of the way, management and the board have pushed us away.”
In a letter to Yahoo about the proxy fight, Starboard noted, “We have been extremely disappointed with Yahoo’s dismal financial performance.” The letter added that the need to launch a proxy fight was “unfortunate.”
The election of board members will take place at Yahoo’s annual meeting in June or July. For its part, Yahoo said in a statement that it will review Starboard’s proposed board candidates and make a decision regarding them. If the two sides don’t agree by the time the annual meeting comes around, then shareholders would vote on the board members.
Yahoo is used to activist shareholders like Starboard who have tried to change the business’s strategy through noisy public battles. Four years ago, hedge fund titan Daniel S. Loeb helped orchestrate the ouster of its chief executive. This eventually lead to the claiming of three seats on the board and the hiring of Mayer.
Despite benefitting from a previous activist investor fight at the company, Marissa Mayer has expressed frustration with these investors for attacking Yahoo. She argued earlier this month that the company was serving shareholders well by applying most of the sales of its Alibaba stock toward buying back Yahoo shares. Still, her comments probably won’t be enough to keep her job through the end of 2016.
If Yahoo does find a seller, that company will probably pick a new CEO and board to try and find a new direction and purpose for the company. If Starboard and Yahoo can’t make a deal before the annual shareholder meeting, Marissa Mayer and her fellow board members will likely be voted out.
Robert Peck, an analyst at SunTrust Robinson Humphrey, believes that shareholder dissatisfaction with Yahoo will give Starboard “a good chance of winning the proxy contest.”
Either way, Marissa Mayer will make out with a good chunk of money as she exits the company in one form or another.