Last Friday, Yahoo filed an amended 10-K document that revealed if CEO Marissa Mayer is fired within a year of the sale of the company, she will net nearly $55 million in cash severance, benefits, and accelerated stock options.
Practically every news outlet reported the news this morning with varying measures of shock and dismay. After all, even as Mayer’s tenure at Yahoo has been rocky at best, she’s continued to reap huge payouts for her service. Yahoo’s value dropped 34% in 2015 while Mayer took home $14 million in compensation and benefits.
But while observers may be tempted to compare this payout to other seemingly egregious severance packages over the years—like Mark Hurd’s $34.5 million haul in the wake of a sexual harassment scandal or Leo Apotheker’s $23.2 million package after only 11 months on the job—there are a couple major caveats about Mayer’s deal that make it vastly different.
The key to understanding why Mayer’s potential payout is so large is that it would involve a full sale of Yahoo’s assets. The sale itself would trigger an "acceleration" of vesting in all of Mayer’s options, assuming a stock price of $33.26, or the closing price of Yahoo’s stock on December 31, 2015.
But what if no sale takes place? Or what if Mayer is fired before the sale, which isn’t outside the realm of possibility? In that case, Mayer would only receive $9,087,414—or less than 20% as much as she would under post-sale conditions.
One of the more recent, high-profile examples of a CEO’s severance package seeing a massive increase thanks to a sale is Sanjay Jha, the CEO of Motorola Mobility, who departed after Google bought the company in May 2012. Because he was terminated within two years of a sale, Jha took home $64.3 million. Had he been fired without a sale taking place, his severance and stock option cash-in would have only been around $11 million.
Here are a few other executives who, in the event of a post-sale firing, would reap a massive payday, including Mayer (less acquisition-prone companies like Amazon, Microsoft, and Facebook do not have such clauses in their public disclosures):