Yahoo in the Firing Line: It's About More Than Money
Business + Economy

Yahoo in the Firing Line: It's About More Than Money


Getting fired is never fun, but a giant severance package can help ease the pain. For Henrique de Castro, the Yahoo chief operating officer ousted this month after a little more than a year on the job, the embarrassment of being so publicly canned might not be easy to move past. But it might be mitigated by the millions and millions of dollars he’ll walk away with.

The Yahoo situation is hardly unique in corporate culture, yet it has certainly grabbed a lot of media attention. CEO Marissa Mayer, who came over from Google in May 2012 with the promise of working some turnaround magic, brought in de Castro that October to turn around Yahoo's advertising operations. de Castro was lured away from Google with a compensation package that paid him more than many of Silicon Valley’s top CEOs, including Mayer. Under his direction, though, the company slipped from the second largest digital advertising seller to third in 2013, putting it behind Facebook for the first time.

Yahoo's fourth quarter earnings don't help de Castro's cause either. Net income was up, but that's due primarily in part to a one-time $49 million patent sale. Meanwhile, gross revenue was down 6.0 percent year over year, from $1.35 billion to $1.27 billion. Search and display ad revenue — de Castro's professional raison d'etre — were both down, as well: 4.0 percent and 6.0 percent respectively.

Dumping de Castro was an expensive decision. While early reports estimated that his severance package would be worth more than $42 million, an analysis by the compensation research experts at Equilar found that he could receive at least $88 million and as much as $109 million. Not bad for 15 months’ work.

The COO’s initial contract called for him to receive total compensation of $60 million over four years, in a mix of salary, bonus and stock options. Even the low estimate of $42 million works out to be 70 percent of his projected pay for 31 percent of his projected time at the company. Good work if you can get it, no matter how abruptly it all ends.

Of course, de Castro's potential payout isn't anything new. Terminated, retiring, or quietly resigning corporate executives have been getting eye-watering farewell payoffs for years. When Michael Eisner retired from his position as CEO of Disney in 2005, the total value of his severance package was $220 million. Pfizer's CEO and Chairman Henry McKinnell walked away with $213 million when he retired in 2006.

So why has de Castro's golden parachute gotten so much attention?

On the most basic level, it's simply the corporate termination news of the moment. And, clearly, $109 million is a lot of money for a departing executive whose claim to fame is losing the company's No. 2 position in digital ad sales – and a departing executive who wasn't even a CEO or chairman.

On top of all that, de Castro was pushed out of a very high-profile tech company by a very high-profile (and sometimes controversial) CEO. Mayer's move from Google to Yahoo was big news to begin with. And Yahoo has stayed in the public eye through natural curiosity about the effect Mayer is having on the Internet pioneer's fortunes, and because of some of the moves she's made, like last year's $1.1 billion Tumblr acquisition.

What might really be behind all the attention is that Castro's apparent firing and golden parachute comes barely more than a year after he joined the company…and about a year and a half after Mayer took the reins at Yahoo. It's a big change for a company not very far into its own attempted turnaround, and it's making people wonder exactly where the company is now heading. 

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