No idea what you're talking about. The number of people 'playing the startup game to strike it rich' is a minority? I mean, yeah, people want to change the world but I'm sure they want to get loaded as well in the process.
Only 15 months, as you can do something that valuable in 15 months. Maybe this guy is a genius with a deep expertise in something precious or maybe he doesn't really have taken any risks by himself since the beginning (cf: http://www.crunchbase.com/person/henrique-de-castro). Impressive CV though.
Well, granting stock gives some pretty serious incentive to increase the value of said stock, as an employee. Stock options aren’t quite as compelling.
That "what" was, I believe, a response to the implication that they want to encourage risk-taking, something that is not generally seen as unconditionally desirable (especially in the light of recent developments).
No human being has ever been or will ever be worth a million dollars a week. The collective dilution that this is anything but criminal is the source of a significant set of problems our society faces.
Nonsense. I don't know about this COO at Yahoo, but when you take decisions at the top of a multiple billion dollar company that will significantly impact the topline or bottomline of your company, of course your job is worth millions of dollars, because your level of impact is way higher than the janitor cleaning the floor in your offices.
You are making an assumption that those decisions generally do something nice for the company. There is an army of people whose only known accomplishment is getting in the right place at the right purely out of luck and riding a luck wave. They themselves would have contributed nothing to the that wave.
Once they do that, its often assumed that all their success was their own work. To expect such people to build anything of real value is a expectations gone too wrong.
While they are at the top, they socialize with their equivalent highly paid buddies. Most of them are in the same league as their's. Its basically a mutual-protection club, in which you need to take care of each other.
>>level of impact is way higher than the janitor cleaning the floor in your offices.
In case of people like these, if exec was swapped with janitor, it would make 0 difference. The Janitor would probably even perform better than the exec.
I can't say anything about the 'per week' or similar time interval units, but hasn't Steve Jobs created huge amounts of wealth for society through jobs creation/economic trades? and for that has been worth his salary? (that is only one example...)
Steve Jobs owned billions of dollars in Apple and Disney and after 2003 earned no salary or other compensation from either (aside from the cost of operating his aircraft which was a few hundred thousand dollars a year). He is a bad example as I was talking about salary.
Stock is generally viewed as part of compensation, no-one's talking purely about salary here and the higher you go on the corporate ladder, the less important salary becomes.
Thanks, I wasn't aware of that, however he did receive $74.75 million in stock in 2003, which was worth a lot of money, and the travel expenses included a $90 million jet!
So he received a lot of compensation in kind (and was probably worth it to Apple).
Well this depends on how you define 'worth' I suppose.
Certainly individuals can make or lose more than a million in a week for a company - for example the CEO of Ratners, Soros, the London Whale or other traders who make millions in one trade (or lose it). Likewise a salesperson might manage to seal a deal worth 100s of millions in future revenue over a couple of meetings. As someone on the creative side, this galls me somewhat, but it is nonetheless true - some positions do potentially bring in far more money for a company than others.
You may question whether they should be or need to be paid that much, particularly if other workers in the same company are paid very little, but I think it's indisputable that individuals can influence profits to that degree in some positions.
The guy who sold me a MacBook didn't earn 200x as much as the guy who sold me nice cheese. They both spent (roughly) equal time with me, had equal amounts of domain-specific knowledge, and were as I estimate, equally helpful. Does your insistence that pay scales work in both directions? I doubt it.
As an engineer, a manager, and a customer, I want to see skill and effort rewarded fairly and equitably. Absurd sales commissions and top executives earning a million dollars a week are nothing but theft from customers, stockholders, and the people doing the labor to create the product.
Only problem is that the salesperson closing the multimillion dollar deal, isn't actually by himself bringing in all that money. He still needs the engineers (or whatever) to actually deliver on the contract...
So is it really a case of the salesman bringing in all that money, or the combined effort of the entire team?
I'm not saying it applies to every salesman, but say a company with an existing product makes a new sale - the money from that is mostly down to the salesperson who closes the deal. I'm sure it depends on the situation. Anyway, the point was more that it is possible for one person to be worth say 10 million USD to a company at a particular time, even if it is quite uncommon.
This is just an expression in the difference in scale between a single person's resources and those of a corporation - if any individual has access to the leverage and resources of a large corporation, they could easily make/lose a lot of money for that company very quickly, sometimes down to dumb luck, sometimes down to skill at their particular niche.
Of course the society which allows the limited liability company to exist might want to redistribute some of that wealth more evenly, because capitalism is pretty unfair and brutal in its raw form, but an individual can certainly be worth lots to a company in monetary terms, because they can make a lot.
Plenty of doctors literally and directly save more than one human life per week. No one would argue a human life is worth less than a million dollars. So, there :-)
According to the Yahoo wikipedia page, their yearly revenue is 4.98 billion or about 96 million per week. So to make himself worth 1 million per week he just has to increase revenue by a hair over 1%.
Doesn't seem outrageous put like that, or have I completely misunderstood?
I'm a little naive about these things. HNews, how is this possible and why would a company accept such terms?
Also, are good executives really worth the money, or is this something that's just become accepted practice and companies have no recourse but to follow along? I know a lot of high-performance people, but I've never known anyone I'd give $60M for 15 months of work.
My hunch is "accepted practice". Would quality executives work for a company that refused to provide that? I dunno. Perhaps. Are there executives who'd willingly work for less money in order to undercut their competition in the labor market? Probably, but are there enough to affect anything? Less likely.
>>Also, are good executives really worth the money
I wouldn't hire these executives to do anything, let alone run a company. Most of them only get into a company because of their network. And once they come in, they have a gang of sycophants built up to assist them through their loot. They last 2-3 years any where they go. After which that 'you cant fool all the people all the time' thing kicks in and they are fired. But what's the point any way? there are enough idiots who will be ready to hire them again and they have a big enough network to help them out.
>>or is this something that's just become accepted practice
I attended a start up conference here in Bangalore. A exec of a big company was invited to speak. His full talk was BS, of course. But he repeatedly emphasized start up's were missing 'expert exec leadership' and VC's weren't paying up enough to ensure such leadership came on board. In short his whole talk was cribbing about how start ups were asking them to perform to get payed and were not just paying them while they wish to sleep on their jobs.
>>I've never known anyone I'd give $60M for 15 months of work.
Any one who is that capable is likely making doing his own work. And never this way.
Clearly the guy is a good negotiator. And I'm not sure if you're serious regarding "$60m for 15 months of work". The idea was that he would work at Yahoo for a much longer time.
If that was the idea, why the hell would they agree to a contract that lets him keep all of it after working for them only a fraction of the planned time?
previous to the (failed) swiss referendum to limit top executive pays by law I saw an interview from the proponents.
The statement that caught my attention was:
"we tend to believe that executive positions are a free market where good wages goes to those that merit them, but it's not, it's a collusive system in which offer and demand is played by the same guys. I give you this board place now, then you leave, you'll get me a board position later in your next company and so on."
I don't know if this is effectively true, but it does ring a bell.
It's because Mayer is an institutional executive, in the Steve Ballmer or Tim Armstrong model. She likes to surround herself with yes-people, and those that are from the same system that she comes from.
The things she is going to accomplish while at Yahoo are: 1) burning through the Alibaba money; 2) riding the stock market bubble until it crashes, temporarily making her look good; 3) not boosting sales or profits much at all if at all
And a few years from now (I'd peg it at three or less at this point), that'll be that, and she will be done at Yahoo.
It arguably became accepted practice after the compensation of top execs in publicly listed companies became public knowledge, after which said compensation skyrocketed as these execs suddenly had a drastically better bargaining position.
Whether they're worth it or not is another matter. But clearly boards tends to think they are.
Since arriving at Yahoo in November 2012, de Castro’s salary, bonuses and equity grants totaled $44.8 million ... Upon his termination, de Castro will also receive $64.6 million, including accelerated equity grants, in accordance with his contract
Executive compensation committees are stacked with people lining other people's nest on the expectation that they themselves will be moving in soon, if not to the same position, some another that has a compensation level that has similarly drifted into the stratosphere.
The rationale for these kind of severance packages is that this is what it takes to hire a top executive away from a top company and into a entirely new role at a riskier company. When an executive leaves a top job to join a new, undefined, risky role at a riskier company, they do so knowing: 1) they will not get that (relatively safer) top job back, a job that represents all the years they spent ascending the org chart, 2) they might not survive in their new job, especially if it comes with performance targets [1], and 3) getting fired for poor performance will permanently tarnish their (previously skyrocketing?) reputation. With that in mind, these executives will always get a golden parachute in their contract.
[1] I'd be interested in seeing data on how many executives do survive in these situations. I wouldn't be surprised if the data showed that a large (~40%) proportion do not hold onto their positions.
At least as of July 2013, the appreciation in the stock price was due to the increase in the value of Alibaba and Yahoo Japan.
"But Yahoo’s turnaround remains very much a work in progress. Although Yahoo’s stock price has soared by a whopping 73% since Mayer become CEO, that gain is almost entirely attributable to investments the company has in two Asian companies, the Chinese e-commerce giant Alibaba and Yahoo Japan. Yahoo’s core advertising business remains sluggish amid intense competition from rival Internet giants like Google and Facebook."
Besides, stock price isn't a good measure of de Castro's performance. Advertising revenue is better. Over the past year, Yahoo!'s advertising revenue has declined while its competitors' have grown. Facebook took the #2 spot in US digital advertising revenues (Google is #1) from Yahoo! last year.
If Yahoo!'s advertising revenue had grown increased at the same rate as, say Google's (up 15% over the past year), revenue would have been ~$600m higher.
It's interesting that de Castro started out at McKinsey. The book 'Dangerous Company' portrays McKinsey consultants as Powerpoint jockeys who are great at formulating high-level strategy but not so good at actually running businesses.
Perhaps de Castro benefited from a rising tide at Google but lacked the turnaround skills required at Yahoo!
I'm try to imagine, as a founder, saying this to a VC:
"In order to start this new company, I'll need to leave my current job. which pays very well and where I've spent years moving up the org chart.
This new company is very risky. We might not hit our performance targets.
So... I'll need a golden parachute, ya know, just in case I can't cut it."
I don't need to tell you what the VC's logical response would be. Too bad that logic doesn't apply to "top management".
Key difference: de Castro was (presumably) poached by Marissa. This is pure speculation, but one way for her to have done it would be to offer downside protection.
As a founder, you take a gamble and the potential payoff is your shares. As an incoming exec hired afterwards you are likely to get options only, for a far smaller portion.
That said, not a golden parachute and certainly not the kind of amounts in this article, but I have insisted on clauses related to salary increases in agreements with VC's in the past. In my first VC funded started, we'd all agreed on a fairly low salary to keep costs down initially, but I pointed out it was not sustainable and that I wanted a clause in to put a floor on our salary adjustments at a specific point (I don't remember if it was 6 months or 12 months).
They tried to pull the "oh, sure, I'm sure we can adjust salaries later, it's just a minor thing, no need to put it in the agreement". But they yielded when I then came back with a two line amendment to the agreement and told them "since it's such a small thing, you won't mind if I insert these two lines, will you, since I'm sure you were serious when you agreed we'd be able to do the raises?"
I don't think they particularly liked me afterwards, but I'm glad I insisted given what I saw from one of the VC's afterwards.
Wow, corporate parazites. This is why I simply struggle to be anything else than entrepreneur. It sickens me to see how these "managers" screw stockholders and employees.
The amounts of money that float back and fourth in america's top 1% is excessive. I'm not sure if this issue fits here but lately it feels like it fits everywhere. Start voting for people that will do something to fix wealth disparity.
I'm not gonna hate on the dude for making money. It doesn't look like he did anything illegal. If anything I'd like to have a coffee with the guy just to learn from him.
This is only news because it has to do with a major tech company and not a minor one.
It's probably some of the google stocks the company had that's the stock bonus. Comparing to the income CEOs in the tech industry this is actually nothing special at all, unless we talk about major companies, like yahoo. Four of the lower CEOs at google got about 128 million this year.
CEOs of other major tech companies are billionaires in NETWORTH but at least they now the PR value of not giving their CEOs this much money. Examples of billionaires that have a relatively low pay, Sergei and Larry (1$), Steve Ballmer (1 million $) and the amazon CEO (about 50k $).
So, first off it isn't that surprising that he gets all that money after all (it's kinda natural because he is fired). Also, as he is fired, his work at Yahoo obviously wasn't worth that kind of money.
But while these money aren't disaster for Yahoo, just to think of it — it's huge. I wonder what he was actually supposed to do to somebody (Mayer) would like to pay him that kind of money so he would work for Yahoo. I mean, yeah, we all know that operating business like Yahoo isn't kids game, but just think of it: why nobody gives you that money so you would work for them?
With De Castro's exit Mayer has 'aided' a massive transfer of wealth from Yahoo! shareholders in less than 2 years to people who appointed her, as well as people she appointed.
Marissa was appointed to achieve the near impossible task of turning around a massive behemoth which seemed dead-set on a course towards oblivion.
The only key asset that still gave Yahoo significant leverage was its war chest and rather than let it dwindle she decided to invest it in a number of bold steps to achieve a dramatic shift in corporate culture.
While some of these steps are indeed turning out to have been mistakes I find I hard to argue, keeping Occam's razor in mind, that her actions did not keep the best interest of the shareholders in mind, especially given Yahoo's performance on the market.
Instead of wondering why he was paid that much, we should be discussing how to get from where we are, to where he is?
What does it take? Why is it that so few of us are doing that?
To all the people who call this irrational, theft, etc. This is a "free" world. You are also able to work your way to the COO level and get such bonuses.
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[ 4.4 ms ] story [ 109 ms ] threadWait, what?
For example: http://online.wsj.com/public/resources/documents/CEOperforma...
I have a really difficult time imagining that this person was overall profitable to the company.
Once they do that, its often assumed that all their success was their own work. To expect such people to build anything of real value is a expectations gone too wrong.
While they are at the top, they socialize with their equivalent highly paid buddies. Most of them are in the same league as their's. Its basically a mutual-protection club, in which you need to take care of each other.
>>level of impact is way higher than the janitor cleaning the floor in your offices.
In case of people like these, if exec was swapped with janitor, it would make 0 difference. The Janitor would probably even perform better than the exec.
But that's not the point.
Its almost like saying, if some one finds a clever way to cheat in an exam and manages to never get caught it must be perfectly acceptable.
You might enjoy the classic Twilight Zone episode "Of Late I Think of Cliffordville." It's available on TV.com.
So he received a lot of compensation in kind (and was probably worth it to Apple).
Certainly individuals can make or lose more than a million in a week for a company - for example the CEO of Ratners, Soros, the London Whale or other traders who make millions in one trade (or lose it). Likewise a salesperson might manage to seal a deal worth 100s of millions in future revenue over a couple of meetings. As someone on the creative side, this galls me somewhat, but it is nonetheless true - some positions do potentially bring in far more money for a company than others.
You may question whether they should be or need to be paid that much, particularly if other workers in the same company are paid very little, but I think it's indisputable that individuals can influence profits to that degree in some positions.
As an engineer, a manager, and a customer, I want to see skill and effort rewarded fairly and equitably. Absurd sales commissions and top executives earning a million dollars a week are nothing but theft from customers, stockholders, and the people doing the labor to create the product.
So is it really a case of the salesman bringing in all that money, or the combined effort of the entire team?
This is just an expression in the difference in scale between a single person's resources and those of a corporation - if any individual has access to the leverage and resources of a large corporation, they could easily make/lose a lot of money for that company very quickly, sometimes down to dumb luck, sometimes down to skill at their particular niche.
Of course the society which allows the limited liability company to exist might want to redistribute some of that wealth more evenly, because capitalism is pretty unfair and brutal in its raw form, but an individual can certainly be worth lots to a company in monetary terms, because they can make a lot.
Doesn't seem outrageous put like that, or have I completely misunderstood?
Also, are good executives really worth the money, or is this something that's just become accepted practice and companies have no recourse but to follow along? I know a lot of high-performance people, but I've never known anyone I'd give $60M for 15 months of work.
All guesswork. But it seems plausible to me.
I wouldn't hire these executives to do anything, let alone run a company. Most of them only get into a company because of their network. And once they come in, they have a gang of sycophants built up to assist them through their loot. They last 2-3 years any where they go. After which that 'you cant fool all the people all the time' thing kicks in and they are fired. But what's the point any way? there are enough idiots who will be ready to hire them again and they have a big enough network to help them out.
>>or is this something that's just become accepted practice
I attended a start up conference here in Bangalore. A exec of a big company was invited to speak. His full talk was BS, of course. But he repeatedly emphasized start up's were missing 'expert exec leadership' and VC's weren't paying up enough to ensure such leadership came on board. In short his whole talk was cribbing about how start ups were asking them to perform to get payed and were not just paying them while they wish to sleep on their jobs.
>>I've never known anyone I'd give $60M for 15 months of work.
Any one who is that capable is likely making doing his own work. And never this way.
The statement that caught my attention was:
"we tend to believe that executive positions are a free market where good wages goes to those that merit them, but it's not, it's a collusive system in which offer and demand is played by the same guys. I give you this board place now, then you leave, you'll get me a board position later in your next company and so on."
I don't know if this is effectively true, but it does ring a bell.
The things she is going to accomplish while at Yahoo are: 1) burning through the Alibaba money; 2) riding the stock market bubble until it crashes, temporarily making her look good; 3) not boosting sales or profits much at all if at all
And a few years from now (I'd peg it at three or less at this point), that'll be that, and she will be done at Yahoo.
Whether they're worth it or not is another matter. But clearly boards tends to think they are.
She's from, like, Google, which makes her ultra effective.
For some reason. Apparently.
According to Bloomberg, he's also receiving $64.6 upon termination, for a total of $109 Million from Yahoo!
http://www.bloomberg.com/news/2014-01-15/yahoo-chief-operati...
Since arriving at Yahoo in November 2012, de Castro’s salary, bonuses and equity grants totaled $44.8 million ... Upon his termination, de Castro will also receive $64.6 million, including accelerated equity grants, in accordance with his contract
[1] I'd be interested in seeing data on how many executives do survive in these situations. I wouldn't be surprised if the data showed that a large (~40%) proportion do not hold onto their positions.
"But Yahoo’s turnaround remains very much a work in progress. Although Yahoo’s stock price has soared by a whopping 73% since Mayer become CEO, that gain is almost entirely attributable to investments the company has in two Asian companies, the Chinese e-commerce giant Alibaba and Yahoo Japan. Yahoo’s core advertising business remains sluggish amid intense competition from rival Internet giants like Google and Facebook."
http://business.time.com/2013/07/16/yahoo-ceo-marissa-mayers...
If Yahoo!'s advertising revenue had grown increased at the same rate as, say Google's (up 15% over the past year), revenue would have been ~$600m higher.
It's interesting that de Castro started out at McKinsey. The book 'Dangerous Company' portrays McKinsey consultants as Powerpoint jockeys who are great at formulating high-level strategy but not so good at actually running businesses.
Perhaps de Castro benefited from a rising tide at Google but lacked the turnaround skills required at Yahoo!
"In order to start this new company, I'll need to leave my current job. which pays very well and where I've spent years moving up the org chart. This new company is very risky. We might not hit our performance targets. So... I'll need a golden parachute, ya know, just in case I can't cut it."
I don't need to tell you what the VC's logical response would be. Too bad that logic doesn't apply to "top management".
That said, not a golden parachute and certainly not the kind of amounts in this article, but I have insisted on clauses related to salary increases in agreements with VC's in the past. In my first VC funded started, we'd all agreed on a fairly low salary to keep costs down initially, but I pointed out it was not sustainable and that I wanted a clause in to put a floor on our salary adjustments at a specific point (I don't remember if it was 6 months or 12 months).
They tried to pull the "oh, sure, I'm sure we can adjust salaries later, it's just a minor thing, no need to put it in the agreement". But they yielded when I then came back with a two line amendment to the agreement and told them "since it's such a small thing, you won't mind if I insert these two lines, will you, since I'm sure you were serious when you agreed we'd be able to do the raises?"
I don't think they particularly liked me afterwards, but I'm glad I insisted given what I saw from one of the VC's afterwards.
I would guess the conclusion is that even that "$25k/year" may be too much and De Castro was ok.
Unfair to compare absolute values of both parachutes but not both companies sizes.
It's probably some of the google stocks the company had that's the stock bonus. Comparing to the income CEOs in the tech industry this is actually nothing special at all, unless we talk about major companies, like yahoo. Four of the lower CEOs at google got about 128 million this year.
CEOs of other major tech companies are billionaires in NETWORTH but at least they now the PR value of not giving their CEOs this much money. Examples of billionaires that have a relatively low pay, Sergei and Larry (1$), Steve Ballmer (1 million $) and the amazon CEO (about 50k $).
So, first off it isn't that surprising that he gets all that money after all (it's kinda natural because he is fired). Also, as he is fired, his work at Yahoo obviously wasn't worth that kind of money.
But while these money aren't disaster for Yahoo, just to think of it — it's huge. I wonder what he was actually supposed to do to somebody (Mayer) would like to pay him that kind of money so he would work for Yahoo. I mean, yeah, we all know that operating business like Yahoo isn't kids game, but just think of it: why nobody gives you that money so you would work for them?
Dan Loeb, who helped appoint Mayer as Yahoo! CEO, made a killing on his investment thanks to Mayer: http://www.theverge.com/2013/7/22/4545072/yahoo-dan-loeb-lea...
Then there's De Castro, who Mayer handpicked as one of her early and critical hires. He apparently made $109 million, not $60 million: http://www.bloomberg.com/news/2014-01-15/yahoo-chief-operati...
One almost thinks his compensation was designed to maximize his earnings were he to fail in the shortest possible period of time!
The only key asset that still gave Yahoo significant leverage was its war chest and rather than let it dwindle she decided to invest it in a number of bold steps to achieve a dramatic shift in corporate culture.
While some of these steps are indeed turning out to have been mistakes I find I hard to argue, keeping Occam's razor in mind, that her actions did not keep the best interest of the shareholders in mind, especially given Yahoo's performance on the market.