Yahoo COO’s dismissal prompts excessive pay questionsNews added by Benefits Pro on January 21, 2014
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By Allen Greenberg

It took just a few hours, if that, for the questioning to begin after Yahoo Inc. fired its COO, Henrique de Castro.

For HR managers, one of the questions that generated the most chatter was Castro’s compensation package – and just how much he was able to walk away with.

“It appears that … de Castro has received a severance package in excess of $29 million. If true, it ranks as one of the most expensive severance packages, especially for less than two years of service,” said executive compensation expert Bruce R. Ellig, author of the “The Complete Guide to Executive Compensation.”

Most of that is in company stock but de Castro did get $1.2 million in cash to cover the next two years of his salary.

Altogether, De Castro made an estimated $109 million from his stint at Yahoo, including salary, bonus, stock awards, compensation for leaving Google and severance payments, according to Equilar Inc., a comp researcher based in Redwood City, Calif.

“The board should be asking several questions,” Ellig said. “Was the sign-on package excessive? Was the decision to hire de Castro sufficiently evaluated? Was he given sufficient time to meet his marketing challenge? And most importantly, is the severance package excessive given the brief period of employment?”

Ellig knows what he’s talking about: He’s a retired author and speaker now but spent 12 years as head of worldwide HR for Pfizer Inc. and was chairman of the board of The Society for Human Resource Management.

Yahoo CEO Marissa Mayer dismissed Castro after 14 months, amid disappointment with his efforts to boost growth, according to various reports.

Bloomberg reported that, in a memo to employees, Mayer said she made the decision that de Castro should leave, according to a person who saw the note and asked not to be identified because it wasn’t made public. There had been friction between the two executives for at least six months, another person said.

Mayer, who took the helm in July 2012, has been working to reinvent Yahoo by revamping products and adding exclusive content to help it compete with Google Inc. and Facebook Inc. for users and advertisers. New products, redesigned e-mail and a spending spree on startups, engineers and media figures so far haven’t translated to growth. Analysts project that revenue dropped 1 percent in 2013, with a 3 percent gain estimated for this year and next.

“It’s a negative for Yahoo,” said Scott Kessler, an analyst at S&P Capital IQ who recommends holding the stock. “This is someone who had a tremendous amount of responsibility. Now, there’s a hole in the executive team.”

The firing is another sign of Mayer’s struggle to get the company on track as Yahoo searches for more users and ad dollars amid rising competition from younger rivals.

Bloomberg contributed to this report.

Originally published on BenefitsPro.com
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