What Will Shareholders Think of Yahoo's Sweet Severance Deal?

Ann All

I've written about some of the cultural aspects of Microsoft's proposal to buy Yahoo, namely how important rank-and-file workers were likely to be to the deal. One person who seems to get this is Yahoo CEO Jerry Yang, who sought to counter sinking morale with an e-mail urging employees to stay focused on their work despite all the Microsoft-related distractions.


In the latest merger-related news on the coming showdown with Carl Icahn at an Aug. 1 shareholders meeting, there was mention of a "controversial" Yahoo severance package. So just how controversial is it? It's certainly very generous -- or unrealistic, depending on how you look at it.


Engineered by Yang, the plan would guarantee a mix of cash and stock payments to all of Yahoo's 13,800 employees if they were fired or chose to quit after being reassigned to a different job within two years of a Microsoft purchase, reports MercuryNews.com. At Microsoft's bid of $31 a share for Yahoo, this would add $462 million to $2.1 billion to the software giant's acquisition costs.


During initial discussions, Yahoo proposed extending the generous benefits to just Yahoo executives, but Yang decided all workers should get them. There was "pushback" to the plan from Compensia, an outside specialist hired to help develop the severance package, the article notes.


The MercuryNews.com quotes a Yahoo spokesman as saying the plan was "in the best interests of shareholders and employees," as it could help prevent employee defections during all of the merger drama.

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