The Yahoo pink slips starting flowing yesterday – a rumored 1000 Yahoos cut. I got a text message from one of my friends at Yahoo with the succinct headline “Laid off.”
I’ve been a Yahoo stockholder for some time, and I’m glad to see the stock price rising back into the $30/share range. And I suppose that laying off 1000 people will only further add momentum to Yahoo’s share prices. But as a regular guy who knows regular guys (and gals) who just got laid off by Yahoo, I’m angry.
About two years ago, I wrote a post about then-Yahoo CEO Terry Semel’s outrageous $230 million annual paycheck. I noted that for $230 million, Yahoo could buy a lot things, for example:
- 460,000,000 clicks on Yahoo or Google (assuming an average CPC of $.50);
- 2500 experienced Internet employees;
- A major acquisition (for example, about 1/3 the acquisition price for Shopping.com or LowerMyBills);
- The gross domestic production (GDP) of the Solomon Islands;
- $230 million of additional profit!
So now Yahoo has jettisoned 1000 employees. Had Mr. Semel not received that $230 million one year paycheck, those 1000 employees might not be on the street right now. And let’s be clear, the 1000 employees getting the ax this week weren’t the ones making the business decisions that eventually drove Yahoo to the place it is in today. Again, I wrote about this way back in early 2006:
What’s up with the “media strategy” that has been in the works for a few years now? And despite the decent profit and revenue from Overture, how come the online user interface hasn’t changed in 4 years (in fact, Overture’s name has changed twice now and the UI is almost as slow as it was in the company’s beginning). Yahoo has also lost its relationship with MSN for paid search, and lost the bidding war against Google for AOL?
If the buck stops somewhere, it stops with Terry Semel and the other over-paid Yahoo executives. But in the ridiculous corporate world that exists today, Mr. Semel and his cronies reap the rewards and credit when things go well, and don’t feel any pain when things don’t. Indeed, I predicted in 2006:
If Terry Semel drove Yahoo into the ground for a few years, it’s not like his salary would be $25,000. In fact, undoubtedly, his contract has clauses in it that guarantee him big payouts in the event of early termination. So even if he did poorly, he would still likely get a nice windfall.
Well, turns out he didn’t get a severance package, per se, but in the last year of his failed regime, he didn’t do too badly:
Despite Yahoo’s recent struggles, Semel received another big bundle of stock options last year that boosted the value of his 2006 compensation package to $71.7 million. That was more than any other CEO among 386 publicly held companies covered in an Associated Press analysis of executive compensation using new rules dictated by the Securities and Exchange Commission.
Indeed, in total, “The former movie studio executive already has made a fortune since joining Yahoo in May 2001, having realized nearly $450 million in gains by exercising some of the stock options that he received during his tenure.”
$450 million dollars for taking a company from a strong first place to a distant second. And now 1000 good people are going to have trouble paying their mortgages. Terry, I know this might cramp your style a bit, but I think this is a perfect opportunity to give back to Yahoo: specifically, give some of that $450 million to those ex-Yahoos who just got axed.
Will that happen? Of course not. But maybe some people in the corporate world will begin to learn from all of this. After all, the business world doesn’t suffer fools gladly. I’d like to believe that companies that reward poor management with hundreds of millions of dollars will eventually have to pay the piper. Again, my 2006 thoughts:
So will CEO compensation growth ever end? Ultimately, I think it will. If you continue to have companies paying their top brass $230 million a year, eventually this will create an opportunity for leaner companies without such insane fixed costs to undercut the bloated bigger companies.