[grandalf]

> Could you provide sources for this?

Do you think that Yahoo's board decided to grant Mayer the golden parachute out of kindness, or out of sympathy to a fellow member of the nobility?

Mayer and Yahoo's board negotiated the terms of her contract. The parachute is meant to lure an executive who would normally not want to risk taking the helm of such a high risk company.

[michaelt]

  Do you think that Yahoo's board decided to grant Mayer
  the golden parachute [...] out of sympathy to a fellow
  member of the nobility?

A number of explanations have been posited for the fact executive pay has soared in recent decades while other workers' pay has remained stagnant.

Bebchuk and Fried's "Pay without Performance" attribute this to the fact that boards routinely approve pay packages that serve the CEO rather than shareholders, instead of bargaining with the aim of maximising shareholder wealth.

They identify several factors underlying this - shareholder inactivity bears a big part of the blame - but one factor is essentially yes: It's in the interests of people who are at the top of business to approve high pay for people who are at the top of business.

[grandalf]

> A number of explanations have been posited for the fact executive pay has soared in recent decades while other workers' pay has remained stagnant.

I think a simpler explanation is supply and demand.

If you want to hire as CEO someone who has worked in a close competitor's most profitable business unit and is credited for much of its success and culture, the pickings for Yahoo were quite slim. Also, Yahoo had brought in several other highly successful CEOs, including its original founder, who had all failed miserably. Mayer was clearly a last-ditch attempt to salvage the company.

> pay packages that serve the CEO rather than shareholders

You are describing incentives that do not simply reward share price growth? If so, and if you think supply and demand for qualified executives has nothing to do with it, what kind of pay package do you think Yahoo should have offered?

I'd argue that there has to be a time bias in the package. Share price growth is fine if the board is OK with Mayer taking 30 years to grow the company into a bigger valuation just before deciding to retire. But if more action in the near term is desired, and behavior other than the typical private equity style fat trimming is desired, what options are left?

[acjohnson55]

Such a risk!

With respect to the complexity of running a multi-billion, it still seems a little absurd to phrase out that way. To me, real personal risk is losing your house or dying.

[grandalf]

Well, Mayer faced tremendous reputation risk if she failed. Now that she has failed, she is not held in remotely the same high regard that she was prior to taking the helm of Yahoo.

She's also been implicated in some of Yahoo's more embarrassing missteps during her tenure.

So it's important to weight the parachute against her annual salary in a "safe" job for 3-5 years. It may still seem overvalued (or undervalued) but the price was reached through negotiation.

[cobalt]

so? If I fuck up, I burn my reputation as well (It may be easier to hide, but it still stands) and I don't get a giant payout

[grandalf]

It depends on your market power when negotiating your contract. Most employees don't have enough market power to negotiate anything more than a week severance pay.

[valuearb]

You weren't already worth $300M.

[ryandrake]

I, for one, would have been perfectly able and happy to have done the job of "fail to turn around Yahoo" for a mere 1/100'th of what she got. For some reason, the board chose not to call me for that interview. Could have saved those shareholders some big money!

[xiaoma]

>"I have to chuckle at this question. Do you think..."

This is kind of rude and condescending and I don't see how prepending it to your comment improves the discussion.

[grandalf]

> This is kind of rude and condescending and I don't see how prepending it to your comment improves the discussion.

Apologies. No condescension was intended. I was amused by the insinuation in the comment that Mayer was chosen for wholly irrational reasons by the board. I removed the mention of my chuckle from the comment.