Here’s why Yahoo’s COO got that $58 million severance package


Angel Navarette/Bloomberg

Henrique de Castro may have worked at Yahoo for just 15 months. But they were some very lucrative ones.

In an SEC filing made public Wednesday, Yahoo revealed that the severance package it awarded de Castro, the company's former chief operating officer who exited the company in January, ended up being worth $58 million. That's more than three times the $17 million at which it was initially signed.

All this for a guy who wasn't even CEO.

The eye-popping size of that golden parachute tells us three things. First, de Castro is the lucky beneficiary of good timing, as Bloomberg BusinessWeek points out. The stock was hovering around its highest prices in years when de Castro was ousted, boosted by the company's stake in Alibaba, the Chinese e-commerce giant that is expecting an IPO. As the company's filing states, "the stock price appreciated nearly 160 percent between the date of his offer letter and the date of his termination."

Second, de Castro made out so well in part because Yahoo had to pay up to recruit him from Google. A little more than $31 million of the $58 million package was in the form of what the company called "make-whole" restricted stock units. The proxy explains that these were needed to "buy out compensation value that the executives forfeited upon leaving their prior employers."

Finally, de Castro's package is a reminder that such first-class escape hatches are likely to keep surprising investors as long as big equity awards are part of the picture. The overall value of golden parachutes — which have come to mean both pay in the event of a forced departure and in the case of a merger or acquisition — may have remained basically flat. And companies may be bowing to shareholder pressures and public scrutiny on certain features, such as paying out less cash or covering executives' excise taxes less frequently.

But in de Castro's case, $56.8 million of the $58 million package was in the form of equity. So as long as piles of stock options and restricted shares remain part of the package, some very soft landings for senior executives are going to stick around.

Read also:

Dismantling CEOs' golden parachutes

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Jena McGregor writes a daily column analyzing leadership in the news for the Washington Post’s On Leadership section.
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Jena McGregor · April 17