As De Castro Exits Yahoo With Huge Payday, What Did Yahoo Get? (A: Not Much)
When Henrique De Castro was hired from Google by new CEO Marissa Mayer in October of 2012, it was with the kind of massively rich employment contract that you don’t see very often in the Web space.
As I noted then:
De Castro is getting a pile of money for taking the job, including a $600,000 yearly base salary and an annual bonus that could double that figure. In addition, the Silicon Valley Internet giant will give him $36 million in stock grants, including a one-time retention equity award of $18 million and $18 million in the form of performance-based stock options.
He is also getting $1 million in ‘make-whole’ cash for forgoing compensation from Google and $20 million in stock to replace his shares at the search giant that will vest over four years.
At the time, Yahoo CEO Marissa Mayer tweeted the hire with glee, which came just a day after she returned from her famous maternity leave:
So much for that! The pair’s relationship has recently become very tense, although his forced departure today, after just over a year at Yahoo, is still equally rich for De Castro.
Along with severance, as noted in his employment letter:
“In the event your employment is terminated by the Company without Cause, the RSUs that would have vested within 12 months after such termination shall immediately vest, and the Stock Options that would have vested in the 12 months following termination of employment if the applicable performance criteria were satisfied, shall remain subject to satisfaction of the performance criteria and, if such criteria are satisfied, vest as if you were employed on such vesting date.”
In other words, De Castro is likely to get more than half of the restricted stock units — essentially like cash — he was awarded when he joined. That’s in addition to the one-time retention award when he was hired and the large sum Yahoo paid him for leaving Google, all of which he gets to keep.
Show of hands: Who would like to be asked to leave at those rates?
Yahoo has not laid out the exact severance terms yet — it will likely have to in more detail — so that could change. But a source close to the board told me that working out the exit terms was a big effort within the company, in its obvious firing of him. [Update: Mayer confirmed the firing of De Castro, in an internal memo to staff.]
But that very same board found it fine and dandy to pay De Castro close to $40 million in total compensation in 2012 and another pile in 2013.
And, for the tens of millions of dollars spent on De Castro, what exactly did Yahoo get? Not much, it seems, if you look at the performance of its advertising business, his much-touted area of expertise. Yahoo revenue, especially in the display arena, declined in the last quarter — again — even as other Internet companies’ sales soared.
Yahoo’s profits did improve, but it was via a combination of cost cuts and also funds it got from its investment in China’s Alibaba Group. Alibaba’s pending IPO has also allowed the company to enjoy huge stock market gains, a reflection on investors’ bullishness toward it. (Alibaba, not Yahoo — except, to be fair, for Mayer herself.)
Here’s De Castro’s employment contract for your enjoyment — unless you are a Yahoo shareholder: