In its 10Q filing on May 9, Yahoo included as an exhibit its 2017 Executive Incentive Plan, signed in March. (Thanks to Michele Leder for posting on this yesterday).
The formula for the bonus – which will be determined at the end of 2017 by the Plan Administrator — will include a company performance factor and an individual performance factor. The company performance factor will use metrics such as: GAAP Revenue, Revenue ex-TAC, Adjusted EBITDA, and TSR.
These seem reasonable. However, skip ahead to the section that defines what happens with a change in control. Specifically, the agreement says that if there’s a change of control “the Company Performance Factor of Section II.B shall cease to apply.”
Instead, the agreement notes, executives (only four are named explicitly in the agreement though others may be added) will received a payment, “equal the Participant’s Target Award for 2017 multiplied by the Participant’s Individual Performance Factor.” There’s a cap, but it is 200% of target. As far as I can tell, Mayer’s maximum Executive Incentive Plan bonus will equal seven-fifteenths of 3 percent of Yahoo! Inc.’s Adjusted EBITDA.
Yahoo shareholders will vote on June 8 on the sale of Yahoo’s operating business to Verizon Communications. One of the definitions of change in control in the incentive plan is: “the consummation of a sale or disposition . . . of all or substantially all of the assets of the Company to a Person or Persons in one or a series of related transactions; provided, however, that, for purposes of this paragraph (d), the assets of the Company shall not include the Company’s direct and indirect equity interests in Alibaba Group Holding Limited and Yahoo Japan Corporation.” It seems to me that the Verizon deal fits that definition.
The plan lists as objectives as, “To reward annual financial and individual performance that complements the Company’s longer-term strategic focus.” The amount of the bonus and the treatment in a change of control suggests otherwise.