Yahoo: Icahn Win Would Irrevocably Trigger Severance Plan

In an FAQ for employees on the company’s change-of-control employee severance plan, Yahoo (YHOO) asserts that a victory for Carl Icahn in his battle for control of the Yahoo board would trigger the terms of the plan.

The plan calls for the acceleration of unvested equity compensation awards for any employee who leaves the company under a two-part test. Part one is a change of control of the company - including the election of Icahn’s board slate. The second part of the test requires employees either to be terminated without cause or to “resign for good reason.” A good reason, Yahoo says, is “if there is a substantial adverse alteration in the employee’s duties or responsibilities, a reduction in annual base salary or annual target bonus opportunity, a change in work location of more than 35 miles following a Change in Control, in each case compared to the employee’s employment terms immediately prior to a Change in Control.”

Yahoo also claims in the FAQ that the board cannot now cancel the plan as long as a change in control offer is on the table.

The company insists, somewhat disingenuously I would say, that the plan is not designed to thwart a takeover. “The Plan is intended to help retain valued employees and preserve the value of Yahoo! during a period of uncertainty, without acting as a barrier to a Change in Control. We believe retaining valued Yahoos would be consistent with any acquiror’s goals,” the company says in the FAQ. But plainly they adopted this plan specifically to thwart an acquisition of the company by Microsoft (MSFT). To suggest otherwise is either deluded or deceitful.

Comments

[carlivar:]

It only triggers one requirement (out of two needed). If Icahn's board wins, employee pay, locations, responsibilities, etc. are not going to change overnight.

2008 Jun 11 04:35 PM

[achates:]

Saying the plan was intended to thwart Microsoft is an oversimplification. There was widespread fear that a Microsoft merger would lead to widespread layoffs as they dropped parts of the company they didn't want. As a result, people were leaving. So, the plan really was, at least in part, meant to help retain staff. Of course, making it less likely that Microsoft would acquire the company also made staff happier, so it was a double win.

Icahn, however, is bleeding crocodile tears about the plan. The likely cost (they presumably wouldn't fire everybody) would have been much smaller than the number Icahn uses all the time. Icahn's claim that people could just walk and qualify for the plan is just silly - the meaning of "good reason" is fairly narrowly defined.

2008 Jun 12 12:07 AM

[Jonha's Pop:]

Fortunately there are more investors than there are employees. What you might call the "Ying & Yang" of it.

2008 Jun 12 08:56 AM