And bang — the doldrums of August are suddenly behind us. Yesterday late afternoon saw the dramatic news of Carol Bartz’s ouster as chief of Yahoo (YHOO), even as a couple of top executives at Bank of America (BAC) were shown the door. (To say nothing of the SEC backing down on proxy access, and asking the public for a critique of all the agency’s existing regulations.)
As of this writing, neither Yahoo nor BofA has disclosed what it plans to pay their suddenly departed. But by rummaging in old filings, we were able to get a pretty good sense of what they are due under their employment agreements — and the contrasts are pretty striking.
If Yahoo’s filings mean anything, Bartz is in good shape. According to Yahoo’s most recent proxy, she could rake in more than $10 million. Her offer letter promises her cash severance equal to her salary plus her target bonus — that’s $1 million and $2 million, respectively — as well as a pro-rated bonus for the year of her termination, which comes out to another $1.3 million or so (given that early September is about two-thirds of the way through the year).
Much of the equity she’s been awarded over the last few years would vest as well, some of it as if an additional 12 months had passed, though the terms are a little convoluted. According to the proxy, though, the value of that accelerated vesting worked out to about $5.23 million as of December 31. Given that Yahoo’s shares are down 23% since then, the figure could be lower — or higher, given that there are a bunch of other options and restricted shares that could be in play but weren’t as of the end of last year. She would also be eligible to stay in Yahoo’s health-care plan (with her family) for the rest of her life, though she would have to pay the full premium.
If you consider that Bartz’s cash compensation over the last two years (not including 2011) worked out to $5.7 million, and her total compensation (including some of the equity that would be accelerated) comes out to more than $59 million for the same period, the severance spelled out in Yahoo’s filings may be less striking. Then again, investors picturing Yahoo’s stock performance relative to the market during her tenure may have other thoughts.
Meantime, we’re curious how Bank of America’s “delayering and simplifying” is going to pan out. We can’t think of a lot of situations where an embattled CEO (or the CEO of an embattled company, if you prefer) significantly extends his own tenure by ousting a handful of subordinates.
Still, Sallie Krawcheck, who ran BofA’s wealth-management division, and Joe Price, who ran consumer and small-business banking, are on their way out. And neither has Bartz-style riches coming to them, at least if Bank of America sticks to what’s in their employment agreements. (We went over some of the following details with the folks at DealBook, who posted a piece about BofA’s shakeup last night.)
In some ways, Krawcheck and Price’s agreements have more moving parts than Bartz’s — and more unknown factors as well. For one thing, some specifics of Krawcheck’s severance benefits don’t seem to have been filed. Her 2009 offer letter says several times that key details about the way equity will be treated on termination would arrive in “a detailed package related to this restricted stock award shortly after the award date,” but if such a package was filed with the SEC, we haven’t found it (or it isn’t identified that way).
The offer letter and BofA’s proxy do provide some insights, however. Krawcheck’s $1.47 million cash signing bonus appears safe, since she stayed more than 12 months after signing on (at which point the cash can be clawed back only for “cause,” like committing a felony or serious ethical breaches).
Much of the $3 million in restricted stock Krawcheck was promised on signing up, and the $5.4 million in stock she was awarded last year, is likely to stick, though it may depend on whether her departure is considered part of a “Workforce Reduction / Divestiture” (elsewhere called a “workforce reduction, realignment, or similar measure”). If it is, the proxy says, she would have been entitled to $4.65 million as of December 31 — otherwise the figure would have been $2.4 million. As with Bartz, of course, changes in her equity awards and the company’s stock price are likely to shift things around a bit.
Price has the least at stake, at least contractually. The same BofA proxy put his equity acceleration, as of December 31, at just $514, 524, whatever the official cause of his departure. Price, unlike Krawcheck, does have a sizable deferred-compensation balance coming to him, however: roughly $5 million at year-end, compared to Krawcheck’s nothing. Neither has much in the way of a pension, by executive standards.
In the end, of course, all the ink that goes into severance clauses often is meaningless. Top executives are pretty good at negotiating new deals for themselves on the way out. Either that or boards and CEOs are struck by conspicuous waves of remorse as they boot the executives they once lauded.
Either way, we’ll keep an eye out for what Bartz, Krawcheck and Price actually get when those filings eventually roll around — and what their replacements get as well.
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