Getting paid 55M$ to fail?

The news is now out that outgoing CEO Marissa Mayer could make up to 55M$ as she leaves an ailing Yahoo, and an inevitable storm of protests has followed on the internet. Most comments claim that she is being “rewarded for failure” and that such a culture is patently unfair as it rewards failing leaders, while the regular workforce that is is let go under similar circumstances gets no such cushion or compensation. Many of these employees may have been “loyal” for long periods of time and they just get left out in the cold. While the outsider who comes in as a leader and “fails”, gets to walk away with a reward!

Sounds intuitively unfair, doesn’t it? But then again, I’m not so sure. These are complex issues and we need to dive deeper and understand the circumstances under which such outcomes transpire.

Here are some counter arguments to the above line of thought, rooted in reality.

1. Firstly let’s consider the suggestion that this whole “loyalty” factor as a strength, is over-rated. If loyalty was what made companies great, then many public sector and govt run companies should have replaced the Apples and Googles of this world. What a person delivers, or has the potential to deliver within a given time may be more important than how much time he or she has spent in the system. Harsh perhaps, but true?
2. In no Utopian world are the troops equal to the general. Not in communist Russia, nor in corporate America. In market demand terms the troops are numerous & easily hireable. Their collective bargaining power is lesser. Hence no severance clause is built into their comps. That’s just how it is. It’s also arguably easier for them to shift jobs and the celebrity stigma does not follow them.
3. Most importantly, there is no way a dying Yahoo could have attracted a top performing executive from Google to come over unless they made it worth her while. That includes her comp & benefits, including the severance clause. When the Yahoo board approved this, they did so because they were making a desperate, last ditch effort to save a company that was already on life support. It was a calculated risk both sides were willing to take, right upfront.
4. Consequently, the 55M$ paid to Marissa M is not some special fee that was dreamt up as a parting gift. It was very much part of her comp package. Most of it appears to be from shares she already holds under agreement that they would vest under such circumstances. Complaining about a pre-existing agreement being honored when things do not work out may feel cathartic, but is not necessarily logical.
5. As for who is responsible for failure – The leader alone, or whether it is a shared responsibility and who should suffer more etc. Well those are questions suited more to theological and philosophical debates. Corporate board rooms are run by a different set of rules. Market forces, profitability, survival of the fittest, demand vs supply etc. leading to defined rules of engagement.

 The pertinent debate of course, is whether the overall level of executive compensation in the US is excessive. And that is a systemic, larger & relevant debate that we must engage in.

As far as this case goes, I would maintain there is nothing undue that has been done here.