This post is written as part of AOL Money & Finance's Best & Worst 2006. Vote for Terry Semel or check out the other overpaid CEOs.
Oh, how the mighty have fallen. Yahoo! Inc. (NASDAQ:YHOO) CEO went from a salary of $600,000 in 2005 to $1 in 2006 through 2008. You feel like crying, I'm sure. No need, I assure you. Over the past three years, Semel has made $429 million selling 18.1 million of his stock options. Sweet, no?
In addition, Terry S. Semel, who took over the reins at Yahoo! after a successful stint at Warner Bros. -- where he is credited with growing the company from $1 billion to nearly $11 billion in total revenues -- was named by Fortune as the sixth highest paid executive in 2005, with a total compensation of $56.8 million.
In June of this year, Yahoo! announced that Semel will be joining other executives earning $1, like the top management team at Google Inc. (NASDAQ:GOOG) and Steve Jobs, Apple Computer's (NASDAQ:AAPL) chief. Instead of a salary, Semel opted for 6 million stock options at an exercise price of $31.59 per share, as well as the opportunity to receive up to 1 million additional stock options each year. Semel also maintains over 17 million stock options, as well as a sizable chunk of Yahoo! stock.
The question is whether he is worth all that. When Semel became Yahoo! CEO in 2001, reactions were mixed. The Hollywood figure was seen by some as old school media, while others deferred to his focused, structured approach. And indeed, YHOO stock price rose some 300% from May 2001 to the end of 2005. This year, however, YHOO share price fell more than 30%.
Since Google's indisputable dominance in the search arena became clear, and Yahoo! has had a problem monetizing its vast and diverse (unfocused) properties, criticism of Semel has been heard from inside and outside Yahoo! A quick look at BloggingStocks posts from the past few months shows post after post of blogger frustration with the CEO. Cramer even put a price on Semel leaving. From within, Semel was recently hit with the Peanut Butter Manifesto, a document from one of the top executives at Yahoo! claiming the company is spread too thin, lacks focus and accountability and requires reorganization.
Perhaps Semel was initially worth his overblown salary, but he certainly isn't anymore. When another highly paid executive, Barry Diller of IAC/InterActiveCorp (NASDAQ:IACI), says that "Terry's a thoughtful, intelligent man and he did not take his media imperialist roots to Sunnyvale," I just have to wonder about these imperialist roots ...
Closing Bell: When We All Love the PIIGS (NBG, SQNM, PG, ERTS, KO)
Serious Money: Cheapest Stocks List Shrinks from 26 to 21
Chasing Value: Hasbro Earnings Makes My Point
Reader Comments (Page 1 of 1)
12-06-2006 @ 2:28AM
Gary Bourgeault (thealphamarketer.com) said...
while it may sound good that he's being paid only $1, it is somewhat deceiving.
The stock option thing is something that's never really good for a company. Why not tie compensation to performance, like any healthy company should do?
He would have done great in his early years, and been motivated now to find new ways to grow quicker.
12-06-2006 @ 5:41PM
Loose Cannon said...
Why do you overstate the revenue increase for Yahoo! and undestate Semel's options compensation received for 2005. It is in fact $175,000,000, which is easily provable.
Loose Cannon
1-04-2007 @ 10:45AM
Jim said...
You forgot Sidney Taurel of Eli Lilly and Company who took a salary of $1 and the Board paid his insurance and contributions to his 401k. This amounted to an extra $80,000+ and the next year his bonus was about $15,000,000+. This was the year the patent on Prozac expired.