SUNNYVALE -- Yahoo's (YHOO) former No. 2 executive could end up collecting an eye-popping $109 million for his 15 months on the job, an executive pay firm estimated Thursday, despite being ousted this week amid signs the company is still struggling to achieve a financial turnaround.
The generous pay and severance package for ex-Chief Operating Officer Henrique de Castro, who was hired by CEO Marissa Mayer to help rebuild Yahoo's declining ad business, would represent one of the biggest golden parachutes Silicon Valley has ever seen -- bigger than controversial payouts given to previously ousted senior executives at Yahoo, Hewlett-Packard (HPQ) and other companies.
The estimate of $109 million represents the maximum de Castro could be paid, as calculated Thursday by Equilar, an executive compensation firm whose studies are widely cited as authoritative. A Yahoo spokeswoman said de Castro's final payout has yet to be determined, since a portion will depend on whether he met certain performance targets that haven't been calculated.
De Castro, who has already collected almost $45 million in cash and stock during his time at Yahoo, is eligible for additional compensation made up of severance payments and stock grants worth up to $64.5 million now that he's leaving, said Equilar's Aaron Boyd. The sizable sum is due in part to the fact that, despite Yahoo's sales slump, the company's rising share price has more than doubled the value of those stock grants since they were initially negotiated in 2012.
But some corporate governance experts are already saying it's too much.
"I think it's atrocious. It makes absolutely no sense for shareholders," said Eleanor Bloxham of the Value Alliance, an independent board and executive advisory firm. She said Yahoo's board "really needs to step up and look at how they reward top executives."
De Castro was a top Google (GOOG) advertising executive before Mayer hired him to run Yahoo's ad business in October 2012. Since then, Yahoo's ad sales have continued to sag as it has lost ground to online rivals including Google and Facebook.
According to a leaked company memo, Mayer told employees Wednesday that de Castro's leaving was her decision. A Yahoo spokeswoman declined comment on the reasons, but analysts say it's clear that Yahoo's hoped-for turnaround has not yet materialized.
Mayer, also a former Google executive, made a big bet on de Castro by recruiting him with a pay deal that was valued, at the time, at $62 million.
That figure included a $1 million cash bonus and a $20 million grant of Yahoo stock to make up for benefits he was giving up by leaving Google, along with $18 million in restricted Yahoo stock and $18 million in options tied to performance goals. The stock and options were scheduled to vest over four years.
Since then, Yahoo's share price has soared even though its revenue declined, making that restricted stock and the options even more valuable than the original estimates. Analysts say the stock is rising because stockholders are excited about the potential return from Yahoo's long-ago investment in the Chinese ecommerce site Alibaba, which is preparing to go public.
While de Castro's stock grants were scheduled to vest over four years, his hiring agreement provides a portion of those shares on an expedited basis when he leaves, provided he was terminated "without cause."
Equilar's estimate is based on assuming that's the case, Boyd said, because Yahoo has not disclosed any specific cause for terminating de Castro. Boyd said the estimate also assumes de Castro met all his performance targets.
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Here are some other noteworthy final-year payouts given to Silicon Valley executives:
Hewlett-Packard paid then-CEO Mark Hurd nearly $24 million for his final year on the job, even though he left in a dispute over expense accounts.
HP also paid $13 million to Léo Apotheker for working just one year as CEO before he was pushed out.
Yahoo paid former CEO Carol Bartz $16 million in cash and stock after she was fired; it later paid CEO Scott Thompson $6.8 million for working only four months before leaving amid questions about his resume.
By contrast, eBay gave Meg Whitman $120 million in salary, bonuses and stock during her final year as a CEO credited with building that company from a small startup to a global success story. Google also granted Eric Schmidt $100 million in stock, as thanks for overseeing spectacular growth, when he handed the CEO job over to Larry Page.
Source: Mercury News research, GMI Ratings
How much is $109 million:
A compensation consultant estimates that Henrique de Castro, Yahoo's former No. 2 executive, may collect up to $109 million in cash and stock compensation for the 15 month period since he was hired. Based on that figure:
$41,923 would be his hourly rate if he worked 40 hours a week from the date of his hire.
880 would be the number of software engineers Yahoo could hire, at the average annual salary of $123,500 earned by software engineers in Santa Clara County.
37 percent is the portion of Yahoo's last quarterly profit that the pay package represents.
Source: Mercury News reporting