Henrique de Castro may have walked away from Yahoo with a termination on his corporate records, but the recently fired COO is walking away with a large sum of money in his pocket. His severance package totals a whopping $58 million after just 15 months on the job.
That’s the revelation from Yahoo’s regulatory filing on Wednesday that’s making news headlines around the world. Yahoo CEO Marissa Mayer was confident in de Castro’s abilities when she hired him as her second in command in 2012. So confident, indeed, that he stacked up a healthy severance package she probably didn’t bet he'd ever cash in.
"The major component of Mr. de Castro's severance benefits, involved the acceleration of his make-whole arrangement, the value of which increased substantially following the date of his hire as a result of the significant appreciation in our stock price," according to the SEC filing.
Then and Now
Mayer gave up hope for de Castro in January because he wasn’t fulfilling her expectations for a Yahoo revival. The COO’s role, in this case, was revving up advertising sales in a Google-dominated industry.
“Ultimately, Henrique was not a fit and that’s a very regrettable conclusion,” Mayer told analysts in late January. “And it’s a conclusion that we tried very hard to avoid, but it was the right decision in the end for the company.”
But that contrasts dramatically with what Mayer said when she wooed him away from Google, where he served as vice president of the search engine giant’s worldwide Partner Business Solutions group, and was responsible for advertising platforms and services for Google's publisher and commerce partners.
"Henrique is an incredibly accomplished and rigorous business leader, and I'm personally excited to have him join Yahoo's strong leadership team," Mayer said. "His operational experience in Internet advertising and his proven success in structuring and scaling global organizations make him the perfect fit for Yahoo as we propel the business to its next phase of growth."
What Was Yahoo Thinking?
De Castro had high hopes. Now he has a sky-high golden parachute. We caught up with Rob Enderle, principal analyst at the Enderle Group, to get his take on the severance package. He told us the amount is surprising.
“First, he’s not a CEO,” Enderle said. “Remember, we got worked up about Carly’s severance package about a decade ago and it was a fraction of this. This is a surprisingly large package. We’d be talking about this even if he was the CEO.”
Carly Fiorina, the former chairman and CEO of HP, led the failed merger with Compaq. The board of directors asked her to resign in 2005. She walked away with $21 million in cash and stock and other benefits worth $19 million.
The parachute, Enderle explained, is supposed to give the executive a level of comfort because the board will not fire someone cavalierly for fear of paying a heavy financial penalty.
“You have to be pretty upset with somebody to let them go if they have a $58 million parachute,” Enderle said. “That has me wondering what the executive management at Yahoo is doing, both to give a parachute that size and then to allow it to execute.”