New Yahoo Hire: Jerry's Severance Plan Makes Plenty Of Sense

Found: Someone willing to defend Yahoo's now-infamous poison pill/severance package -- the one that has Carl Icahn, and now the NYT's Joe Nocera, so whipped up. Not surprisingly, the defender is a Yahoo employee.

But Eran Hammer-Lahav, Yahoo's "Open Standards Evangelist", makes a point worth considering. Eran, who just landed a job with Yahoo last month, is unlikely to parlay the controversial severance package into a huge payout. And he argues that his co-workers aren't looking to do so, either. Instead, he says, they viewed the package as a reason to stick around, not to bail.

The common claim is that the plan, by providing a generous payout for employees, encourages them to leave as soon as a merger is announced. But it fails to recognize the powerful impact it has on employee morale and sense of security. Without the plan, I would not have joined Yahoo! – a move that would have been extremely risky, like say, running into a burning building. ...the plan creates, a trial period of 2 years in which employees can give the new entity a chance, see if they can benefit from it, and take their time if they want to consider something else. It tells them that [in exchange] for their willingness to ride along, the shareholders are willing to assume most of the risk – where is actually belongs.

In my case, the plan guarantees me 6 months’ salary with health benefits for me and my family – you know, the stuff that actually matters to people whose last name isn’t Icahn. It assures me that if my job is eliminated or if the condition of my work are significantly changed, I can take my time looking for another job. It takes away the immediacy of having to deal with this situation. Once people start to worry and begin looking for a new job, they usually don’t stay long regardless if the merger happens or not.

The people complaining about the plan are not Microsoft but some of Yahoo!’s shareholders. My guess is that Microsoft got the point everyone else seems to miss: That with this ‘poison pill’, Microsoft would have been better off. It would have forces Yahoo!’s employees to at least stay until the merger is final and starting to take effect, as the plan requires an actual change (a “good reason”). In addition, it would have given them 2 whole years to figure out how to keep Yahoo’s employees.

Eran also argues that the $2.4 billion that the plan was supposed to cost Microsoft or another potential acquirer is irrelevant, because cost of not having a plan -- and having employees flee en masse -- would ultimately be much more. We'd argue it another way: The most costly part of the plan was its symbolism: It was part of an all-out effort by Jerry and co to convince Steve Ballmer that Yahoo would fight a merger down to the last man -- and it appears to have worked. When Jerry (or Jerry's board) later tried to acquiesce and sell the company, they'd sewn enough doubt in Ballmer's mind to quash the whole deal.

The good news for Eran and other Yahoos who take comfort in the plan: It's not going away. The bad news for Eran and company: It's not going away. Yahoo has fended off Microsoft for now, but it's got plenty of turmoil ahead of it.

See Also: Icahn Calls Yahoo "Deceitful"
Thanks For Shafting Yahoo Shareholders, Jerry
Found: Ambitious Person Eager To Work At Yahoo!