Yahoo 2007 Annual Report Download - page 133

As noted above, in November 2007, the Compensation Committee approved a new compensation arrangement
for Ms. Decker in connection with her appointment as President. The arrangement included retention grants of
stock options that are scheduled to vest in installments over a three-year period and restricted stock units that are
scheduled to vest in installments over a two-year period. In addition, the Compensation Committee provided that
the portion of the options granted in November 2007 that are vested as of the date Ms. Decker terminates
employment with the Company will generally remain exercisable for one year following her termination date, and
approved an amendment to the option granted to her on May 31, 2006 to provide that the portion of the option that is
vested as of the date Ms. Decker terminates employment with the Company will generally remain exercisable for
three years following her termination date. These post-termination exercise provisions are to help mitigate
Ms. Decker’s risks related to short-term stock price fluctuations in a volatile market and to allow her to benefit from
strategic initiatives implemented while she was President, the full value of which may not have been realized by the
Company prior to her departure.
The material terms of the options and restricted stock unit awards granted to the Named Executive Officers in
2007 are described below under “Grants of Plan-Based Awards — Fiscal 2007.”
The Compensation Committee determined that a mix of both stock options and restricted stock units with time-
based vesting schedules was appropriate in 2007, principally because stock options would only have value if the
Company’s stock price increased, while the restricted stock units would have a retention benefit regardless of stock
price, and thus were important to help retain the recipient, but the overall value of the award would still be based on
stock price. The particular size of the grants and mix of stock options and restricted stock units was determined by
the Compensation Committee in its discretion after an overall assessment of all of the factors noted above,
Mr. Yang’s recommendations and, in the case of the awards to Ms. Decker, with the view toward bringing her total
direct compensation opportunity (after considering her base salary and annual bonus opportunity) within the top
quartile of competitive market practice for purposes of both recognition and retention, and because the structure of
her compensation package is at risk for her own personal as well as the Company’s performance.
Grant Practices. Beginning in August 2006, the Compensation Committee adopted procedures providing
that new hire and retention equity awards may be made to employees, including executive officers, by the
Compensation Committee only at regularly scheduled meetings on or around the 25th of each month except March,
June, September and December. This schedule is designed so that awards are not granted during the period
commencing on the first day of the last month of each quarter and ending two business days after the Company’s
quarterly earnings release.
The Company does not have any program, plan or practice to time the grant of equity-based awards to our
executives in coordination with the release of material non-public information. All equity grants are made under the
Company’s stock plan, which is approved by the stockholders. The per share exercise price of stock options cannot
be less than the closing sale price of the Company’s common stock on the Nasdaq Stock Market on the grant date.
Compensation Committee Actions after Fiscal 2007
Change in Control Severance Plan. On February 12, 2008, the Compensation Committee approved two
change in control severance plans (the “Severance Plans”) that, together, cover all full-time employees of the
Company, including each of the Named Executive Officers currently employed by the Company. On January 31,
2008, the Company received an unsolicited proposal from Microsoft Corporation (“Microsoft”) to acquire the
Company. On February 11, 2008, the Company issued a press release indicating that its Board of Directors had
unanimously concluded that the proposal was not in the best interest of the Company and our stockholders. The
Severance Plans are designed, in light of the uncertainty caused by the Microsoft proposal, to help retain the
Company’s employees, maintain a stable work environment and provide certain economic benefits to the
employees in the event their employment is actually or constructively terminated in connection with a change
in control of the Company. The material terms of the Severance Plans are described in a Form 8-K filed by the
Company with the Securities and Exchange Commission on February 19, 2008. Compensia advised the Company
and F.W. Cook & Co. advised the Compensation Committee with respect to the terms of the plans.
Stock Ownership Program
As described above, the Company believes that, in order to align the interests of our executive officers with
those of our stockholders, executive officers should have a financial stake in the Company. The Company’s policy is
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