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Yahoo drops CEO salary to $1

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CIOL Bureau
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By Eric Auchard

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SAN FRANCISCO  - Yahoo

Inc
. said  its board of directors has shrunk Chairman and CEO Terry

Semel's annual salary to $1, while boosting his overall future compensation

through stock options and grants.

In a filing with the U.S. Securities and Exchange Commission on Friday, Yahoo

said its board had approved two days before a long-term executive retention plan

where Semel will receive $1 for each of the next three years through 2008.

His salary in each of the past three years was $600,000.

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Yahoo is not unique among Silicon Valley companies in deemphasizing salary

and linking compensation to company performance in the form of share bonuses.

Since 2004, Google

Inc.
, Yahoo's biggest rival, has paid $1 in salary to its top executives --

co-founders Larry Page and Sergey Brin and CEO Eric Schmidt -- compensating the

three billionaires instead through stock options and grants.

The world's largest Internet media company said Semel stands to benefit from

a discretionary bonus in the form of a fully vested stock option of up to 1

million shares a year, priced at Yahoo's closing trading price the day of the

grant.

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The actual amount of the bonus will be based annually on the performance of

the company and be approved by the board.

As a retention incentive, the board granted Semel a stock option to buy 6

million shares of Yahoo's common stock at an exercise price of $31.59 per share,

the closing price of the company's common stock on May 31, the date of the

grant.

The stock option vests annually over a three-year period, in progressively

higher increments of 25 percent, 35 percent and 40 percent, as long as Semel

remains with the company.

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It can be exercised over seven years, subject to conditions. If, however,

there is a change in control at Yahoo, Semel's bonus options for that year would

vest instantly.

In 2005, Semel exercised options on 7 million shares, which after deducting

the prices paid for the stock, netted him $173.6 million, according to previous

regulatory filings.

"The compensation arrangements outlined in today's filing underscore the

board's high level of confidence in key members of the executive management team

and their proven ability to drive outstanding performance," a Yahoo

spokeswoman said.

The board's compensation committee also approved four-year performance and

retention plans for Daniel Rosensweig, the chief operating officer, and Susan

Decker, chief financial officer, who will each receive an annual salary of

$500,000 for 2006 through 2009.

Each will be eligible to receive an annual target cash bonus of $1 million

for 2006 through 2009, based on meeting performance goals. Both also were

granted an option to buy 2.1 million shares at $31.59, based on Wednesday's

share price.

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