Yahoo's Bartz has a big brass ring

The newly minted CEO had her options exercise price set Friday, but the stretch to reach the 5 million-stock-options mark is long.

It was a rather blase day for Yahoo's closing stock price Friday. It didn't shoot to the moon on the latest Microsoft takeover rumor, nor crater to the Earth's core on fears that the software giant is never coming back in some shape or form.

CEO Carol Bartz

But, nonetheless, Yahoo's newly minted CEO, Carol Bartz , was likely taking notice. Her potential fortune is tied to Friday's closing stock price.

Bartz, under her compensation package, is eligible to reap the rewards of 5 million stock options, which carry an exercise price based on Friday's close of $11.73 a share.

There's a catch, however.

Bartz's shares won't begin to vest unless Yahoo's stock rises by a minimum of 150 percent above the exercise price. That means Yahoo's stock needs to climb to $29.33 a share and maintain that average closing price for 20 consecutive trading days, in order for Bartz to vest one-third of the 5 million shares.

And she needs to do this by January 1, 2013, or all 5 million options go poof.

If Bartz can hurdle the first leg of the Yahoo vesting challenge, she could find herself holding 1.67 million options with a value of roughly $48.9 million.

Potentially, there is even more to come.

Here's how Bartz can score the rest of the 5 million options. The methodology remains largely the same, except for the percentage increase required and number of shares that vest:

•175 percent increase, stock hits $32.26 a share, one-sixth of options vest.

•200 percent increase, stock hits $35.19 a share, one-sixth of options vest.

•225 percent increase, stock hits $38.12 a share, one-twelfth of options vest.

•250 percent increase, stock hits $41.06 a share, one-twelfth of options vest.

•300 percent increase, stocks hits $46.92 a share, one-sixth of options vest.

Compensation experts note Yahoo's stock option incentive is rather rare. Usually, options for CEOs vest over time and by achieving certain performance metrics. In Bartz's case, however, the 5 million shares are based solely on Yahoo's stock price appreciating over the next four years.

This type of options package ties Bartz's good fortune directly with that of Yahoo investors.

And given that the company now has shareholder activist Carl Icahn on its board, the chances of Bartz later getting her options re-priced at a lower strike price are slim to none.

 

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