Yahoo's New Rock Star Retention Program

Yahoo, in the midst of a fight to remain independent, is granting “golden handcuff” stock options to key employees. The stock options are given to “key contributors” among the rank and file – senior executives are not eligible.

These stock option grants are on top of the previously announced changes to Yahoo’s severance plans. That provided for accelerated vesting of employee stock options and severance pay following a change in control (an acquisition by Microsoft, for example) and a termination of employment, and it applied to all Yahoo employees.

The new plan applies only to a select group of key Yahoo employees – the “rock stars,” as one source put it. They are being given special (and large) stock grants over and above their normal allotment. The size of the option grants is discretionary, but may be almost as large as their existing grants. One in twenty or so Yahoo employees will be getting these grants, says one source.

The options are also on an accelerated vesting schedule. Normal options are granted with a four year vesting schedule. If you leave earlier, those stock options disappear. The Rock Star options, though, vest over just 18 months. And they are also subject to the same acceleration provisions that Yahoo announced in February, so if the company is acquired and the employee terminated (or quits under certain conditions), they get all the stock.

It is apparently fairly well known within Yahoo that some key employees are being given these special stock options, although we haven’t heard much grumbling from the vast majority that didn’t get them. Perhaps they’re too busy worrying about job security to spend much time on envy.