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Jan.22

2:35 PM ET

Thursday, 22 Jan 2009

Bartz Gets Millions; Yahoo Bails on Pay Increases for Rank and File

Posted By:Jim Goldman

Topics:CEOs and CFOs | Information Technology | Internet | Technology

Sectors:Internet | Technology

Companies:Time Warner Inc | Yahoo! Inc | Microsoft Corp

Yahoo
CNBC.com

For the first time in its history, Yahoo [YHOO Loading... () ] has suspended scheduled pay increases for the company's rank and file, even as it signs up new CEO Carol Bartz with a pay package that some say could be worth as much as $40 million over the next few years.

A source close to Yahoo confirmed the pay increase suspension, telling me that Yahoo "always prided itself, even in the deepest and darkest days, we always rewarded our employees." He added that in the current economic climate, and in the midst of other cost-cutting measures already underway at the company, halting pay increases only made sense, even though it's something Yahoo has never done, even during the dot com bust.

Yahoo spokesman Brad Williams confirmed the news, saying that employees were notified yesterday.

It's another shot against sinking morale at the struggling internet company which dealt with two broad layoffs in 2008, and the resignation recently of co-founder and CEO Jerry Yang. But momentum seemed to shift recently with news that Bartz, the former Autodesk CEO and chairwoman, and news that talks with Microsoft [MSFT Loading... () ] and Time Warner's AOL [TWX Loading... () ] over a possible Search deal may be enjoying new momentum.

Bartz's pay package though did raise some eyebrows. According to filings, she'll receive $1 million in base pay; an annual bonus that could exceed $4 million depending on performance; 5 million, 7-year options; annual equity grants (her 2009 grant will be worth $8 million; a $150,000 grant to cover advisory fees connected to her employment contract; and a $10 million equity grant that will cover the equity grants and medical coverage she gave up from her former employer Autodesk.

It might be hard for Yahoo employees to stomach that pay package and then realizing that one of Bartz's first orders of business would be to suspend their pay increases, but such is the climate in Sunnyvale right now.

"We already know that things are bad, and this news is more reflective of the bad things we already knew," says Citigroup's Mark Mahaney.

That's the Street's perspective, he says. Employees, he concedes, might have a different one.

Yahoo reports its fourth quarter and full year earnings next Tuesday.