Yahoo is letting employees cash out their stock options at an accelerated pace, as the internet company tries to boost morale and stop a growing brain drain.
The company changed its stock option grants so that options begin vesting after one month, rather after the standard one-year period.
Yahoo first began offering the fast-vesting stock options to employees in January 2015, as a retention incentive for valued workers who threatened to jump ship, according to a person familiar with the matter.
As Yahoo scrambles to reverse a growing tide of departures, the grants have become more widespread. The company, traditionally stingy with new stock bonuses, has tried to stem the departures with the fast-vesting options as more employees consider leaving, according to people familiar with the matter.
The monthly options are designed to allay employee concerns that the typical 12-month waiting period to cash out stock options now looks like a risky proposition, according to sources. At the time the move was made, Yahoo’s stock was trading at a high point, so the accelerated vesting gave employees a chance to take advantage of it.
Yahoo declined to comment on the thinking behind the stock-option change, but confirmed that it had rejiggered its stock plans.
“More than a year ago — in early January 2015 — we made changes to our Employee Stock Purchase Program and to the vesting schedule on Restricted Stock Unit awards,” a Yahoo representative said.
Yahoo CEO Marissa Mayer is under fire from activist investors, some of whom have called for Mayer to be replaced and for the company to be put on the auction block. Yahoo itself, meanwhile, is working on a complex plan to separate its core internet business into a separate company through a reverse spin-off.
And while Yahoo is preparing to lay off a big chunk of its staffers as it narrows its focus in hopes of revitalizing its business, the company is also suffering from an exodus of valued executives and rank-and-file engineers.
One of the latest departures is Mayer’s senior director of corporate strategy, Shweta Vohra, who left Yahoo to become chief of staff at Medium, a blogging platform founded by Twitter’s Ev Williams.
As Re/code’s Kara Swisher reported last week, two more VPs have departed in the last month.
Two more executives in Mayer’s inner circle are also preparing to leave soon, a person familiar with their moves said.
An incentive and an acknowledgment
The accelerated options are among various tools Yahoo has used to try to retain executives, such as asking some top execs to make commitments to stay on another three or five years, as Re/code reported earlier.
Some of the stock-option packages that Yahoo has doled out to retain employees have been in the seven-figure range, says one former worker with knowledge of the matter.
Stock options at most tech companies typically vest over four years. A first tranche of options vests after 12 months, and the remaining options gradually vest every month for the next three years.
For Yahoo, the new structure eliminates the one-year waiting period so that employees can cash out some of the stock after one month — although the stock can only be sold by insiders during certain windows. For a $400,000 stock-option grant, for example, one-forty-eighth of the shares now vest each month with no cliff.
Gaining additional stock that was awarded every month was an incentive to keep people to stay, but also an internal acknowledgment that people didn’t want to bet on Yahoo’s health over the next year, said one of the sources.
Over the past year, more than a third of the employees left the company, according to The New York Times. Based on its most recent earnings report, that number — with new additions included — shows the company has already scaled down 14% over the last year.
Yahoo plans to present a new strategic plan for the company on or around its earnings call on February 2.