Stock Options Give New CEO Big Stake in Yahoo’s Growth

The stock-option package granted to Terry Semel, Yahoo Inc.’s new chief executive, suggests an unusual executive commitment to the company’s long-term growth.

The recent grant of 10 million options, combined with the 1 million shares Semel previously purchased, raises his potential ownership stake in the Web portal to nearly 2%, according to Yahoo.

Half of the options are priced at $17.62, Yahoo’s share price on April 16 when it was announced Semel was joining the company. The remaining 5 million options are priced from $30 to $75, for a total package that “provides incentives for him to build the company for the long-term,” according to a Yahoo spokesman.

“This is very gutsy. He’s doing it the way you’d hope someone would do it coming in,” said compensation expert Graef Crystal. But CEOs of technology firms are granted option packages that virtually guarantee a huge upside, he said.

Semel, former co-CEO of Warner Bros., officially replaced Tim Koogle as CEO and chairman on May 1. Yahoo will reveal Semel’s salary and bonus compensation in August, but the company has said his compensation would be in line with that of other executives.

Koogle earned $310,000, plus bonuses. Gregory Coleman, Yahoo’s newly hired executive for its North American operations, got a $1.25-million signing bonus and will be paid $750,000 annually. Yahoo’s stock has plummeted by nearly 90% in the last year as much of the market for online advertising evaporated.

Some analysts say Semel’s experience as a veteran media executive is crucial to reversing the fortunes of the troubled Internet pioneer, which positions itself as a media network. But others question his lack of experience in advertising, Yahoo’s primary revenue source.

Yahoo’s stock fell $2.13 to close at $18.79 on Nasdaq.