Yahoo CEO Gets Stock Option Bonus

Yahoo Inc., whose profit more than doubled last year, rewarded Chief Executive Terry Semel with a stock-option grant that won’t begin to pay off until the shares rise by at least a third.

The option on 1.3 million shares, granted in lieu of a cash bonus for 2005, has an exercise price of $40.68 a share, 33% more costly than Yahoo’s closing share price on the date of the grant, Sunnyvale, Calif.-based Yahoo said in a filing with the Securities and Exchange Commission on Thursday.

Semel oversaw a 126% jump in profit to $1.9 billion in 2005, spurred by demand for Internet advertising as companies shift budgets from traditional media to the Web.

Sales rose 47% to $5.26 billion at the world’s most-visited website. The option, granted March 10, is fully vested and has a seven-year term, the filing said.

“Regardless of how you measure it, it’s a large option bonus,” said Fred Whittlesey, chief compensation officer of PayScale Inc., a Seattle company that tracks executive pay. “It’s a big grant for an annual accomplishment.”

Yahoo said the exercise price for Semel’s option was the same as for other employees who were granted options in December.

The shares, which have declined 23% this year, fell 40 cents to $30.13 on Thursday.

Yahoo spokeswoman Joanna Stevens said that Semel’s compensation was determined by the company’s board of directors and that he was paid according to company performance. His 2005 salary will be disclosed in an April regulatory filing, Stevens said.

Semel had a salary of $600,000 in 2004. The company said in December that Chief Financial Officer Susan Decker and Chief Operating Officer Dan Rosensweig received $1 million bonuses for 2005.