San Francisco: Yahoo Inc said that its board of directors have shrunk Chairman and CEO Terry Semel's annual salary to $1, while boosting his overall future compensation through stock options and grants.
In a filing with the US Securities and Exchange Commission on Friday, Yahoo said its board had approved a long-term executive retention plan where Semel would receive $1 for the next three years till 2008.
He had been receiving a salary of $600,000 per annum for the past three years.
Yahoo is not unique among Silicon Valley companies in de-emphasising salary and linking compensation to company performance in the form of share bonuses.
Earlier in 2004, Google Inc, Yahoo's biggest rival, had paid $1 in salary to its top executives.
Google’s Co-founder Larry Page, Sergey Brin and CEO Eric Schmidt were the astounding billionaires who received compensation through stock options and grants.
The world's largest Internet media company said Semel stands to benefit from a discretionary bonus in the form of a fully vested stock option of up to 1 million shares a year, priced at Yahoo's closing trading price the day of the grant.
The actual amount of the bonus will be based annually on the performance of the company and be approved by the board.
As a retention incentive, the board granted Semel a stock option to buy 6 million shares of Yahoo's common stock at an exercise price of $31.59 per share, the closing price of the company's common stock on May 31, the date of the grant.
The stock option vests annually over a three-year period, in progressively higher increments of 25 per cent, 35 per cent and 40 per cent, as long as Semel remains with the company.
It can be exercised over seven years, subject to conditions.
If, however, there would be any change in control at Yahoo, Semel's bonus options for that year would vest instantly.
In 2005, Semel exercised options on 7 million shares, which after deducting the prices paid for the stock, netted him $173.6 million, according to previous regulatory filings.
"The compensation arrangements outlined in today's filing underscore the board's high level of confidence in key members of the executive management team and they’re proven ability to drive outstanding performance," a Yahoo spokeswoman said.
The board's compensation committee also approved four-year performance and retention plans for Daniel Rosensweig, the chief operating officer, and Susan Decker, chief financial officer, who would receive an annual salary of $500,000 for 2006.
Each would be eligible to receive an annual target cash bonus of $1 million for 2006 based on meeting performance goals.
Both have also been granted an option to buy 2.1 million shares at $31.59, based on Wednesday's share price.
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