Yahoo fails to keep pay plan details secret

There's even more information now public on the lengths to which Yahoo went to create a compensation program that critics say was aimed at making a takeover bid more costly.

Yahoo had sought to keep the details from being made public, but a Delaware Chancery Court judge unsealed the information on Monday.

"I conclude that defendants have not satisfied their burden to show good cause for the continued filing of the portions of the complaint under seal," Judge William Chandler III wrote in his opinion. As a result of the ruling, the proposed class-action suit against Yahoo's directors was made public in its entirety, including various e-mail exchanges by the Yahoo workers and outside consultants that worked on the compensation plans.

Bernstein Litowitz Berger & Grossmann, the lawyers bringing the suit on behalf of two Detroit municipal retirement plans, posted the newly unsealed documents on their Web site.

The suit charges that Yahoo's directors breached their fiduciary duties by their actions, including failing to negotiate a deal with Microsoft and enacting the compensation plan. It seeks invalidation of the compensation program as well as an injunction barring the directors from engaging in actions contrary to increasing shareholder value.

Among the juiciest of the e-mail exchanges is one that took place on February 5 between two executives at Compensia, an outside compensation firm hired by Yahoo.

In the first message, principal Michael Benkowitz describes Yahoo's plans to cover all employees in an exchange with firm President Tim Sparks. "Their latest proposal is to provide 100 percent equity acceleration for everyone," Benkowitz wrote.

"That's nuts," Sparks replied.

For those who have been living in a cave, Microsoft went public with a $31-per-share bid for Yahoo on February 1, after failing to reach a deal privately. Yahoo rejected the offer. The two sides held a couple of face-to-face negotiations but never got on the same page, with Microsoft ultimately pulling its offer earlier this month. The two sides now say they are discussing a business deal short of a merger, said to center around Microsoft acquiring Yahoo's search business.

Update: Another tidbit worth noting is that when Microsoft proposed buying Yahoo in January 2007, it was willing to pay "about $40 per share," according to the suit.