In a rare display of Silicon Valley executives walking the plank for shareholders, Yahoo’s general counsel resigned and Chairman Marissa Mayer sacrificed two years of bonuses to close the company’s sale to Verizon.
According to an independent probe by Yahoo, Inc.’s board of directors that was disclosed in a March 1 Securities & Exchange Commission 10K, there was no intent by the web portal’s management to suppress information regarding a series of companywide user hacks that began in 2013. The board’s conclusion that there was no effort to defraud shareholders is critical, because Yahoo faces about 40 email user class action lawsuits.
The Independent Committee concluded that Yahoo’s information security team had contemporaneous knowledge of the 2014 compromise of Yahoo user accounts, along with a 2015 and 2016 cookie forging of 32 million accounts by the same intruder.
Yahoo’s remedial actions, which included consulting with law enforcement, were considered insufficient by the investigators, given the risks to user security.
Bloomberg reported that Yahoo’s general counsel Ronald Bell left the company after the investigation determined that from a business standpoint, the company’s legal team did not sufficiently pursue a further inquiry of the hacks by a state-sponsored intruder, despite having information that should have justified taking such an action.
Breitbart News reported in December that Verizon Communications Inc.’s top lawyer stated that he considered the disclosure of a 2013 hack of 500 million e-mail accounts constituted a “potential material adverse event” that would allow for the mobile powerhouse to pull out of the $4.83 billion buy-out it had announced on July 25, 2016.
Less than 24 hours later, Yahoo disclosed a 2014 hack of over a billion client accounts by a “state-sponsored actor.” Bloomberg reported that Verizon was “exploring a price cut or possible exit” from its proposed Yahoo acquisition. Under the terms of accepted Verizon’s buyout offer, Verizon could have contractually dumped their buyout and still collected a $145 million breakup fee from Yahoo.
Yahoo’s CEO Marissa Mayer apparently agreed to wave her 2015 and 2016 bonuses, plus any stock option grants, to close the Verizon acquisition that was repriced at $350 million discount — about a 7% haircut in price to the original offer.
No one seems to be complaining that Ms. Mayer will suffer much financial pain from the events. CNN estimated that Mayer has already received more than $162 million in salary and stock awards, and is eligible for another $57 million in severance pay if the Verizon deal closes.