By Stephen Gandel
July 26, 2016

Updated from July 26 with response from Yahoo

After the Verizon (vz) deal was announced on Monday, the Internet erupted in outrage that Yahoo CEO Marissa Mayer could collect as much as $55 million. That’s the figure Yahoo (yhoo) stated in April that Mayer could collect if the company were sold and more-than enough to get observers who think Mayer has not done a great job to declare her pay unfair, and another sign that corporate compensation is corrupt.

But, here’s the thing, that widely reported $55 million figure grossly understates what Mayer is likely to pocket after the deal closes.

The real number: $122,578,795.

With an assist from top compensation consultant Brian Foley, here’s how I get to that figure:

  • The number that Yahoo disclosed in its financial filings in April was based on the company’s stock price at the end of 2015. But Yahoo’s shares have risen 16% since then, in part on speculation of the Verizon deal. At Yahoo’s closing price of $38.76 on Tuesday, Mayer’s stock options, which would instantly all vest after the deal if she were to leave the company, would net her $42 million.
  • Mayer also has 650,290 shares of restricted stock that she would immediately be able to sell if the deal with Verizon goes though, producing another $25 million. That includes a portion of the 353,356 restricted stock units, or nearly $14 million worth of Yahoo shares, that the company granted Mayer in 2016, but which Yahoo didn’t include in the $55 million estimate Yahoo made in April. Half of those shares are supposed to be performance-based, meaning Mayer won’t normally get them unless Yahoo met certain goals, like earnings targets. This past year, Mayer had to forfeit just over 400,000 of those performance shares. But because of the deal, and a so-called change of control provision in her contract, Mayer may be able to pocket at least some of those shares in 2016 whether she hits the performance goals or not. What’s more, Mayer may also get a new round of stock grants, again not contingent on whether she hits performance goals, for next year, since the deal isn’t expected to close until the first quarter of 2017.
  • What’s more, the $55 million figure only includes the new grants. It doesn’t include the 1.3 million shares she has already been granted, nor the shares of Yahoo she has acquired during her four-year tenure at the company, which all of a sudden become much easier for her to sell if she leaves Yahoo. Sell those and Mayer would pocket another $53 million.
  • But that’s not all. On top of that, Mayer is entitled to receive her base salary, which in 2015 was $1 million, for two years after she leaves the company. In addition, Yahoo has agreed to continue to pay the premiums on Mayer’s health insurance for a period after she leaves the company, an additional $26,324 per year, because it’s hard, and can be expensive, to get health insurance when you leave your job without going directly to another one. We all know what that’s like.
  • But wait, there’s more. Yahoo is also paying to help Mayer land a new job. During her period of transition, Mayer will presumably need office space, and someone needs to pay for it. The company will put up $15,000 for 24 months of outplacement services for Mayer.

“I think the bottom line is look at what [Mayer] is ending up with: She did quite well even if shareholders didn’t,” Foley says.

What’s more, Mayer’s huge payout nearly didn’t happen. The reason the Verizon deal is so lucrative for Mayer is because of a so-called change of control provision. Yahoo, like other companies, has long had the provision in Mayer and other executive’s pay agreement. According to the clause, Mayer can immediately cash in all of her options and unvested stock if Yahoo gets acquired by another company, and Mayer leaves Yahoo within the next year. But the clause technically didn’t provide for a sale of Yahoo’s main business unit, its internet operations, to another company, which is the deal Yahoo struck with Verizon. But in April, Yahoo’s board voted to alter its change-in-control provision to include the sale of a major business unit as well; and with that, Mayer’s $123 million payday was created.

Without that vote, Mayer would have walked away with “only” around $14 million.

Some have tried to justify Mayer’s Yahoo pay as deserved based on Yahoo’s stock price during her tenure, which did rise 151%. But much of that rise was the result of the fact that Yahoo owns 15% of Chinese internet retailer Alibaba (baba), whose shares have more than doubled during Mayer’s time as CEO of Yahoo. Yahoo also owns a 35.5% stake in Yahoo Japan, a separate public company that trades in Japan. Shares of that company have risen 72% since Mayer joined Yahoo. Factor out those two stakes, and the value of Yahoo’s remaining business has actually dropped nearly $2.4 billion during her tenure.

A Yahoo spokesperson reached by Fortune declined to comment.

Update: A Yahoo spokesperson provided the following statement:

A recent article in Fortune used questionable assumptions and formulas to make grossly misleading and inaccurate estimates of our CEO’s compensation. As we explained to the reporter before he published the piece, it is misrepresentation to classify equity Mayer previously vested in over four years at the company as a “payout” from an acquisition. Moreover, among other concerns, Mayer’s total compensation and severance depend on many factors yet to be determined including future stock prices, company performance, and personal financial decisions. To represent one-sided guesswork as “the real number” is at best careless and inaccurate journalism.

If Mayer’s incredibly golden parachute doesn’t convince you executive compensation is broken in America, I’m not sure what else will.

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