Yahoo Ditches Poison Pill Severance Plan

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Struggling Internet giant Yahoo has settled a shareholder lawsuit by altering the terms of a so-called “poison pill” severance plan for its employees that itadopted shortly after Microsoft announced its unsolicited takeover offer back in early 2008.The severance package was designed to keep Yahoo employees with the company in the event of a merger by making it very expensive for a new owner to jettison them; it also would have made moving Yahooemployees to Microsoft’s Seattle-area headquarters difficult.

Under the settlement with its own shareholders, Yahoo’s severance terms won’t go into effect if Yahoo were just to sell its Internet search business—the one part of Yahoo Microsoft might still be interested in buying. The settlement also reduces the period of time employees would be eligible for severance pay in the event of an acquisition: the original terms had Yahoo employees eligible to collect severance if laid off within two years of a takeover; now, the period is just one year.

The settlement also stipulates that the election of a new board of directors is not considered a “change of ownership” so far as activation of severance benefits is concerned.

The lawsuit challenging the severance terms was part of a class action brought by the police and fire retirement system of Detroit and other investors, including pension funds.

Yesterday, Yahoo began the process of formally laying off some 1,500 employees.

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