How to Negotiate a $109M Severance Package

There’s been a lot of press about Yahoo COO Henrique de Castro getting fired by CEO Marissa Mayer after just one year in the job. Much of the press revolves around his $109M severance package because people are dumbfounded by how anyone could receive so much money for failing.

But let’s examine the circumstances under which de Castro accepted the position. Mayer snagged him from Google where he had a great gig working for the #1 company on the Fortune Best Companies to Work For list. He was given an opportunity to walk into Yahoo, a company whose revenues have been declining consistently for years, due to competition from Google and Facebook. His charge was to orchestrate a major turnaround for the company, no small feat.

No executive takes on such a role without meticulously negotiating a comprehensive severance package. His severance benefits, including equity awards, were laid out in his employment letter. I’m assuming de Castro knew he was taking an enormous risk teaming with Yahoo and the only way Mayer was going to be able to convince him to come on board was by offering him a huge “insurance policy.” 

So what does all this mean for you? If you are in the midst of a negotiation for a new job, it may be important to negotiate your severance package on the way in, because it can be difficult, if not impossible, to negotiate it on the way out. While it might seem awkward to negotiate your exit when you’ve just gotten your foot in the door, it’s a prudent and frequently expected point to negotiate, particularly if part of the new role requires a turnaround effort. As long as you can prove to the prospective employer that what you are negotiating for is fair and reasonable, you should be able to make some headway in the negotiation process.

Since negotiating severance may feel like a difficult conversation, here are a few tips.

1. Begin the conversation by displaying your excitement about the offer and reiterate why you think you are a great fit and what value you can bring to the role.
2. Explain that you expect to have a long and fruitful career with the company.
3. Discuss the reality of the risks associated with the role if there are any in terms that are fair and reasonable. For example, you might say, “Given the fact that this is a volatile market, I think it would be prudent to discuss the severance package, should market conditions impact company performance.” If you are being brought in to manage a turnaround, you might say, “Given the fact that the firm is facing significant challenges, some that may be outside their control due to the economy, I believe it is reasonable to discuss what happens if the original goals are not met.” If you are negotiating with a start up, you might say, “Since I am leaving an established Fortune 1,000 company for this start-up, there is inherently more risk and I would like to discuss the opportunity for severance if the company does not take off.”

While I can’t guarantee you will leave the negotiation table with a package as lucrative as de Castro’s, you will certainly be taking better ownership of what happens to you financially if your new job doesn’t work out the way you had planned.