How is it possible that one of the nation’s leading top executive search firms did not uncover this fact during its due diligence on behalf of Yahoo?

The lesson is pretty clear — companies should be thorough in vetting candidates, especially their C-suite executives. And executives should be prepared to substantiate every entry in their résumé and employment application. These are basic threshold issues.  But, yet this type of slippage appears front and center on the first page of today’s New York Times Business Section.

Certainly understandable why a 5% shareholder would sue to remove Thompson and seek greater board representation.

Executives contemplating very public resignations and similar activity may want to think twice about it.  They should be mindful of the implications of confidentiality and non-disparagement provisions that may be contained in their employment documents signed at the time of offer or are contained in an employment agreement.  Publishing a tell-all book may also violate those provisions.

In addition, firms may become ever more vigilant in enforcing their protective agreements, and may seek to make examples out of those who cross the line. In fact, in today’s Wall Street Journal, Liz Moyer writes in “Goldman Review Focuses on Exit” that Goldman has started “scouring computers and emails for potentially deragotory terms that might have been used by employees to describe the firm’s clients.”  Beware.  Be careful.  Re-read your agreements and seek counsel where you are unsure of their meaning.

Regardless of your perspective, one thing is clear.  His expression of his opinion in a national publication illustrates the potential dangers of media exposure by senior executives.  Maybe his comments were well-intended; perhaps they were not.  But what will now happen to him and the people who reported to him, or to whom he reported?  Now that his thoughts are in the news, in every form, it is hard to predict what wheels his departing bus will have.  Will the regulators pounce, will clients leave, will recruiting suffer, how many lives will this impact?  Will his comments carry sufficient weight to render a potential change in the perceived culture of his former employer, or will these thoughts be dismissed as sour grapes?  In this continuing period of reduced bonus pools and compensation structures and the vilification of the financial industry in some sectors of the media and politics, will this public display of opinion be seen as a breath of fresh air or merely a piling on of further criticism? Questions to which the answers are yet to come.

This post was co-authored by Charles A. Bruder, a Member of Norris McLaughlin & Marcus and Co-Chair of its Executive Compensation & Employee Benefits Group. Charles is experienced in all aspects of defined contribution and defined benefit plans, deferred compensation arrangements, stock option plans, employee stock ownership plans, and other incentive and equity-based compensation arrangements.

Nonetheless, an intriguing angle on this is how the $100 million will be treated.  Can Mr. Isenberg merely waive the payment and not be taxed since, in effect, the $100 million may have been constructively received by him by contract?

The Company’s press release indicates that it entered into an agreement with Mr. Isenberg whereby Isenberg voluntarily terminated his employment effective December 31, 2011, remaining as Chairman through June 2012. It also states that Mr. Isenberg will receive “no cash compensation in connection with the termination and waives all claims he might have had against the Company in connection with his employment agreement, including any claim that the October 26, 2011 appointment of a new chief executive officer constituted constructive termination entitling him to [the] $100 million payment.”

In another interesting side note, Mr. Isenberg’s severance amount may constitute deferred compensation, depending upon the terms of his employment contract.  It is unclear what, if anything, Mr. Isenberg received (or will receive) in exchange for his agreement to forego receipt of this severance amount.  News reports suggest that his estate will receive a $6.6 million payment upon his death. However, if any amount payable to Mr. Isenberg (or his estate) in exchange for this agreement occurs after the date upon which he would have otherwise received his severance payment, the negotiated amount could constitute a substitute payment with a deferred payment date, which may be an impermissible subsequent compensation deferral in violation of Code Section 409A. When dealing with deferred compensation (as with many other tax provisions), you can’t do indirectly what you can’t do directly.

The $100 Million Giveback

This post was co-authored by Charles A. Bruder, a Member of Norris McLaughlin & Marcus and Co-Chair of its Executive Compensation & Employee Benefits Group. Charles is experienced in all aspects of defined contribution and defined benefit plans, deferred compensation arrangements, stock option plans, employee stock ownership plans, and other incentive and equity-based compensation arrangements.