American Capitalism

Remember Yahoo? Twenty years ago, it was a titan of the internet, with services that ranged from email to search to web hosting to video.

But it failed to maintain its competitive position against emerging firms like Google, Facebook, and Amazon. And although it hired Marissa Mayer away from Google in 2012 to become its new Chief Executive Officer, its market share continued to decline.

Even worse, the firm suffered multiple massive data breaches during Mayer’s reign. Hackers gained access to the personal information of (quite literally) billions of users, while Mayer arranged for the firm’s American assets to be sold to Verizon.

To be fair, one can certainly argue that Yahoo was beyond any chance of resuscitation when Mayer came aboard as its Chief Executive Officer. And yet one cannot deny that the firm clearly failed under her watch.

So what will happen to Mayer after Verizon acquires Yahoo? Apparently, she’ll receive a $23 million severance package. And earlier this month, the firm publicly clarified that she will earn these benefits on top of $56 million worth of previously earned stock options.

Ms. Mayer undeniably risked her career by moving from Google to Yahoo. And according to the principles of American capitalism, she should have expected to receive lavish economic rewards if she had succeeded at reviving the firm.

But according to those same principles, stakeholders in failed organizations should expect to share in the losses of their business entities. After all, if they are eager to share in the spoils of success, they should also be willing to bear the risks of failure.

But in Mayer’s case, and in many similar cases, the very corporate officers who preside over the failure of their firms are immensely (and perversely) rewarded for their outcomes. In other words, they receive the spoils of success, whether they actually succeed or fail.

That may simply represent an ingrained feature of American capitalism. But it cannot possibly be a productive condition for the long-term health of the American economy.