Is Yahoo's Carol Bartz the Most Overpaid CEO?

Yahoo (YHOO) CEO Carl Bartz, who joined the company in 2009 following its botched merger with Microsoft (MSFT), has won praise in the press for her blunt, foul-mouthed management style. Investors, though, are beginning to lose patience.

Bartz, 60, yesterday topped a list of the most overpaid CEOs in the S&P 500, compiled by proxy advisory firm Glass Lewis. Her 2009 pay package of $39 million seems hard to justify. Shares of the Sunnyvale, Calif.-based company are down more than 14% this year. Quantcast estimated Yahoo's monthly unique visitors in January 2008 at 133 million. The figure is down to about 126 million today, the measurement service says. Earlier this year, Facebook overtook Yahoo to become the second most-visited website on the Internet, after first-place Google (GOOG).

Shares of Apple Inc. (AAPL), whose CEO Steve Jobs was named the most underpaid corporate chief, are up 40% this year. Jobs, a billionaire, has taken a salary of $1 for years. In fact, Bartz sees herself in a similar predicament to Jobs when he returned to the pioneering tech company in 1997 after being forced out in 1985.

"Everyone likes to think about iPod days, but it took Steve a long time, even knowing the company, to get it turned around after he came back. So of course it's been done," she told Esquire in May. "It's not my job to convince people. It's my job to work with this team and execute. Three years from now, Yahoo! is going to be the shiny new penny."

A Steady Stream of Exiting Execs

Judging from the exodus of top managers, it's easy to see what she means. Brad Garlinghouse, a Yahoo senior vice president whose 2006 "Peanut Butter Manifesto" called for big changes at the portal, joined AOL (AOL), parent of DailyFinance, as president of Internet and mobile communications in 2009. Susan Decker, who was Yahoo president during Jerry Yang's disastrous tenure as CEO, left the company after Bartz was named CEO. Executive Vice President Hillary Schneider and Senior Vice President David Ko are the latest in a long line of top executives to depart under Bartz's leadership.

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Yahoo continues to struggle on many fronts. Google's share of the search market has begun to slip because of the company's troubles in China -- not because of the Yahoo-Microsoft alliance. It now holds about 69.1% of the worldwide market in the June quarter, compared with 5.4% for Yahoo! and 4.8% for Microsoft, according to Strategy Analysis.

As companies are wont to do, Yahoo defended Bartz's pay, arguing that it's unfair to include the value of her stock options because she did not actually take the money home. As Bloomberg News notes, certain conditions have to be met before Bartz will be able to exercise options on 5 million shares, which cannot be sold until 2013 except under extraordinary circumstances. That argument, however, is as stale as a day-old loaf of bread. Companies have been know to "reprice" options by lowering the targets a CEO must meet.

Bartz can begin proving the naysayers wrong. The company reports third quarter results on Oct. 19. Wall Street has been disappointed before by Yahoo and will not take kindly to it happening again.