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By Elinor Mills, 5 June 2006 09:05

NEWS

Yahoo! chief executive Terry Semel, the highest compensated executive in the San Francisco Bay Area last year at more than $56.8m, will receive an annual salary of $1 through 2008, according to documents made public on Friday by the US Securities and Exchange Commission (SEC).

For the next three years, Semel will also be eligible to receive an annual bonus of up to one million shares and the option to purchase six million shares at an exercise price of $31.59 each as a retention incentive, under management compensation arrangements approved on Wednesday by Yahoo!'s Board of Directors compensation committee.

The board of directors said it doesn't anticipate making any further equity grants to Semel in the next three years.

Semel was the highest-paid executive in the San Francisco Bay Area in 2004 and 2005, according to a survey released last week by the San Francisco Chronicle. Semel's salary and bonus were $600,000 last year, and total compensation, including restricted stock and the estimated value of options, was $56.8m, down from $131.2m the year before, the study found.

Some studies show that the average pay for chief executives in 2005 was between $10m and $15m.

The $1 salary follows moves by other tech executives, including Apple CEO Steve Jobs. Google chief executive Eric Schmidt, and co-founders Sergey Brin and Larry Page, have also voluntarily agreed to cut their annual salaries down to that token sum. Their salary loss is more than offset by the millions the Google executives have made off stock sales.

Dan Rosensweig, Yahoo!'s chief operating officer, and Susan Decker, chief financial officer, will each continue to receive an annual salary of $500,000 through 2009, according to the SEC filing. Each will also be eligible for a $1m bonus, the option to purchase 2.1 million shares of stock at $31.59 each and a performance award of 50,000 restricted stock units, the filing said.

Rosensweig's total compensation was $24.4m last year and Decker's was $24.3m, ranking them fifth and sixth, respectively, in the Chronicle's executive pay survey.

Yahoo! chief technical officer Farzad Nazem will continue to receive an annual salary of $500,000 through 2007, a potential cash bonus of $1m, an option to purchase 900,000 shares at $31.59 each and 50,000 restricted stock units based on performance. He was ranked seventh with just more than $24m in total compensation last year in the Chronicle survey.

General counsel Michael Callahan received an option to purchase 330,000 shares at $31.59 each and 73,000 restricted stock units, according to the regulatory filing. He was ranked 119th in the Chronicle survey.

Yahoo!'s stock price has dropped more than 18 per cent over the past year but it has jumped nearly 300 per cent in the five years Semel's been at the helm.

Yahoo! posted first-quarter revenue in April of $1.09bn, up 33 per cent from a year ago, while net income was down year-over-year to $160m on higher stock compensation expenses.

Elinor Mills writes for CNET News.com