A Yahoo employee severance plan meant to protect workers after a merger with Microsoft should be scrapped, according to a shareholder lawsuit against Yahoo and its directors.
Both the plaintiffs and billionaire investor Carl Icahn, who is waging a battle for control of the Yahoo board, have criticized the severance plan as costly and said it was an obstacle to any merger, The New York Times reported.
The plaintiffs, two Detroit pensions, said if Icahn wins control of the board, Yahoo could be faced with up to $2.4 billion in potential severance payouts under the plan, according to the Times, the same amount that the plan could cost Microsoft.
A spokesman for Yahoo said that figure was an estimate based on many assumptions, including that all Yahoo employees would be fired or otherwise be able to claim severance benefits, the Times reported.
The plan offers enhanced benefits, cash and accelerated vesting of stock options, to any Yahoo employees who are fired or leave because their roles are diminished after a merger or change in control of the company, it said.
Lawyers representing the pension plans are reported to have asked a judge in Delaware to hold a trial to determine the fate of the plan ahead of the company's August 1 shareholder meeting.
Legal experts told the paper a trial could shine a light on Yahoo's talks with Microsoft and affect the outcome of the proxy fight.
Yahoo has said the suit is without merit, the Times said, which said Icahn did not return a call seeking comment. (Reuters)