• The New York Times, Tuesday, June 10, 2008 11 AM

Lawyers representing two Detroit pension plans are suing Yahoo over the employee severance plan that was put into place to insulate existing workers who might lose their jobs in the event of a Microsoft takeover. The plaintiffs claim that the plan, which would have cost Microsoft an extra $2 billion or more, has become a major roadblock to a potential takeover. Most shareholders want a Microsoft takeover because it would immediately add value to the company's under-performing stock. The plaintiffs are moving to hold a trial to determine the fate of the severance plan before the company's Aug. 1 shareholder meeting.

Said plan offers incentives to Yahoo employees who are fired or leave the company as a result of their roles being diminished or terminated in the wake of a takeover. Benefits include cash and an accelerated vesting of stock options. Yahoo claims the plan is necessary to protect the company's talent, and thus, is good for shareholders.

"If Icahn's slate prevails, Yahoo shareholders will be funding huge cash severance and equity acceleration over the following two years for every employee who is either terminated or who resigns with 'good reason' as that phrase is loosely defined in the severance plans," the plaintiffs argued in a brief obtained by The New York Times.

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