Yahoo compensates board members with stock options, many of which are underwater. At least that's how I'm reading the company's last proxy, in April 2007.

The filing is a little old -- reporting 2006 data -- but it suggests there isn't much upside to Yahoo board duty.

Maybe Microsoft has earned enough sympathy on the current board -- when its bid pulled YHOO up to the high $20s, some of the directors' recent grants went back in the money. YHOO closed at $28.09 today.

Footnotes from Yahoo's last proxy, with exercise prices in bold:

Each non-employee director listed in the table above was granted a stock option to purchase 15,000 shares on May 25, 2006 under the Directors' Plan with an exercise price of $32.92, which had a grant date fair value of $158,513. The outstanding option awards held by each director at 2006 fiscal year-end: Mr. Bostock (236,195), Mr. Burkle (415,000), Mr. Joshi (115,000), Mr. Kern (755,885), Mr. Kotick (235,626), Mr. Kozel (271,233), Mr. Wilson (328,200) and Mr. Hippeau (842,599, which includes an option to purchase 200,714 shares granted by SOFTBANK).

Board members are also in the habit of taking stock options instead of fees. Excerpts from more footnotes:

In lieu of cash, Mr. Hippeau elected to receive payment of his chair fees for the third and fourth quarters of 2006 in the form of options to purchase the Company's common stock. Accordingly, Mr. Hippeau was granted an option to purchase 445 shares on September 29, 2006 with an exercise price of $25.28, which had a grant date fair value of $3,790, and an option to purchase 440 shares on December 29, 2006 with an exercise price of $25.54, which had a grant date fair value of $3,608.

In lieu of cash, Mr. Kern elected to receive payment of his chair fees for the third and fourth quarters of 2006 in the form of options to purchase the Company's common stock. Accordingly, Mr. Kern was granted an option to purchase 445 shares on September 29, 2006 with an exercise price of $25.28, which had a grant date fair value of $3,790, and an option to purchase 440 shares on December 29, 2006 with an exercise price of $25.54, which had a grant date fair value of $3,608.

In lieu of cash, Mr. Kotick elected to receive payment of his chair fees for the third and fourth quarters of 2006 in the form of options to purchase the Company's common stock. Accordingly, Mr. Kotick was granted an option to purchase 445 shares on September 29, 2006 with an exercise price of $25.28, which had a grant date fair value of $3,790, and an option to purchase 440 shares on December 29, 2006 with an exercise price of $25.54, which had a grant date fair value of $3,608.

But of course, there's more at stake here than money.