Back when I worked as a vice president at a well-known dot-com, I was given a change-of-control agreement in case the company was sold, closed or taken over by someone else. It essentially was a nice severance package to keep me from leaving during a period of uncertainty for my company, because the thinking was that it wouldn’t do the business any good if the key executives got worried about the future and decided to bolt.

Change-of-control packages are pretty common for most companies, but rarely do they extend down past the executive team or a handful of key employees. There’s a good reason for that: It’s just too expensive to offer such packages to a large chunk of an organization’s workforce—unless you happen to be Yahoo.

Newly released court documents stemming from a lawsuit filed by shareholders over Yahoo’s rejection of a buyout bid by Microsoft this year show that “Yahoo’s chief executive, Jerry Yang, pushed for an expensive plan to retain employees in the event of an acquisition by Microsoft despite reservations of some Yahoo executives and of a consulting firm that Yahoo hired to help devise the plan,” according to a report in The New York Times.

This unprecedented plan, which Yahoo executives defend, would have given a large severance package to every single Yahoo employee if Microsoft had succeeded in its unsolicited attempt to buy Yahoo. According to an Associated Press story, “The severance program, adopted Feb. 12, guaranteed a mix of cash and stock payments to all 13,800 Yahoo employees if they were either fired or quit after being reassigned to a new job within two years after a Microsoft takeover.”

This is essentially a change-of-control package, and although such packages are pretty common, I’ve never, ever heard of them being offered to everyone in the company. The New York Times agrees: “Executive compensation experts have said severance benefits tied to mergers are common but that they are rarely extended to everyone on the payroll.”

In other words, this payoff for every Yahoo worker was designed to act as a “poison pill” and make it a lot more expensive for Microsoft to buy Yahoo, and therefore, make it less likely they would do it.

How much more expensive? The AP says that the “severance plan would have increased Microsoft’s costs by $462 million to $2.1 billion, based on the software maker’s initial Jan. 31 offer of $44.6 billion, or $31 per share, according to Yahoo estimates released Monday. If the bid had been raised to $35 per share, Microsoft’s potential costs from the severance program changes would have ranged from $514 million to $2.4 billion, Yahoo estimated.”

Yahoo still says that the big change-of-control package was necessary to retain and attract employees. In other words, the company was worried that the potential Microsoft buyout might scare some workers into quitting and that would ultimately harm the ongoing business. That’s always a possibility, of course, but I have never seen a company decide that they needed to offer a change-of-control package to every single employee, from janitor up to the CEO, to help keep the business going. Most reasonable people, I think, would say that this is not only excessive, but crazy.

Some shareholder groups agree. Two Detroit pension plans have sued Yahoo and say that Yahoo’s board breached its duty in rejecting Microsoft’s initial $31-a-share bid, and that the change-of-control offering to every Yahoo employee plan creates “huge incentives for a massive employee walkout” and an obstacle to any potential merger.

I like Yahoo and use the Web portal numerous times a day. It’s still a good company in a lot of ways, but not the market leader it once was—Google has supplanted it. The anti-takeover strategy, though, shows that Yahoo still has some innovation chops. If it had applied that kind of creativity to its ongoing business, maybe it would never have had to defend itself against Microsoft in the first place.