Wednesday, May 02, 2007

Why I Can't Run for Election to Yahoo!'s Board of Directors

Since January of this year, I've been formally advocating for changes at Yahoo! - the Internet titan, which has gone through a difficult last 2.5 years when comparing its performance to Google, its closest and most direct competitor.

Since August 6th, 2004, through today, Google's stock has increased 333%, while Yahoo!'s has decreased by 8.4% and the NASDAQ has climbed 35%. In other words, $10,000 invested in Google's aftermarket IPO price would be worth $33,300 today. That same $10,000 invested in Yahoo! at that time would be worth $9,160 today. That's a 3.6x differential.

I became a shareholder of Yahoo! at the beginning of this year -- purchasing 45 shares, which I still own. On January 7th, I began to advocate for change at Yahoo!, issuing a "draft" Plan B via a YouTube video and a blog posting and asking for others who shared my sentiments to help refine and improve the alternative plan, in order to take it to the company.

The response was immediate and strong. Several current and former Yahoo! employees, long-standing shareholders (including an actual widow - no orphans, though, to my knowledge), and even a former castmate of the Apprentice LA joined the campaign. Press coverage was strong too. There was an novelty aspect to it. "Web Warrior Takes on Yahoo" was one headline.

Pledges of Yahoo! shares immediately started to pour in via the blog (in the comments section) as well as suggestions for improving the plan. To help keep this collective shareholder action better organized, the folks from YouChoose.Net helped create a form to track the various pledges of shares and Wikia helped create a Yahoo! wiki, where our supporters could actually go and directly edit the "Plan B."

I had no idea this would happen when I sat down in my guest-room on a Sunday morning in January to record my first video. However, it did strike me that, with the power of blogs and social networking (the tools that Yahoo! itself promotes to draw groups of users together for their collective benefit and Yahoo!'s), which had worked it the political realm, perhaps now was the time for shareholders to be able to band together and help influence the direction of a public company for the betterment of all its shareholders.

Within a few weeks, we were up to a total number of pledged Yahoo! shares of 1 million. Today, we are just shy of 2 million Yahoo! shares - worth approximately $55 million.

On February 22nd, we finalized our "Plan B" and formally submitted it to Yahoo!'s Corporate Secretary. We asked to bring forward the nine points of our "Plan B" as business at the 2007 Yahoo! annual meeting. All nine points, we believe, if implemented, will create significant additional value for Yahoo! shareholders.

We couldn't include it as a formal stockholder proposal, as the submission date (set by Yahoo!) was back in December 2006. We also put forward my name as a nominee for the Yahoo! board -- also to be voted on at the 2007 annual meeting. There were certain requirements, as set forth in Yahoo!'s corporate by-laws, that anyone must meet, in order to be nominated to the board. We believed we fulfilled all of them, including (of course) being a stockholder at the time of nomination.

I regret to say that I have been informed that our reading of the requirements to stand for election as a director for Yahoo! was apparently not accurate. It isn't sufficient to be a stockholder in the company to run for election to the board, you need to be a stockholder of record. That is to say, that Yahoo!'s master list of stockholders needs to have a record of you as a stockholder before you nominate yourself to its board. Not enough time had passed for E*Trade to inform Yahoo!'s transfer agent that Eric Jackson now possessed 45 Yahoo! shares.

To say I'm disappointed is an understatement. I believe that Yahoo!, despite its problems over the past years, has an incredible collection of assets and a bright future -- if it acts swiftly and wisely in the coming 6 - 12 months. If it drifts, acting swiftly and wisely 18 months from now will be too late. A fresh perspective to the Yahoo! board of only one person, but someone representing a sizable group of shareholders, would signal to all Yahoo! shareholders that their voices are being heard around the board table.

However, for those of you who support a "Plan B" for Yahoo! and would like your voices to be heard by Yahoo!'s board and management, your support now is more important than ever. On June 12th, Yahoo! will hold its annual meeting in Santa Clara. The company proxy was released earlier this week. There are 2 ways you can make your voice known - in support of "Plan B" - at that meeting.

(1) Our group is entitled -- just as any other shareholder is -- to speak up at the Q&A session preceding the formal meeting. Continuing to pledge your shares to our plan will give us a greater collective stake when we stand up to make our points.

(2) Every Yahoo! shareholder can vote "for" the 10 directors on the company's slate of directors or they can "withhold" votes for any or all directors. Because Yahoo! has moved from plurality to majority vote counting this year (for which they deserve kudos), any Yahoo! director receiving less than 50% of shareholder votes will be required to immediately leave the board. In recent years, there have been a number of high-profile companies receiving high "withhold" votes. In all these cases, the results were symbolic -- not requiring the company to take action. This could be one of the first examples in a post-Enron world where a company actually sees one or more of its directors voted down by majority vote.

Therefore, my fellow Yahoo! shareholders, I ask you to continue to support a "Plan B" for Yahoo! and read your Yahoo! proxy wisely. We live in a shareholder democracy, after all. Every vote counts. If you don't believe in Yahoo!, please sell your shares. Many did over the past two weeks following the Q1 earnings call. Those of you who didn't sell obviously still believe in the company.

If you want to help influence Yahoo!, for the benefit of all shareholders, but don't just want to sign a blank check for the Yahoo!'s current board and management based on the last 2.5 years, support "Plan B" and withhold your votes for some of Yahoo!'s directors.

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2 comments:

CrossProfit said...

I take it that you are against the MSFT proposed merger no matter what the offer is. Is this correct?

Disclosure: Comment by a CrossProfit analyst and does not reflect the opinion of CrossProfit.com.
http://www.crossprofit.com

Eric Jackson said...

As a Yahoo! shareholder, I’m happy with this news. How can you be unhappy with a 15% bump in the stock this morning, after seeing that amount of shrinkage after the Q1 #s came out.

However, this is just rumor now. We'll have to learn of the details of any potential deal. As a user and fan of the company, I’m skeptical that this deal (without other meaningful steps) will really lead to increased usage of Yahoo! in the competitive landscape. Employee retention is a huge question mark.