Friday, June 08, 2007

ISS Says Vote AGAINST Key Yahoo! Director, Mentions "Plan B"

This past week, influential proxy advisor ISS came out and advised institutional shareholders to vote AGAINST 3 Yahoo! directors: Roy Bostock, Art Kern, and Ron Burkle. They comprise Yahoo!'s Compensation Committee.

The suggested action reflects ISS's disapproval in CEO, Terry Semel's, compensation package for 2006, after previous years of generous pay. More on that follows in the article below.

The report also prominently mentions the "Plan B" campaign begun in January on this blog and still going strong against Yahoo! A whole page in the report covers the details of the nine-point plan submitted to Yahoo! last February and still -- to our knowledge -- not implemented by the company.

In addition to Bostock, Kern, and Burkle, "Plan B" calls on Yahoo! shareholder to vote AGAINST Eric Hippeau, Terry Semel, Robert Kotick, and Gary Wilson. The votes will be cast and counted in Santa Clara on Tuesday (June 12th) at Yahoo!'s Annual Meeting. I will be there to represent the other 100 shareholders who have joined our campaign to urge Yahoo! to take immediate steps to unlock value buried within this great company. I'm looking forward to have the chance to address Terry Semel.

Far away from Sunnyvale, something interesting happened yesterday. ECS -- a little-known investment fund -- announced that it had purchased $650,000 of shares in Vodafone and were going to be agitating for changes at the telecom. That stake represents 0.0004% of Vodafone - a $168 billion company. To put that in perspective, our "Plan B" group owns $56 million of Yahoo! shares, close to 0.2% of the company - with a market cap of $37 billion. The profile of an activist investor just got smaller -- something which will aid our campaign as we continue it in the months to come, no matter the result on Tuesday.

We have a view of Yahoo! as a $160 billion company, which it could easily achieve in the next two years if managed properly. That's much more attractive than a $40 billion or $60 billion MSFT-YHOO or EBAY-YHOO. We need to hear how Yahoo! will build a bridge to that $160 billion vision so that it can control its own destiny. "Plan B" is a good first step.

Here is a link to the article on ISS:

Yahoo CEO's Pay Too High, Groups Say

SAN FRANCISCO (Dow Jones) -- Yahoo Inc. Chief Executive Terry Semel has not earned his considerable pay, and shareholders should therefore withhold support for the company's compensation committee members at its annual meeting next week, two proxy adviser firms said recently.

The firms, Proxy Governance Inc. and Institutional Shareholder Services, said in reports that Semel's compensation, particularly a grant of 6 million stock options awarded in 2006, is bloated relative to that of CEOs at companies such as Microsoft Corp. and Google Inc.

"Mr. Semel's stock options grant is particularly troubling in light of the company's recent poor stock performance and corporate performance," ISS said in a report issued May 30.
Proxy Governance, in a report issued Wednesday, said that "the average three- year compensation paid to [Semel] is 926% above the median paid to CEOs at peer companies."

Yahoo (YHOO) shares have fallen more than 10% in the past year, while those of competitor Google (GOOG) have risen over 30%, and those of Microsoft (MSFT) have also risen more than 30%.

To protest Semel's pay, both ISS and Proxy Governance recommended that shareholders withhold support for Yahoo compensation committee members Ron Burkle, Roy Bostock, and Arthur Kern, "as a way of signaling concern about the company's compensation practices," Proxy Governance said.

Yahoo is hosting its shareholder meeting Tuesday in Santa Clara, Calif.

Yahoo spokeswoman Helena Maus said in an e-mail that Semel's 2006 direct compensation was reduced to $1, with the rest coming in the form of performance- based stock option grants.
"Under Terry's leadership, the company has a clear strategy to create stockholder value," Maus said.

In its report, ISS took particular interest in Semel's three-year retention agreement signed in May, which included the sizable grant of 6 million stock options.

That "mega" grant has a present value of $92 million, ISS said. Including Semel's bonus from 2005, his pay package in 2006 was therefore worth an estimated $107.5 million, ISS said.

Maus said that the options grant was made with the expectation that no other long-term grants will be made to Semel "for the next three years, with the exception of the annual bonus grants."

Maus added that the options have exercise prices equal to the market value of Yahoo's stock at the time of the grant, "so Terry will only financially benefit from these options if all Yahoo! stockholders also benefit from improvements in our stock price."

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