Monday, June 18, 2007

Yahoo! Annual Meeting Recap: Shout-Out to Adam Taggert and Terry Semel

Last week, I attended Yahoo!'s annual meeting in Santa Clara. Although there was an inordinately high amount of visible security as I made my way into the Convention Center, the actual session was fairly subdued.

As many of you know, our group had been pushing shareholders to not "sign a blank check" to Yahoo!'s board and management after this last year's performance. To do that, we recommended shareholders vote "AGAINST" 7 of 10 directors. Had any directors received less than 50% "FOR" votes, according to new rules put in place by Yahoo! last January (for which the company deserves kudos), he would have had to resign the Yahoo! board.

We realized this was a long shot. Anyone who follows these kinds of votes knows that the company's slate is usually re-elected with 98 - 99% approval (which is exactly what each Yahoo! director received last year). When the voting was finally complete at last week's meeting, Yahoo!'s Computershare representative announced that the "board has been re-elected with 66% support." He then went on to discuss the various sharholder proposals which were all defeated (although pay-for-performance got 34% support). There was a lot of whispering which started to happen in the audience at the 66% number. If 33% had voted against the Yahoo! board on average, that was a historically high number. To put that in perspective, Disney stripped Michael Eisner of his Chairman title in 2004, after 43% of shareholders voted against his re-election to the board. It was also very odd for the company not to release details of individual director re-election results within the first 24 hours after voting. Yahoo!'s PR team later clarified to the press that (1) the highest "AGAINST" vote any one director received was 33% and (2) they wouldn't disclose individual director results until their Q2 10Q which they'll file with the SEC next month.

Despite the fact that we don't know the final results, it's clear that our "AGAINST" vote campaign was a success and that -- quite clearly -- Yahoo! shareholders did not give the company a "blank check" for the coming year. No doubt, the recommendations of ISS, Glass Lewis, and ProxyGovernance played key roles in this result. Although our campaign was quite public, received a lot of press, and galvanized support from the individual investor community, it's impossible to achieve a 50% number without the major institutional investors behind you. I can't tell you how many institutional investors I spoke to who were angry about Yahoo!'s last 3 years of performance but wouldn't decide how to vote until they saw how ISS, Glass Lewis and others came out with their opinions.

Many have asked me if I consider the Yahoo! vote a victory. I do. The company will be better off in 2, 5, 10 years because of it. I know that this company wants to be better -- and it can be better; shareholders wouldn't be so energized if they didn't feel that there are so many wonderful assets to make the most of in the coming years.

Terry Semel approached me after the meeting. He is very charming and I appreciated him reaching out to me. He clearly wants the company to do better. He told me that he is interested in discussing ideas that our group has for unlocking shareholder value. He wants any dialogue to be private (not splashed about on this blog), which, of course, is understandable. I take him at his word. We're all on the same team here: the let's-make-Yahoo!-the-best-it-can-possibly-be team.

Finally, I want to mention something really special about Yahoo! and its culture. This is a company that allows for disagreement and debate to get to the best possible result. Everyone publicly saw this when Brad Garlinghouse's memo (the "Peanut Butter Manifesto") was leaked to the press last November. However, they've had the Yodel Anecdotal corporate blog up for many months now, where the company is often at the end of sometimes very critical comments. Several employees have also shared with me that the company has a number of internal email lists where employees often get into heated debates about certain product/development issues. Yahoo! doesn't censor any of these. And that's a good thing. According to research I've done with Dartmouth Tuck School Professor, Sydney Finkelstein, companies that allow for dissent and debate (rather than promoting "groupthink") are more successful and less likely to fail in the long-term. Yahoo! has open-mindedness in spades and I believe it will be key to its reversal of fortune in the coming weeks and months.

Let me give you one additional example of "open-mindedness": Adam Taggert. Who is Adam Taggert? He's a Director of Yahoo!'s hugely important Mobile Group, one of the key growth areas that Terry Semel regularely cites as being critical to the company's future success. Adam was at last week's annual meeting - with a lot of other Yahoo! employees. Imagine his chagrin when I criticized Yahoo! Go - his mobile product that the company went public with (in beta) last January - to Terry and everyone else. I complained that the product, although pretty, was slow on my BlackBerry, to the point where I felt I had to use Google to get mobile info. Adam approached me after the meeting and explained that they knew this issue and that the next version was due out shortly which would correct this problem. He asked if he could uninstall and reinstall Yahoo! Go on my device. I didn't have time, so he emailed me a couple of days later and spent about 20 minutes with me on the phone correcting the problem.

I told Adam: "I'm sorry if I embarrassed you on Tuesday. If some guy got up and said something critical about my product in front of my bosses, I would find it hard to take." He said that he appreciated the criticisms. "That's what we need to hear to make this better. We've heard it before and are working really hard to improve the next version. I'm going to call you as soon as it goes public."

An organization is nothing more than the sum of its individuals tied around a vision and strategy to succeed. Thank God that Yahoo! has lots of Adam Taggerts working for it. It's men and women like him who are going to take this company to the next level. When there's criticism, they sit up and listen to it. They strip out the emotion and find the helpful suggestions that ultimately make Yahoo! a better company.

Thank you, Adam and Terry, for listening. And thanks for doing everything you can to make Yahoo! the most successful company in the world. We look forward to being a part of the solution, not part of the problem.

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Anonymous said...

I really enjoyed your blog about ousting Terry Semel and the board of directors at Yahoo! well Terry Semel is history who you want gone next?

something wrong with these YPN ads

Just a Bad Business Model. Pay Per Click doesn't work

Anonymous said...

Congratulation on getting the Board to act. Out of interest, how did you find the names of the institutional investors to contact them? I hold another stock with even poorer performance than YHOO and am interested in seeing whether we can accomplish what you have.

Eric Jackson said...

Hi Anon:

Yahoo! Finance or any finance site has a link to the top 10 holders of any public company.

Good luck! I hope this campaign inspires other investors to get active. We'll all benefit from a more dynamic capital market.

Anonymous said...

Hi Eric,

Thanks for the quick reply. Yeah those sites list the top holders by institution but not actual contacts charged with managing that particular holding. Did you then go to each to find out who that person was, or was there a more expedient source? Again, thx for the inspiration. It's nice to see that we're not powerless.

Eric Jackson said...

Yeah. No quick solution. You have to beat the bushes.

Anonymous said...

Okay Eric. Thx. And congrats again.