Naples Daily News: Naples Small Investor Led Shareholder Revolt Against Yahoo!

From the Sunday Naples Daily News:

By Laura Layden

Saturday, June 30, 2007

You might call it a Webolution.

It all started back in October when Naples resident and management consultant Eric Jackson wrote about Yahoo! on his personal blog. He questioned the company’s management and the leadership of then-CEO Terry Semel.

He wrote that the rise in the company’s stock price in the first few years after Semel joined Yahoo! in 2001 had more to do with the increased popularity of Internet advertising than with the executive himself -- and that anyone could have done the same job in the same situation.

Little did he know the reaction he would get. E-mails and phone calls poured in from disgruntled investors.

“At the time, there was this huge amount of traffic that came on my blog. I didn’t get that many visitors to my blog and suddenly there was all this interest. People were making comments.
Ninety-five percent were agreeing and frustrated with Semel’s leadership,” Jackson said.
The outpouring of support led him to become a shareholder in Yahoo! and an activist pushing for change.

Observers have credited Jackson for taking down Semel, who stepped aside as Yahoo!’s boss earlier this month. On June 18, Yahoo! announced Semel was out as CEO and that co-founder Jerry Yang would replace him.

The change in leadership came after Jackson, who bought 96 shares of Yahoo! stock in January, led a high-profile campaign to oust Semel and to replace six others on the company’s board of directors as part of what he calls “Plan B.”

“I think a lot of people were dissatisfied, and he just brought a voice that had a lot of weight because he represented the small guy,” said David Neubert, a Yahoo! investor and former Wall Street trader in New York that got behind his campaign. “Representing the small investors gave him more weight than if he was a single investor representing more shares.”

The campaign attracted national attention. The Wall Street Journal, New York Times, Business Week, USA TODAY and the Los Angeles Times picked up on the story. Jackson appeared on CNBC and Bloomberg Television.

“For Bloomberg they sent a truck to where I live in North Naples,” he said. “For CNBC, I had to drive to Fort Lauderdale because there wasn’t a studio in Naples that had a satellite dish to do the uplink.”

He used his blog and YouTube to organize investors to support him.

“I didn’t have any money to do a marketing campaign,” he said.

After reading Jackson’s blog, Neubert pledged his 4,500 shares (worth about $120,000 at the time).

Jackson impressed him.

“You see Carl Icahn do this stuff,” Neubert said. “But you don’t see a little guy like this doing it, and he wasn’t even from the financial world.”

“My hope is that it becomes the wave of the future, and that a lot more individual investors do this,” he said.

The group’s nine-point plan suggested how Yahoo! could turn itself around.

“The company hasn’t been doing particularly well in the last three years, especially in comparison to Google,” Jackson said. “Google’s stock has gone up by about 300 percent, and Yahoo!’s stock has gone down 8 percent, as of a few weeks ago. It has been an underperforming company. It has been a frustrating company to watch as a shareholder.”

Within the first few weeks of posting his interest in driving change at Yahoo!, investors pledged 500,000 shares to his campaign.

“I was surprised at how many current and former Yahoo! employees had contacted me and started expressing interest,” he said.

Today, his group represents 100 individual investors, owning 2.1 million shares (worth about $60 million).

Jackson sent Plan B to the company in February, but the board gave it little notice, he said.
In April, he met with Yahoo! executives in California. But nothing changed, he said.

Now, Yahoo! seems to be paying attention.

At the company’s annual meeting on June 12, more than a third of the stockholders opposed the re-election of at least one Yahoo! director. That rarely happens. It sent a clear message that shareholders weren’t happy and wanted change at the Internet giant.

“I think everyone was very surprised that the vote was as high as it was,” Jackson said.
He attended the annual meeting at the Santa Clara Convention Center in California and asked tough questions of Semel, who at the time appeared to have no immediate plans of leaving Yahoo!.

Jackson demanded to know whether Semel still had the “fire in his belly” to continue on as Yahoo!’s boss.

Semel answered “absolutely.”

Jackson also asked how Yahoo! planned to better compete with Google and grow its display advertising business.

In his speech to shareholders that day, Semel didn’t apologize for the company’s poor performance and Jackson told him he should have.

Semel responded the best was yet to come.

Less than a week after the annual meeting, Semel resigned.

“This is the time for new executive leadership, with different skills and strengths, to step in and drive the company to realize its full potential — it is the right thing to do, and the right time is now,” he wrote in a letter to Yahoo!’s board of directors.

He said there’s “no doubt that, with its new leadership team, Yahoo! will realize its enormous potential.”

Yahoo! seems to be acting on other points in Plan B. The company has stepped up its buy-back program for stock and is looking to reduce overlapping divisions, two suggestions in the plan, he said.

“I don’t expect them to do everything in the plan, but it seems they are following up on several of the points, which makes us happy,” he said. “I think they are on the right track again.”
Jackson, 35, has a master’s and Ph.D. in strategy and corporate governance from Columbia University’s Graduate School of Business in New York.

He owns his own management consulting firm, Jackson Leadership Systems Inc., which his father founded in 1989. Though it’s based in Naples, the company has clients around the country, including cement supplier Lafarge, chemical company BASF and the NBA’s Toronto Raptors.

Previously, Jackson was a vice president of strategy and business development at Web telephone service provider VoiceGenie, now a part of Alcatel. Jackson moved here last fall from Toronto.

This is the first time he’s been involved in an activist campaign. He’s watched others build up their stake in companies to force change. By others he means the likes of billionaire investor and takeover king Carl Icahn, who has made a bid for Bonita Springs-based home builder WCI Communities Inc. and wants to replace the current board of directors with his own slate of officers.

Jackson also has taken cues from Naples’ own Bruce Sherman, an investment consultant who instigated the sale of newspaper giant Knight-Ridder.

The difference is that Jackson is a small investor who used the Internet to organize his campaign.

He even attempted to get elected to Yahoo!’s board of directors, but a technical hang-up kept that from happening.

He’s not stopping at Yahoo! He plans to launch more activist campaigns against other companies.

But he’s not revealing any names yet.

“I’m still researching,” he said. “So we haven’t actually bought the stakes yet.”

With all the publicity from his Yahoo! campaign, he’s been asked if he’s going to create his own hedge fund.

“That might be a spin-off business for Jackson Leadership,” he said. “Hopefully, sooner rather than later. Maybe Naples will become the activist investing capital of the world.”

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ISS Governance Weekly: The Power of Protest Votes

From the recent "Governance Weekly" newsletter put out by the ISS:

By Ted Allen, Director of Publications

The resignation of CEO Terry Semel at Yahoo! this week is the latest example of the growing power that investors wield with “withhold” and “against” votes in board elections.

“Shareholders used to be quite reluctant to vote no,” Amy Borrus, deputy director of the Council of Institutional Investors (CII), told Governance Weekly. “Shareholders are becoming more emboldened and more willing to hold directors personally accountable for their performance.”

Semel stepped down June 18, less than a week after at least one director received 34 percent opposition, in part because of a “vote-no” campaign by investor Eric Jackson. The Internet company hasn’t released specific vote totals, but news reports indicate that all board members were elected with at least 66 percent support. That was significantly less than last year, when all the directors received more than 98 percent support.

Jackson and other shareholders complained that Semel’s generous pay package wasn’t justified by the company’s lagging shares, which fell almost 10 percent in the past year, while rival Google's increased by more than 30 percent. In 2006, Semel received an estimated $107.5 million pay package, which included 6 million stock options, according to ISS data.

While the shareholder opposition wasn’t the only reason for Yahoo’s CEO change, the negative votes at the June 12 annual meeting appear to be the final straw that persuaded the board to replace Semel with Jerry Yang, one of Yahoo’s founders. Semel will remain at the Sunnyvale, California-based firm as chairman.

Traditionally, the act of withholding support in an uncontested director election has been viewed by investors as a symbolic protest. While the importance of board elections has increased in the past year as scores of firms, including Yahoo, have adopted majority voting and/or resignation policies, very few directors at U.S. companies ever get more than 50 percent opposition. Last year, just eight directors out of more than 31,000 on corporate ballots failed to receive majority support, according to ISS data.

The vote at Yahoo is further evidence that a significant (but less than a majority) negative vote can prod companies to make management and governance changes. At Home Depot, labor funds and other shareholders withheld more than 30 percent support from 10 directors last year amid criticism of CEO Robert Nardelli's compensation. In January, the company replaced Nardelli and announced several pay reforms.

Last May, the California Public Employees’ Retirement System (CalPERS) and other shareholders withheld 28 percent support from two compensation committee members at UnitedHealth Group. The investors targeted the directors after the health insurance company disclosed that CEO William McGuire held $1.6 billion in unexercised stock options, including options dated when the company's shares were at quarterly lows. McGuire announced his departure in October.

In perhaps the most famous example of a successful vote-no campaign, a coalition of public pension funds and other investors withheld 45 percent support from Walt Disney CEO Michael Eisner in 2004, prompting the board to strip him of his chairman title.

The vote at Yahoo may also persuade other investors at other firms that protest efforts can have an impact. Jackson, who owns 45 Yahoo shares, recalled that his campaign was initially derided by some investors as “futile” and “useless.”

“I do think this is a signal to all shareholders, large and small, that they shouldn't be shy,” Jackson told Governance Weekly. “They should articulate their views.”

Michael Garland, director of value strategies at the CtW Investment Group, which manages labor funds, said a CtW study of 2006 voting found that some large mutual fund companies are starting to vote against directors in certain cases. “It's changing and it's progress,” he noted, which he attributed in part to the funds having to disclose their votes.

Close Vote at CVS/Caremark

In addition to the Yahoo vote, there have been other notable negative votes this season. At CVS/Caremark, Roger Headrick received a 42.7 percent “against” vote amid criticism over his role as a Caremark director in approving the pharmacy-benefits company’s sale to CVS earlier this year. A second director received 33.4 percent opposition.

The CtW Investment Group has called for Headrick's resignation and argues that he would have failed to get a majority of votes cast (which is now required for election at CVS) had uninstructed “broker votes” been excluded. CalPERS has urged the board to “strongly consider” asking Headrick to step down, while CII and North Carolina Treasurer Richard Moore have requested that the company disclose the number of broker votes cast for Headrick.

CVS/Caremark officials, which have said the “broker votes were spread among the votes cast for and against the directors,” have stood by Headrick and not disclosed that number.

CtW's Garland criticized CVS/Caremark for failing to respond to the vote, recalling that Disney's board took action “within hours” of the vote against Eisner in 2004. Given that CVS/Caremark now has majority voting, Garland said the board can't dismiss the vote as a symbolic protest.

“At CVS, the intent was not ambiguous; shareholders knew that they were voting against Headrick,” Garland told Governance Weekly.

Meanwhile, CtW, CII, and other investor advocates are pointing to the close CVS/Caremark vote to build support for a proposed New York Stock Exchange rule to bar broker votes from uncontested director elections. These advocates contend that broker votes are routinely cast in favor of management nominees and “taint the integrity” of director elections.

That rule, which is to take effect Jan. 1, 2008, requires the approval of the Securities and Exchange Commission, which held a roundtable on the issue last month. Borrus of CII said the importance of voting in director elections will only increase if the SEC approves the NYSE rule change. “With the SEC taking action, all these votes on directors will become front and center,” she said.

So far, it’s not possible to determine the full extent of withhold votes this year, since many companies don’t immediately release vote results for specific directors. While firms typically report that every director was reelected, just a few companies provide a detailed breakdown of votes in board elections before filing their quarterly 10-Q reports. Based on the limited results that are available, it appears that many investors are no longer reluctant to use director votes to protest company practices. (On the other hand, some governance observers expect that protest voting will decrease in the future as more firms adopt majority voting and shareholders realize that their votes could bar a board nominee from taking office.)

Compensation Concerns

For the second year in a row, it appears that compensation concerns are generating significant “no” votes. At Occidental Petroleum, six compensation committee members received more than 34 percent opposition amid investor complaints over CEO Ray Irani’s pay package. That negative vote was even higher than last season, when four pay panel members received 20 to 21 percent withhold votes. Irani received a $62 million pay package in 2006; The Wall Street Journal estimated that exercised stock options helped increase his total compensation to $416 million.

Irani also serves on the board at KB Home, where he received 19.3 percent opposition. CalPERS was among the investors that voted against Irani, who chaired the home builder’s compensation committee during a period when stock option grants were improperly dated. Three other directors received withhold votes that ranged from 15 to 19 percent.

Past stock option problems have led to significant shareholder opposition at other companies. At Brocade Communications, investors withheld 42.7 percent support from Sanjay Vaswani, who joined the board in 2004 and now serves on the compensation committee. Former CEO Gregory Reyes went on trial this week on securities fraud charges and is accused of misleading investors about backdated options from 2000 to 2004. Reyes has pleaded not guilty. The company’s board also has not responded to a majority-supported shareholder proposal that seeks to abolish supermajority requirements.

Like Yahoo shareholders, investors have voted against directors at other companies to express concerns that CEO pay doesn’t reflect corporate performance. At homebuilder Toll Brothers, Carl Marbach, who chairs the compensation committee, received a 25 percent withhold vote after the Laborers’ International Union of North America and the Amalgamated Bank mounted a vote-no campaign. The two labor investors complained that CEO Robert Toll received $28 million in 2006, while profits fell almost 15 percent.

At electronics manufacturer Solectron, four pay panel members received more than 26 percent opposition. In 2006, CEO Michael R. Cannon received a 170 percent pay increase, while the company’s shares declined 23 percent.

Failure to Respond to Shareholder Proposals

In recent years, a significant number of shareholders have opposed directors who fail to respond to investor proposals that get majority support. In 2006, directors at five S&P 500 firms received more than 20 percent withhold votes after not acting on majority-backed proposals.

This season, six directors at FirstEnergy received 32 to 42 percent opposition after they failed to implement a shareholder proposal to rescind supermajority voting requirements. That resolution received 73 percent investor support last year and also got majority backing in 2005.
Likewise, two International Paper directors received 25 percent and 38 percent negative votes, respectively, after the company did not adopt annual elections for all directors, as requested by a shareholder proposal that won almost 80 percent support last year.

At Peabody Energy, five directors received 24.2 to 27.9 percent withhold votes after failing to act on a majority-supported proposal that seeks annual elections for all directors.

Other Notable Votes

At apparel marketer Kellwood, Jerry Hunter received a 48.9 percent withhold vote at the company’s June 7 meeting. He was opposed by CalPERS, which questioned his independence and noted that he received a 51 percent negative vote when he last was on the ballot in 2005. Hunter, who serves on the compensation committee, is a partner in a law firm that provided more than $86,000 in legal services to the Missouri-based company last year.

One director at Penn National Gaming received a 36 percent withhold vote, while another had 32.7 percent opposition, according to UNITE HERE, which led a vote-no campaign. The union, which represents hotel and casino workers, opposed three incentive plans proposed by management and criticized the board's maintenance of a “dead-hand” poison pill defense that can't be undone by future directors.

At the New York Times Co., the four directors who are elected by public shareholders received 42 percent withhold votes. Morgan Stanley Investment Management and other investors opposed the directors for a second year to protest the newspaper company’s dual-class equity structure. In 2006, those directors received 30 percent opposition.

Not all high-profile vote-no campaigns received wide support this year. At ExxonMobil, a coalition of 17 institutions, including state pension funds and proponents of socially responsible investing, opposed Michael Boskin, who chairs the company’s public issues committee. While news reports indicated that Boskin received 7 percent opposition, that was less than the 20 percent votes against three compensation committee members last year as investors protested former CEO Lee Raymond's $98.4 million retirement package.

At Verizon Communications, the AFL-CIO and two communications workers' groups waged a vote-no campaign against the compensation committee over the pay received by CEO Ivan Seidenberg. While the company hasn't released specific board vote totals, Verizon did report that all the directors were elected with at least 90 percent support.

Staff Writer L. Reed Walton contributed to this article. Unless otherwise stated, the vote results in this article are drawn from company quarterly filings or press releases.

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Six Reasons Why Yahoo Should Buy Joost

The following post appeared in Seeking Alpha yesterday. Although I don't agree with all the author's points (including that Jerry Yang is only there on a temporary basis or that Yahoo! needs to dress itself up for a sale), I think it's an excellent idea and fits perfectly with Yahoo!'s unspoken strategy of "playing nice" with big content providers. A major acquisition like Joost (and, say, Facebook) would be game-changers for Yahoo! How quickly the discourse would change from discussing Yahoo!'s problems and departing executive to some new swagger in their step.

In light of last week's events, when Jerry Yang replaced Terry Semel as Yahoo's (YHOO) CEO, the company needs to go for some big bets if it wants to stay as relevant in the future as it is now.

Google (GOOG) has already won the overall search war by grabbing 56% market share, compared to Yahoo's 21%. Google has also made an smart move by buying YouTube, as video has clearly exploded in the last 12-18 months. But YouTube is still the wild-wild west of videos, so Yahoo has a great opportunity to legitimizing internet video by buying the emerging online video company Joost.

Here are the top reasons why Yahoo should buy Joost:

1) Joost has already developed an important market position and buzz behind its mantra of "TV anywhere, anytime." It has signed contracts with a whole host of major content providers to stream content on its platform.

2) Joost was started by Niklas Zennstrøm and Janus Friis (Skype and Kaaza founders). These two have enviable track records in building web 2.0 companies

3) Yahoo Videos is going nowhere (compared to YouTube). Yahoo can jumpstart its video story by buying Joost, in a similar manner to what Google did by buying YouTube

4) Joost is in its early stages and is therefore still in beta. As soon as it's available for all, its membership will grow exponentially. Yahoo may be able to buy it now for less than a billion dollars, whereas in 12 months it may have to pony up a much larger sum. (Yahoo lost in not buying Facebook early on.)

5) This move will not only prevent AT&T (T) or Comcast (CMCSA) from buying Joost; it will make Yahoo itself a much more attractive target for AT&T or Comcast, or even for Microsoft (MSFT).

6) By many accounts, Jerry Yang is filling the CEO chair only on a temporary basis, until Yahoo finds a professional CEO. By buying Joost, Yahoo will also acquire Joost CEO Mike Volpi, who has developed his CEO type skills in running large divisions of Cisco.

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Business News Network Interview: Mutiny at Yahoo!

I was interviewed today by former CNBCer Pat Bolland on Canada's Business News Network on the whole Yahoo! "Plan B" Campaign.

Here is a link to the 6 minute interview.

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ZDNet: Will Yahoo's board also get a makeover?

From today's ZDNet:

Will Yahoo's board also get a makeover?

By Stefanie Olsen, and Dawn Kawamoto,
CNET News.com
Published on ZDNet News:
June 22, 2007, 4:00 AM PT

After months of criticism, Terry Semel is gone from the corner office at Yahoo, and Jerry Yang is finally back to running the company he co-founded.

But in the aftermath of the executive shakeup at the Internet's No. 2 search site, a big question remains: will the board of directors that recently gave Semel a $71 million yearly compensation package answer for its mistakes as well?

It could happen, despite the outcome of last week's annual Yahoo shareholders' meeting: as unhappy as investors may have been with Semel's compensation, which the Associated Press said was the largest deal received by a chief executive among the 386 publicly traded companies it tracks, the board survived the meeting last week intact.

Many believe the meeting ultimately led to Semel stepping down. Still, the lowest voting percentage any of the 10 board members received was 66 percent, according to Yahoo. The company did not say who got the low vote or break out percentages for each board member.
Also, Semel will still be the nonexecutive chairman of the company.

But that meeting could be just the first act in a long-running boardroom drama at Yahoo. A number of influential organizations, such as the advisers at Institutional Shareholders Services, think a shakeup isn't such a bad idea. ISS has taken Yahoo's board of directors to task for the last two years for Semel's compensation package, asking that it be tied more to the company's performance. But the board argued that the package (Semel has reportedly earned $450 million in six years at Yahoo) was justified in order to retain his talent.

"They just furnished a massive compensation package to Terry and then turned around and terminated his tenure. It begs the question about whether there's some intelligent design behind the program," said Patrick McGurn, executive vice president at ISS.

"Problems on the compensation front can be a window into the boardroom," McGurn added. "A second part of the process could be in looking at succession among the directors."

So how exactly would that happen, and when? Like other public companies, Yahoo is mindful of ISS' recommendations. ISS clients such as pension funds, mutual funds and other institutional investors will often vote their shares in lockstep with recommendations received from ISS. As a result, what the advisers say can greatly sway shareholder votes, especially for companies with a large base of institutional investors rather than mom-and-pop investors.

ISS advised its clients to vote against the re-election of Yahoo's compensation committee: Ron Burkle, managing partner of private investment firm the Yucaipa Companies and friend of former president Bill Clinton; Arthur Kern, co-founder of radio group American Media; and Roy Bostock, former chairman of ad agency BCom3 Group. Burkle and Bostock joined the Yahoo board after Semel in 2001 and 2003, respectively. Kern has been with Yahoo's board since the company was founded in 1995.

Yahoo shareholder Eric Jackson, president of the consultancy Jackson Leadership Systems, believes 7 out of the 10 directors should go, and he wrote as much in a proposal earlier this year. The three members Jackson's group wanted to see remain were Yang, Skyrider CEO Ed Kozel and Vyomesh Joshi, an executive vice president in imaging and printing for Hewlett-Packard.

Calls to Yahoo board members were not returned, but Helena Maus, Yahoo's senior director of corporate communications, sent a statement. The "Yahoo (board) is wholly committed to increasing shareholder value and will be working closely with Jerry Yang and (new president) Sue Decker to help accelerate execution and further strengthen Yahoo's leadership in order to capitalize on the enormous growth opportunities ahead."

But given the negative sentiment on display at the shareholders meeting, the board could remake itself before next year's annual shareholder meeting. One or more of the members could decide to step down, or Yang could nominate new members before 2008.

Majority rulesYahoo's directors are subject to re-election each year, and under changes to the company's bylaws the board enacted in January, the stage is set to allow shareholders to vote a director out of office, even if no opposition candidates are running for that seat.

Under the "majority vote" system, which a number of corporations are increasingly embracing, Yahoo directors are required to draft a resignation letter and have it waiting in the wings. If directors have more "against" and "withhold" votes than "for" votes, they are required to tender their resignation to the board, following the annual meeting.

Although the board's nominating and governance committee, comprised of independent directors, can make a recommendation to reinstate the ousted director, the board would be required to make its final decision public.

"The majority vote is one way companies can show they are listening to shareholders," said Jerry Mucha, proxy manager with proxy solicitation firm Morrow & Co. in Connecticut. "If you have a lot of withholds, or did not act on a shareholder vote that passed, this is one way to show you are listening to shareholders."

Mucha, as well as other proxy solicitors, note that a 33 percent withhold or against vote may be
considered high if shareholders are weighing their decision solely on the financial performance of the company. But if a company has a large percentage of institutional investors who rely on recommendations from proxy advisory firms, then a figure of a 30 percent withhold vote is not uncommon.

Board members who aren't facing any withhold vote recommendations by a proxy advisory firm are typically re-elected with a 90 percent approval margin, said Mucha. Jackson, however, believes the figure is around 98 percent.

Changes to the board can come via a director's resignation and a replacement nominated by the board of directors, or the board can change its bylaws to expand its size. Shareholders can also wage a proxy fight and nominate their own slate of opposition candidates for election at the next shareholders meeting.

Jackson said he had wanted to run for the board earlier this year but wasn't a registered stockholder at the time he filed papers. Whether it's him or not, Jackson wants some fresh perspective.

"The whole board has been guilty of being a little bit complacent," he said. "The board could benefit from some more youth and varied perspective and people who will ask tough questions of Jerry and (new Yahoo President Sue Decker)."

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Global Proxywatch: Shareroots

From today's Global Proxywatch by Stephen Davis (Vol XI No 25):

Maybe you snickered on reading in January about Breakout Performance, a blog operated by Florida investor Eric Jackson (GPW XI-3). Jackson was trying to stir a netroots shareowner rebellion at Yahoo, which he blasted for lagging performance. But he held a mere 96 shares himself. No matter: Jackson swaggered that he'd use "blogging, vlogging, LinkedIn Answers, Flickr mash-up photos, wikis, and polling to force change." You don't have to understand details of what he was talking about. All you need to know is that at Yahoo's June 12 AGM, some 33% of the vote - including lots of institutional investors - agreed with his call to oust certain directors. And within days CEO Terry Semel resigned. Put aside consequences for Yahoo. The bigger lesson is that there's now a formula to unlock potent netroots shareowner activism.

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TheStreet.com: Grass-Roots Activist: Yahoo! Just the Start

From this morning's TheStreet.com:

To watch the video news clip of this article on TheStreet.com TV, click here.

By Brett Arends
Mutual Funds Columnist
6/22/2007 7:16 AM EDT
Click here for more stories by Brett Arends

Look out, high-tech fat cats. Eric Jackson, the private investor and blogger who helped bring down Yahoo!'s (YHOO - Cramer's Take - Stockpickr - Rating) Terry Semel, is turning his sights on other underperforming CEOs.

"I have a list, and I'll be taking action," he tells me. "There are a number of other companies that are ripe for the same kind of approach. This won't end with Yahoo!"

He's naming no names, though he says several of his possible targets are "mid-cap tech companies."

After taking on the board at Yahoo!, which has a market cap of $37 billion, that should be a breeze.

Semel stepped down this week after a remarkable shareholder revolt at last week's annual meeting. The board suffered a major humiliation after one-third of the votes were cast against management on some ballots.

Yes, as with all such issues, Semel's was finally decided by the big institutional investors. And yes, the ultimate factor was Yahoo!'s lackluster performance in the last few years.

But none of that might have coalesced into a coup without the grassroots campaign to bring change.

And what made this revolt unusual was the way small shareholders were able to use blogs, online videos and other "netroots" tools to start the ball rolling and build up momentum.

Thanks to the Web, small shareholders didn't have to sit around in frustration waiting for fat cats to act. They could push things along.

Principal among them was Jackson, a business consultant with his own firm in Naples, Fla. He even made a pitch to other shareholders via YouTube.

Jackson says his campaign techniques weren't just inspired by past proxy battles waged by top financiers but also by recent "netroots" political campaigns. "I took my inspiration from the likes of Carl Icahn, but also from the likes of Howard Dean and Ned Lamont," he said. "We used YouTube and blogs and wikis. We used the Internet and the blogs to come out of nowhere and build support at the grassroots level."

It was a fitting end for Semel. During his tenure from 2001 to 2007, he had missed out on whole swathes of new developments on the Internet, from Google (GOOG - Cramer's Take - Stockpickr - Rating) to Wikipedia to social networking sites such as MySpace. In the end he was brought down by an online revolt he never saw coming.

"I don't think anyone would have predicted this outcome a few months ago," says Jackson. At the start of his campaign, he remembers, Semel's defenders mocked it. "Words like 'feeble' and 'useless' were used," he recalls.

His takeaway from it all now? "In the age of the Internet, the best ideas will rise to the top. It doesn't matter how large or small you are. If you can put together a compelling argument and bring others together, you can have a voice."

The video clip of this article, from TheStreet.com TV, is here.

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AllThingsD - Voices: A New Day for Yahoo

From today's Voices section of AllThingsD:

(Thanks to Kara Swisher for the invitation.)

A New Day for Yahoo

June 20, 2007
by Eric Jackson
President, Jackson Leadership Systems

I hadn’t expected Terry Semel to step down on Monday. Less than a week before, after Yahoo’s annual meeting in Santa Clara, Calif., he approached me. He was quite affable, considering that we had had a pointed exchange during the earlier Q&A session and that I led a group of 100 shareholders owning 2 million shares who had submitted a nine-point “Plan B” to the company for creating additional value, where point No. 1 was to remove him as CEO. Despite that, he said he was interested in holding a “constructive dialogue” with our group of shareholders. He gave every indication that day that he intended to fight on (with, yes, “fire in the belly”).

Several commentators didn’t think that Yahoo would change all that much following the shareholder vote, partially because Jerry Yang (and also co-founder David Filo) is “not a boat rocker.” (Kara Swisher did acknowledge that she was wrong in this post.) Something obviously had changed between last week’s annual meeting and Monday’s closing-bell announcement. Jerry Yang is the new CEO, with Sue Decker as the company’s president.

In the wake of this news, analysts, commentators and pundits started reading the tea leaves about what the changes signified. Some saw Yang as purely an “interim” CEO who didn’t really want the job. Some said that he was too close to Semel and wouldn’t deviate from the prior strategy. Others inferred that Yahoo was more likely to put itself up for sale (including–surprise–a few investment bankers). One big complaint leveled against Yang was that he’d never run a 12,000-person company before. No, he just helped create and build a 12,000-person company.

As a shareholder, I couldn’t be happier with the leadership moves announced Monday. Yang will be extremely successful in his new role. He wants this now–not for himself, but for the users, employees and shareholders of the company. What’s more, he can and will be successful.

Here’s why: In the weeks leading up to the shareholder vote in Santa Clara, I was contacted by email or phone by almost a dozen current or recently departed Yahoo employees. What’s clear is that Yang and Filo are universally beloved. “David Filo would send out IMs to others on the product/engineering side when some bug turned up at 2 a.m.,” boasted one very impressed ex-Yahoo. Several people asked me: Can we “draft” them to play even bigger roles at the company? They’re getting their wish.

So, let’s go over the case for Yang as CEO:

1. Nobody knows the business as well as he and Filo do. These two guys are the corporate DNA. When you walk into the lobby at Yahoo, you are inundated with an internally focused marketing/morale-boosting campaign called “We Were; We Are,” complete with black-and-white shots of the early days at the Stanford computer lab, contrasted with colorful modern images of Yang and Filo. They have continued to be intimately involved in the business and know where it needs to go.
2. He’s already off to a fast start. For a guy who some say was reluctant to take the job, he appeared remarkably energetic in Monday’s analyst call announcing the changes. His instincts and alacrity will serve him well.
3. He knows how to do deals. Yang architected the very significant partnership with SBC (now AT&T) in early 2001. More recently, in 2005, he did the deal with Alibaba.com. Critics have pointed to Broadcast.com and GeoCities as examples of expensive acquisitions he was involved in that didn’t pan out. This was a different time, however, when Yahoo had a different market cap itself. His instincts were correct (on video and social networking, way before they were seen as “growth” areas). He won’t be shy to do deals in the months ahead, which the company will benefit from.
4. He’s got the mental strength. It would not have been easy for Yang to go through the last few days leading up to Monday’s announcement. Semel is a friend. Yang wanted it to work. But he was obviously ready to take on this responsibility.
5. It’s his time. None of us has experience until we get experience. Yang hasn’t run a 12,000-person company, but he’s worked there every day of his professional life. He’s 38, not 25. And he–like Filo–loves this company more than anyone else. More important, though, the two co-founders feel a responsibility for the company. It’s a critical time and Yang’s ready. Back in business school, I took a class in which we read and discussed key passages from Shakespearean plays and the business lessons they taught. Yang reminds me of Prince Hal, the 20-something, fun-loving prince from “Henry IV.” Hal’s father and courtiers worry that he won’t be ready later to ascend to the throne. Yet, when fate calls, Hal closes one chapter of his life and becomes King Henry V–one of the most revered in the monarchy’s history. My sense from watching Yang at the meeting and since then (and the same goes for Filo) is that the flip has switched. These guys are all-in, in a way they haven’t been before.
6. Sue Decker’s there to help. As a leader, you rely on those around you to help you in areas where you are weaker. Yang’s lucky to have someone as capable as Decker working closely with him.

So, what does this mean for Yahoo’s shareholders? Unlike some, I strongly believe that Yahoo will remain independent. Yang and Filo built this company. They aren’t there to flip it. Yahoo will be much more aggressive in acquiring other companies. And they will look to win on new battlegrounds with Google. It was encouraging to read that they will release the next version of Yahoo! Go (their mobile product) on Friday.

The two most important competitive advantages any company has are its culture and its people. Yahoo’s been blessed with great people through the years, but morale has taken a hit of late. With Yang ensconced as CEO, and with Decker’s and Filo’s support, people are excited again in Sunnyvale. It’s about We Were, We Are, but also what We Will Be.

Eric Jackson is president of Jackson Leadership Systems, a leadership, strategy and governance consulting firm. This year, he led a “Plan B” group of 100 Yahoo shareholders with more than 2 million shares in an Internet-based activist campaign to unlock value at the company.

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ZDNet: Five Steps to a Yahoo! Turnaround

From today's ZDNet:

By Elinor Mills, CNET News.com Published on ZDNet News: June 20, 2007, 4:00 AM PT

After 18 months of floundering, Yahoo finally swallowed a bitter pill Monday and replaced Chief Executive Terry Semel with co-founder Jerry Yang.

But just promoting "Chief Yahoo" Yang and giving Semel a ticket back to his old stomping grounds in Hollywood won't be enough to get the company back on track, Yahoo watchers said in interviews Tuesday. The company has a beast of a competitor in Google and a shaky product lineup. Plus, employee morale is low, and at least one key management position remains unfilled.

"It's clear they have lost mind share and market share to competitors, namely Google, over the last several years," said Derek Brown, an analyst at Cantor Fitzgerald. "Seems to me that they're in a fairly important juncture in their history."

That's not to say it's a lost cause. Yahoo still pulls in gobs of traffic and is one of the best-known brands in the country. And no one knows the company better than Mr. Yahoo himself, Jerry Yang. But the clock is ticking. Analysts, industry watchers and one former Yahoo executive say Yang has to move quickly on five things:

Focus on social media: It seems a bit cliche at this point, but there is no question that social media is hot and Yahoo hasn't done enough to ride that wave. Despite the company's acquisitions of popular photo site Flickr and bookmarking site Delicious and the rapid rise in use of its Answers site, analysts say Yahoo has failed to adequately integrate the services or create a centralized online hub for people to hang out. Yahoo's 360 social network has not been widely adopted, even within the company.

"The social-media space is new growth for the Internet, and Yahoo has properties but none are on par with MySpace, Facebook or even YouTube," said Sandeep Aggarwal, an Internet analyst at Oppenheimer & Co.

Several observers suggested that Yahoo should buy, or at least partner with, Facebook. Last year, Yahoo ignominiously lost, to Microsoft, a deal to serve ads on Facebook and reportedly has declined to offer as much money as Facebook wants to be acquired. Yahoo has conceded that growth for display advertising, its largest business, is slowing, and analysts say many advertisers are being lured over to popular social-networking sites.

"They haven't done a good job of integrating the social media they have now," said Danny Sullivan, editor of the Search Engine Land blog. "Maybe getting something like Facebook would help them."

Added Greg Sterling, principal of consultancy Sterling Market Intelligence, "They need to build a center to their social-media strategy through the acquisition of a social network or blogging platform."

Get better at video: Another hot area where Yahoo is lagging is video, partly for the same reason as social networking--advertisers follow the eyeballs. Google nabbed the prize when it acquired viral video site YouTube for $1.65 billion in stock last year.

Yahoo has stated that it plans to target social networking, video and mobile. "They need to definitely be on the lookout for acquisitions that make sense in those areas," said Eric Jackson, chief executive and president of consultancy Jackson Leadership Systems. "I suspect that Jerry is going to be a little faster to move."

Jackson was the shareholder who challenged Semel at last week's shareholder meeting, saying that Semel owed stockholders a public apology for the company's lackluster financial performance.

Streamline internal structure, processes: With nearly 12,000 employees and so many different products and divisions, Yahoo has become a large, complex corporation that some critics say has difficulty respond quickly to competitive threats, such as Google on search and search advertising. The company could start by axing redundant, overlapping and underwhelming products, like it did by shutting Yahoo Auctions and closing Yahoo Photos in favor of Flickr, Jackson said. Consolidating MyWeb and Delicious might be a start, he added.
"Authority and decision making needs to be pushed down within the organization," Jackson said. "There is a culture that has become apparent where too many managers are quashing ideas that come up from below."

Yahoo also should improve the efficiency of its display advertising business so that it doesn't lose out advertising to sites with lower cost-per-impression rates, like MySpace, said David Card, an analyst at Jupiter Research. "They need to make their internal machinery work better," he said.

Name a chief technology officer: Yahoo needs to fill its open chief technology position, and soon. The spot has been vacant since Farzad Nazem resigned several weeks ago. Given that Yahoo is a technology company, the role is, needless to say, a rather big deal.

"They need to bring in good additional management, someone who has credibility both internally and externally, a hitter CTO," said Ellen Siminoff, former senior vice president of entertainment and small business at Yahoo who is now the chief executive at search engine marketing firm Efficient Frontier. "Or David Filo," who co-founded Yahoo with Yang 12 years ago and as a "Chief Yahoo" is very involved in technical aspects of the company, Siminoff added.

Jackson agreed. "David Filo would be perfect, but I don't know if he wants the job," he said.
"They need to devote more resources to the engineering technology group."

Innovate out of trouble: Yahoo remains one of the top Web sites on the Internet and its e-mail, instant messaging and news services are leaders, but the company hasn't had a real home run in a while with a new product. While Google grabs the headlines and geek cachet with products like Google Earth, YouTube and Google Apps, Yahoo's coolness factor has suffered.

A few months ago Yahoo opened what it calls "Brickhouse," a unit devoted to developing innovative new products, but so far there's been only one release--Yahoo Pipes, an interactive feed aggregator.

"They need to acquire or build a couple of new hits on the product side. Those can either be innovative looks at a new area or hitting a specific demographic group" like women, Siminoff said. "They need to show some innovation, some new product that is different from Google."

Among other suggestions, Sterling said Yahoo must work to restore employee confidence by articulating "a vision people can get excited about." And Yahoo should do what it can to boost its portal status now that AOL and MSN are re-inventing themselves and in flux, said Card.

"Overall, I'm still positive on Yahoo," Sullivan said. "I think you have to have (a company) out there being a counterbalance to Google."

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Bloomberg Opinion: Yahoo's Semel Pays for Performance With Options: Graef Crystal

Graef Crystal is one of the most respected voices on executive compensation in the world. I have followed his works since the late 90s. He came out today with an opinion on Terry Semel's pay, which is below.

By Graef Crystal

June 20 (Bloomberg) -- Terry Semel, who stepped down as chief executive officer of Yahoo! Inc., is one of a handful of U.S. CEOs who really understand what pay-for-performance is all about.

In moving from CEO to non-executive chairman on June 18, Semel gave back to the company 4.5 million of the 6 million- share stock option he received in May 2006. He will get no severance pay, either.

That's the way performance-based pay is supposed to work, which almost all U.S. CEOs simply don't get. To them, if something goes wrong, it is the fault of exogenous events, like higher oil prices or the decisions of the Federal Reserve. They believe they are entitled to high pay during bad times as well as good.

Although Semel's long-term performance had been excellent, the last year to June 18 presented a different picture, with total return dropping to negative 7.4 percent at a time when the return on the Standard & Poor's 500 Index was 25 percent.

More recently, Semel wasn't criticized just for his performance. His pay became an issue, too, with some proxy advisory services urging shareholders to withhold their votes from the three directors who comprise the company's compensation committee.

Why the uproar? On May 31, 2006, Semel was handed the monstrously large option covering 6 million shares and carrying a strike price of $31.59 a share. Yahoo declared the option to have a present value at grant of $63 million. I scored the option a bit higher, $66 million, but who's quibbling.

What made that option all the more galling was that between Dec. 30, 2005, and the date of grant the stock had dropped 19 percent.

Other Things

There are, however, three other things that should be considered when looking at Semel's compensation:

* His 6 million-share option grant carried with it a decision not to grant him any more stock options during a three- year period. So if you amortize that $66 million of present value over three years, the figure drops to a much lower $22 million.

* From 2003 on, Semel hadn't taken his annual bonus in the form of cash. Rather, he was, in 2006, given additional stock options -- 1.3 million.

* Then at the same time he took that giant stock option in May 2006, Semel agreed to cut his base salary to $1 a year from $600,000.

So, Semel effectively went on an all-options diet. Since a stock option is the riskiest form of executive pay, he had one of the most risky pay packages among U.S. CEOs.

Still, even if you charge only a third of that monster option grant to his 2006 compensation, Semel would have turned up in the overpaid column.

Total Pay

Looking at the total pay received by 533 other U.S. CEOs running companies with market values of $4 billion or more, Semel's total pay (after counting only a third of the options' present value) of $34 million positioned him 106 percent above the average. That's after adjusting the average for differences in company size, company total return in 2006 and the degree of risk in the pay package.

You certainly can't criticize Semel for what has come to be known as opportunistic grant timing. The stock didn't take off after the May 2006 grant was made. It declined, and it kept declining. On the day of his resignation, all 6 million option shares were underwater.

Now, when your typical U.S. CEO steps down, he is showered with money, even though the reason for the departure is lousy performance. There is salary and bonus for a number of years, and all the free and option shares that haven't yet vested miraculously become vested.

No Cushion

Semel worked with no employment agreement to cushion his fall, and Yahoo spokeswoman Joanna Stevens said Semel returned to the company ``anything not vested.''

According to the terms of his May 2006 option grant, as detailed in the company's proxy statement filed on April 30, 25 percent of Semel's 6 million option shares vested on May 31, 2007, and the remainder were returned to the company.

As non-executive chairman, Stevens said that Semel will be paid just like any other outside director of the company. In 2006, outside directors received free shares worth $165,000 and a stock option with a grant-date fair value of $159,000.

Semel should be the role model for other CEOs who find themselves in a similar situation.
I take particular offense at the fun poked at him just a week ago by California Governor Arnold Schwarzenegger. Speaking at a dinner with Semel in the audience, Schwarzenegger pointed out that he gave up his multimillion-dollar movie career to work for no salary as governor. Then he added: ``Unlike Terry.''

When Schwarzenegger was in his prime as a movie star, I very much doubt that he worked for a percentage of the net. My guess is that he worked for a percentage of the gross, something for which all movie stars lust. Working for a percentage of the net could cause you to earn nothing if your movie is a turkey.

Well, governor, Terry Semel has always worked for a percentage of the net. And yes, his latest movie has indeed proved to be a turkey, though probably unlike you, he didn't walk away with a pile of bucks.

(Graef Crystal is a columnist for Bloomberg News. The opinions expressed are his own.)

To contact the writer of this column: Graef Crystal in Las Vegas at at graefc@bloomberg.net . Last Updated: June 20, 2007 00:44 EDT

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The Guardian: Founder Yang takes over after Semel quits

From tomorrow's Guardian:

Bobbie Johnson, technology correspondent
Wednesday June 20, 2007
The Guardian

Investors and analysts backed the surprise departure of Yahoo!'s chief executive, Terry Semel, yesterday but gave a mixed response to news of his successor.

Mr Semel announced late on Monday that he was stepping down after six years in the job, after mounting pressure in recent months. In a letter to the board, Mr Semel admitted that "none of us is at all satisfied with the company's recent financial performance" and that he had decided the time was right to step aside.

He will remain on the board as non-executive chairman but has been replaced by Jerry Yang, who started Yahoo! with his fellow college dropout David Filo in 1995. Mr Yang, 38, said that it was "a great honour" to be taking the position, while admitting that the past year had "obviously not been an easy one for us".

But the decision to appoint him to the top job received a lukewarm response from investors and analysts. Some said they doubted whether he had the experience or new ideas to revive the company.

"We would have liked to see a more radical departure from the past but Yang clearly thinks he can turn this thing around," said Ben Schacter of UBS.

The reshuffle also moves the fast-rising executive Susan Decker into a more influential position. Ms Decker, a former Yahoo! chief financial officer who was recently promoted to head of advertising, was widely seen as Mr Semel's successor but will become company president.

Eric Jackson, leader of a group of small shareholder activists, said: "Mr Semel brought much-needed stability to Yahoo! in the early days but we weren't the only ones who were critical over the past three years. I don't agree that Jerry Yang is a stopgap or that he's inexperienced - in the technology industry the founders of any company cast a major shadow."

Mr Semel, a New Yorker who was chairman and chief executive of the Warner Bros studio, was seen as an outsider when he took over at the pioneering dotcom company in 2001. He quickly set about trying to turn Yahoo! into a global media company and under his charge the company expanded from 3,500 staff to 12,000.

However, a series of mis-steps in recent years has seen the share price fall and his fate was sealed by the stifled launch of the much-heralded Panama advertising system last year. Touted as a competitor to Google's immensely successful advertising scheme, Panama was met with muted enthusiasm, putting Mr Semel's position into question among investors.

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AP: Yahoo's New CEO Facing Tough Challenge

From today's AP article by Michael Liedtke:

Yahoo Inc. thinks it's back on the right track now that co-founder Jerry Yang has replaced Terry Semel as chief executive, but analysts and investors already are wondering whether the shake-up is just a prelude to more radical measures, including a possible sale or breakup of the troubled Internet icon.

While Yang promised to rejuvenate Yahoo, Wall Street worried that the Sunnyvale-based company's new boss might too much like the old boss.

Yahoo shares fell 49 cents, or 1.7 percent, to finish Tuesday at $27.63, reversing the positive sentiments initially expressed after the management change was announced late Monday.

"There was some knee-jerk excitement when people first heard the news, but now they are starting to question whether this was change just for change's sake," said Standard & Poor's equity analyst Scott Kessler. "Is this really going to lead to a fundamental change in the way Yahoo sees things and does things?"

The reservations about Yang, 38, primarily stem from his managerial inexperience and ties to Semel.

Although he once ran Yahoo in its very early days, Yang has never been the top executive since the company went public in 1996 and blossomed into a far-flung business with 11,700 employees and more than $6 billion in annual revenue.

What's more, Yang emerged as one of Semel's closest allies during the past six years while serving in his role as "chief Yahoo." He was also a board member who presumably was consulted on some of the key management decisions that left the company a distant second to Google Inc. in the lucrative online advertising market.

"He didn't function as chief Yahoo, so why would you think he will succeed as CEO?" said Global Equities Research analyst Trip Chowdhry. "They already missed the boat and, in the Internet space, there are no second chances."

Chowdhry thinks Yahoo eventually will sell off major chunks of its operations, including e-mail, instant messaging, finance and its photo-sharing service Flickr.

Although he provided few specifics about Yahoo's next move, Yang made it clear in a Monday that he believes the company can remain independent.

Other analysts believe Yang will be able to tackle Yahoo's challenges with the help of Susan Decker, who was promoted to second-in-command as part of the new hierarchy.

"We believe the recent changes at Yahoo are aimed in the right direction," RBC Capital Markets analyst Jordan Rohan wrote in a Tuesday note.

Eric Jackson, a Naples, Fla. management consultant who sparred with Semel at Yahoo's annual meeting last week, said he believes Yang has learned from his predecessor's mistakes and will engineer a comeback.

"It's misguided to think Jerry will do the same thing as Terry just because they were allies," Jackson said. "He has a much better feel for the Internet industry than Terry."

Yang also has more of an emotional and financial stake in a company that he launched in 1995 along with another former Stanford University graduate student, David Filo, who is currently helping to steer Yahoo's technology department.

Combined, Yang and Filo own a 10 percent stake in Yahoo currently worth about $3.8 billion.
Yahoo's inability to keep pace with Google's torrid growth put the company in its current bind. Once the larger of the two companies, Yahoo has been outsmarted by Google at virtually every turn in recent years.

Mountain View-based Google now makes more in three months than Yahoo does in an entire year - a contrast that has been reflected in the companies' respective stock prices. Google's shares have increased by six-fold since their initial public offering in August 2004 while Yahoo's stock price has dipped slightly during the same period.

Yahoo introduced a retooled advertising system in February, but the improvements aren't expected to pay off until later this year. After Yahoo suffered an 11 percent decline in its first-quarter profit, Decker said Monday that the company's second-quarter results may fall at the low end of management projections.

The downturn has fueled speculation that Yahoo might seek a buyer like Microsoft Corp. or consider combining some operations with another major Internet brand like eBay Inc. or News Corp.'s MySpace.com.

In his note, Rohan also raised the possibility of Yahoo renewing its attempts to buy Facebook Inc., the second most popular online social networking site behind MySpace. Yahoo approached Palo Alto-based Facebook last summer only to be spurned by the startup's founder, Mark Zuckenberg, who has since indicated his preference to remain independent.

Kessler thinks an outright sale of Yahoo is unlikely because any bidder probably would still have to pay about $40 billion - a steep price even for Microsoft, which also is trying to catch up to Google.

Yahoo seems more likely to prune its operations to try to reduce costs and eliminate some of the bureaucracy that has been blamed for stifling innovation. Kessler believes a large Santa Monica office that Semel opened to house media operations is now a prime target for closure.

Jackson also suspects the Santa Monica office may be shut down as part of Yang's efforts to turn around the company.

"I think he really wants to step up and he won't be afraid to pull the trigger," Jackson said.

Copyright 2007 Associated Press. All rights reserved. This material may not be published
broadcast, rewritten, or redistributed

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VentureBeat: Terry Semel is Out at Yahoo!

From yesterday's VentureBeat:

By Matt Marshall 06.18.07

Terry Semel, who was brought in to turnaround Yahoo after the Internet bust, has stepped down from the top job.

The former Hollywood exec looked like a master initially — when Yahoo’s revenue and profits surged after 2001. There’s no doubt Semel’s steady hand helped. Soon, however, it became clear Yahoo’s performance had more to do with the boom in Yahoo’s search business than with Semel’s guidance. As Google has left Yahoo further and further behind, shareholders like Eric Jackson have increased their criticism.

Jackson wrote this post for VentureBeat more than six months ago, demanding that the board fire Semel. We’re not sure if Jackson’s ensuing campaign has anything to do with Semel’s announced departure today, but his group has been relentless (here’s his blog).

Semel’s massive compensation became a target for criticism. He also appeared out of touch. Underling execs such as Brad Garlinghouse called out for action, producing the famous “Peanut Butter memo” about Yahoo’s malaise.

Jerry Yang, Yahoo’s co-founder, steps in as CEO.

Sue Decker, the former CFO, becomes president. Semel stays non-executive chairman.

Here are more details from Bloomberg news.

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CNBC: Yahoo CEO Resigns

Here's the link to the CNBC report at close of business yesterday announcing Jerry Yang taking over as the head of Yahoo!

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Bloomberg TV: Changes at the Top at Yahoo

Bloomberg-Clip • Jun. 19, 2007. 08:00 AM EST

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Blog 2.0 et Web Marketing: Jerry Yang le fondateur, nouveau directeur de Yahoo

From Vincent Abry's Blog:

Par Vincent Abry, mardi 19 juin 2007 à 07:49 :: internet :: #527 :: rss article consulté 84 fois
Eric Jackson a réussi son coup : faire tomber Terry Semel, le directeur de Yahoo. Terry Semel vient de donner sa démission hier soir. Même si comme le dit Pierre Chappaz il a réussi quelques belles réalisations, je pense que sa place n'était plus chez Yahoo qui ne cessait de plonger face à une concurrence de Google trop forte. Semel gardera un rôle de président mais non exécutif. Susan Decker, vice-présidente de la publicité, devient présidente du conseil d'administration. Voyez plus d'info sur le blog de Jerry Yang.L'action de Yahoo montait de 3% hier soir. Sûrement un beau gap à attendre pour aujourd'hui. En after hours hier soir l'action était à +4.73% avec un volume de 16 000 000 de titres échangés.

Jerry Yang, le nouveau CEO de Yahoo, est l'un des deux fondateurs avec David Filo. Yang est originaire de Taiwan ; il a déménagé à San José aux Etats-Unis à l'âge de 10 ans. A son arrivée Yang ne connaissait que le mot "chaussure (shoe)" bien que sa mère soit professeur d'anglais. Son père est mort alors qu'il n'était âgé que de 2 ans.Il est marié à l'américaine d'origine japonaise, Akiko Yamazaki.Yang siège aussi aux conseils d'administration de Alibaba, Cisco et Yahoo Japon.Sa fortune personnelle est évaluée à 2.2 milliards de dollars. "Février 1994, deux étudiants de Stanford, Jerry Yang et David Filo éditent le "Jerry and David's Guide to the World Wide Web". Un site où ils mettent à disposition des internautes leurs favoris (bookmarks), classés en plusieurs catégories. L'idée d'un guide plus complet leur vient deux mois plus tard. Yahoo, qui n'est alors qu'une start-up, est fondée le 2 mars 1995." (extrait du Journal du Net)

Hummm ca sent bon la nostalgie des débuts de Yahoo tout ca, voyons voir ce que ca va donner !!! "The time for me is right. The time is now. The Internet is still young, the opportunities ahead are tremendous, and I’m ready to rally our nearly 12,000 Yahoos around the world to help seize them." dit Jerry Yang sur son blog. Ce qui peut se traduire librement par: "Le timing pour moi est parfait. Le timing est maintenant. Internet est encore jeune, les opportunités encore immenses, et je suis prêt à rallier nos 12 000 employés autour du monde pour les aider à grandir à nouveau"

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CNET: Yang replaces Semel as Yahoo CEO

From yesterday's CNET:

By Elinor Mills Staff Writer, CNET News.com -->
Published: June 18, 2007, 4:01 PM PDT
TalkBackE-mailPrint del.icio.us Digg this

Yahoo Chief Executive Terry Semel stepped down on Monday and handed the reins of the struggling search company to co-founder Jerry Yang after six years on the job.

Susan Decker, former chief financial officer and head of the advertiser group, has been named president. Semel, meanwhile, will assume the position of nonexecutive chairman and serve as an adviser to the management team and board of directors.

"This is the right thing to do for Yahoo and the right time to do it," Semel said in a conference call with analysts and media.

The shakeup comes nearly one week after a somewhat contentious shareholder meeting in which stockholders criticized Semel's pay in light of the company's lackluster stock price and failure to mount any serious challenge to Google on search and search advertising. Shareholders re-elected the board members with only 66 percent approval, which is low compared with the 80 or even 90 percent approval that is usual. In addition, 34 percent of shareholders voted in favor of a proposal to link Semel's pay with the financial performance of the company.

With the personnel changes, the company is undoing some of the reorganization it initiated six months ago in which it formed three business units: Technology, Audience and Advertising. Now, Decker will oversee Audience, which she previously headed up, and Advertising, whose head had not been named. The Technology group, which has been searching for a unit head since the departure of Chief Technology Officer Farzad Nazem several weeks ago, will report to Yang. Co-founder David Filo will oversee the technology organization until a replacement for Nazem is named.

"The past year has been a difficult one for Yahoo and none of us has been satisfied with the company's financial performance," Semel said in a statement. "As the board and I discussed my future goals and plans I was clear in telling them of my desire to take a step back from an executive role sooner rather than later. We therefore concluded that this is the time for new executive leadership to step in and drive the company to realize its full potential."

Yang and Decker will be an "unbeatable team," he said. Decker is a "strategic powerhouse" and a "financial wizard" and "one of the best business people around," Semel said.

Yang and Decker both sounded choked up in speaking about Semel. "It is an emotional time for us at Yahoo," Yang said. Semel "has not only been a strong leader, he's been a consummate partner…Terry has been a true role model and a mentor to me," he added. "I've learned how to become a better leader and a better person" because of Semel.

Yang credited Semel with re-focusing the company on key priorities after the dot-com bust and helping Yahoo increase its revenue nearly nine-fold to $6.4 billion last year, boosting operating income from a loss to nearly $1 billion and overseeing the number of users grow to more than 500 million and employees to nearly 12,000.

Decker called Semel a "true leader of leaders" and said Yang "really represents the heart and soul of Yahoo."

Yang said he was ready for the challenge of leading the company. "I know the business and market dynamics well," he said. "Yahoo is in the midst of a multi-year transformation…It's imperative that we execute with speed and clarity and discipline," Yang added.

Decker said that while the company's affiliate search business was running slower than expected and growth of its display advertising business had slowed, executives were pleased with early financial returns for the company's new paid search-marketing platform, Panama. "We expect year-over-year growth versus what we saw in Q1," she said. The company's second-quarter revenue will be at the mid-point to the low-end of its previous guidance of $1.2 billion to $1.3 billion, she added. The company reports its second-quarter results on July 17.

Eric Jackson, a shareholder who had told Semel during the shareholder meeting last week that he should apologize publicly for the company's lagging financial performance, said he was pleased with the management changes.

"I think that Semel was the right person at the time he came in in 2001. He did a lot of great things to stabilize the company and set it on its path after the bubble burst, but shareholders were looking for some new blood and direction," said Jackson, chief executive of consultancy Jackson Leadership Systems. "No question, the meeting and the voting results were weighing on the minds of the board and co-founders," he said.

Greg Sterling, principal of consultancy Sterling Market Intelligence, agreed. "I think the public speculation over Semel's fate and future had been getting louder and there was enough discontent at the shareholder meeting to show that that was only going to increase if Yahoo didn't deliver a very solid quarter and perhaps even out-perform," he said. "This may be a mature recognition on (Semel's) part that it is time for a leadership change."

However, Sterling said: "They still have real issues to solve. This takes the pressure off and the distraction around Semel, but now they've got to right the ship."

Yahoo lost its lead in the search market to the younger Google in recent years and watched as Google turned search advertising into a cash cow. Yahoo has only 27 percent share of the search market share compared to Google's nearly 50 percent. Yahoo's stock has dropped about 10 percent from a year ago, while Google's has jumped about 30 percent. Yahoo also took a hit on Wall Street after it reported that first-quarter net profit was down from a year earlier and failed to report any positive effect from Panama. However, the latest news sent Yahoo shares up nearly 3 percent in after-hours trade to $28.12.

Putting to rest any speculation that Yahoo is a takeover target, Semel said: "The board and I believe Yahoo is, and can be, a vibrant independent company."

The Wall Street Journal and New York Post reported in May that Microsoft and Yahoo were in talks on either a merger or a partnership to help them both take on Google. The Journal later reported that the talks were off, but the reports posed the question of whether Yahoo would or should merge to better compete. Analysts concluded that merging with Microsoft would ultimately not be wise for Yahoo.

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WSJ: Amid Missteps, Yahoo's Semel Resigns as CEO

From Today's Page One of the Wall Street Journal:

Company Faces HeatFrom Google, Investors;A Co-Founder Steps Up

By KEVIN J. DELANEY and JOANN S. LUBLINJune 19, 2007; Page A1

The abrupt resignation of Yahoo Inc. Chief Executive Terry Semel, amid mounting investor criticism that the company needs new leadership, reflects the continuing fallout for technology companies now lagging red-hot Google Inc. in crucial areas.

Mr. Semel, 64 years old, is widely credited with helping to focus a foundering Yahoo following his 2001 arrival and helping it ride the recovery in online advertising. The Sunnyvale, Calif., company is one of the largest sellers of such ads, and has played a key role in leading some name-brand companies to increase their marketing on the Web.

In recent years, though, Yahoo has been eclipsed by the success of Google's search-advertising-fueled growth, faced criticism for a lack of management focus and fumbled some opportunities to capitalize on the latest high-growth Internet areas such as video and social networking.

A recent struggle to upgrade its online ad systems to more closely match Google's approach suffered delays, and Yahoo lost executives and failed to fill crucial slots. Mr. Semel had also drawn fire for 2006 compensation that has been estimated by some at $71 million, which critics said wasn't warranted amid the company's declining revenue-growth rates and share price. In all, he has garnered more than $450 million from pay and stock-option exercises since 2001.

With Mr. Semel becoming nonexecutive chairman, Yahoo co-founder Jerry Yang, 38, was tapped to be CEO. Susan Decker, the company's 44-year-old former chief financial officer and head of a key operating unit, became Yahoo's president. Mr. Semel said he resigned the CEO post voluntarily so Yahoo would have "management that's thinking more long-term and that's going to help drive the company into the future."

Now, Mr. Yang and Ms. Decker face the task of steering Yahoo to capitalize on a massive base of more than 500 million users each month and to narrow the gap with Google. The company's strong relationships with advertisers and loyal consumers who use its popular services, such as email and news, will be an asset. But there are signs of further challenges ahead as well.

Ms. Decker said during a conference call with analysts yesterday that Yahoo's results for the second quarter would come in at the low to mid levels of its projections, as slowness in its core graphical-display advertising -- such as banner ads -- outweighs benefits from an ad-systems upgrade it dubbed "Panama."

The executive shake-up could intensify speculation that Yahoo is a candidate for acquisition or other combination. Yahoo in the past year has had conversations of varying intensity with Microsoft Corp., Time Warner Inc. and eBay Inc. about combining at least some of their activities, without reaching any deal, people familiar with the matter say.

"Jerry Yang didn't sound like he wants to sell, though that doesn't necessarily mean the company won't be sold," said Morris Mark of Mark Asset Management, a New York money-management firm that owns Yahoo shares. "Jerry Yang said all the right things for someone who wants to run the business."

Media companies Time Warner and News Corp. recently have separately been considering possible deals to merge their Internet activities with Yahoo, some of those familiar with the situation say, though none of the discussions appear to be advanced. Mr. Yang told analysts during the conference call that his company's board believes Yahoo should remain independent at this point.

"This is a time for new executive leadership, with different skills and strengths," Mr. Semel wrote in a letter to the board released by Yahoo. "We are again addressing challenges created by dramatic changes in the needs of audiences and advertisers," he said, and acknowledged that "none of us is at all satisfied with the company's recent financial performance." But, he said, "Yahoo continues to have tremendous fundamental strengths."

Mr. Yang wrote on Yahoo's Web site that his joint vision with Ms. Decker is "a Yahoo that executes with speed, clarity and discipline." (Read the post.) In an interview, he said, "We see ourselves as having to change to keep pace with the environment, but we also have to differentiate and get ahead of it," suggesting Yahoo would be more aggressive in trying to pioneer services that would set it apart from rivals. Some critics have accused Yahoo of doing little more than following the lead of Google and taking few bold risks of its own.

Exact details of how Mr. Semel came to step down remain in dispute. Mr. Semel formally notified Yahoo directors during an emergency board meeting conducted by telephone Sunday, said one person familiar with the matter. Some board members were surprised by the timing, said this person, adding that the board has discussed plans for Mr. Semel's succession at each meeting over the past year. This person said Mr. Yang's position wasn't designed to be only an interim role, and that "he's going to be in that job longer than people think."

Another person familiar with events said directors conferred off and on informally several times last week before concluding Friday that Mr. Semel should give up the CEO post because Yahoo was "not catching up with Google." However, this individual added that directors currently intend to conduct a search for a new chief executive. Ms. Decker "has the inside track as the internal candidate, but there will be external candidates as well."

Mr. Semel said in an interview that he wasn't pushed out in any way by the board, and that his departure resulted from continuing discussions with directors. "No surprise on our end," Mr. Semel said. "We thought it was the right time to do it." He said indications that the Panama project was yielding positive results played a role in the timing.

Mr. Yang, who co-founded the company in 1995, has had varying levels of involvement with it since then, say people familiar with the matter. In an interview, he said he isn't serving in merely an interim role as CEO.

It isn't clear whether a strong protest vote at last week's annual meeting may have played a role in the management shakeup, though Mr. Semel denies that. Proxy-advisory firms had recommended that investors withhold votes from members of Yahoo's compensation committee. Though Yahoo didn't give the specific vote breakdown, it said the full slate of 10 directors was reelected with at least 66% of the overall vote each.

That relatively high proportion of withheld votes suggests "shareholders want a new direction," said Eric Jackson, a management consultant in Naples, Fla., who owns 96 Yahoo shares. He led a grass-roots drive to oppose the reelection of seven of Yahoo's 10 directors. Yesterday's change in leadership "no doubt will lead to a shuffling at the board" as well, Mr. Jackson predicted.

Since becoming Yahoo CEO, Mr. Semel has reaped huge stock-options packages, even though the use of stock options has lost favor in Silicon Valley. According to a study by compensation firm Equilar Inc., Mr. Semel has realized a total of nearly $452 million in salary, bonus and stock-option exercises since 2001, including $231 million in fiscal 2004, $174 million in fiscal 2005 and $19 million in fiscal 2006.

In addition, Mr. Semel was awarded an additional $71 million in stock options in the 2006 fiscal year, according to Equilar's calculations. Some of that grant has already vested, and Mr. Semel will be able to exercise those options over the next three years, but he may not be able to exercise the unvested options, Equilar says.

The executive changes harken back to the last big shakeup at Yahoo in early 2001. At that time, as the company was reeling from the dot-com meltdown and numerous missteps such as a bungled opportunity to buy Internet auctioneer eBay, then-CEO Tim Koogle left the company and Yahoo said it would search for a new chief executive from outside the company.

The person it ended up selecting in April 2001 was Mr. Semel, the former co-CEO of Warner Bros. He was considered a surprise choice because while he was known as a top handler of Hollywood talent, he wasn't seen as the main operational guru running Warner Bros.

Shortly after his arrival, Mr. Semel identified a few major opportunities, such as overhauling its online-ad-sales efforts. Yahoo laid off staff and allocated more people to core businesses. It shut down activities viewed as nonessential. The payoff was enormous, as online advertising recovered with a vengeance, broadband usage proliferated and Yahoo led the charge. Yahoo's shares rose more than 270% from Mr. Semel's arrival through the end of 2004, but have fallen since then. Revenue rose nearly ninefold from 2001 to its $6.4 billion level last year.

But with Google's rise, it became clear that Yahoo was lagging behind in the fast-growing search and search-advertising markets. Yahoo last year suffered from slumping shares, slowing revenue growth, staff defections and a delay in the crucial Panama project aimed at boosting online ad sales. Executives began fretting that the Internet company's top management wasn't prepared to take the strong medicine they felt was needed. That dissent sprung into public view in November 2006 when The Wall Street Journal published the so-called Peanut Butter
Manifesto by a senior Yahoo executive, calling for big changes.

The company unveiled a reorganization in December and announced the departure of Chief Operating Officer Dan Rosensweig and other executives. Recently, Yahoo has faced competition in its graphical-display advertising business from sites such as social-networking services that have lots of places for ads they can sell at prices far below Yahoo's traditional rates.

"It seems like it's about the second stage of a five-stage rejuvenation for Yahoo," said Jordan Rohan, an analyst at RBC Capital Markets Corp. in New York. He said further stages would have to include overhauling its graphical-display-ad business amid the increased competition.

Yesterday's moves mark a new chapter for Mr. Yang. Until today, his official title was "Chief Yahoo." Mr. Yang recently became interim executive sponsor of Yahoo's technical staff with the departure of the company's longtime chief technology officer, Farzad Nazem. In response to a shareholder question at Yahoo's June 12 shareholder meeting about whether Mr. Yang might serve as permanent CTO, Mr. Semel said, "If Jerry would think hard about being our CTO, I'd be very flattered and very honored."

At the meeting, Mr. Jackson, the shareholder activist, asked Mr. Semel whether he still had "the fire in the belly for this job." Mr. Semel answered, "Absolutely -- I think Yahoo has more opportunity going forward than perhaps any other time in its history."

Ms. Decker's appointment as Yahoo president marks the former financial analyst's continued rise. The role will test her abilities in managing operations, where some believe she needs more experience before she might ascend to the company's top post.

--Gregory Zuckerman, Martin Peers and Matthew Karnitschnig contributed to this article.

Write to Kevin J. Delaney at kevin.delaney@wsj.com and Joann S. Lublin at joann.lublin@wsj.com

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USA Today: Yahoo co-founder Yang becomes CEO

From today's USA Today:

By Jefferson Graham, USA TODAY

Yahoo (YHOO) co-founder Jerry Yang on Monday stepped in as CEO at the struggling Internet giant — saying it's not too late for Yahoo to be No. 1 again.

"We have all the assets to win," said Yang, taking over for Terry Semel.

Semel, a former Warner Bros. executive who had been CEO since 2001, had been under investor pressure to resign over his high pay ($71.7 million in 2006) and Yahoo's underperforming stock. Company shares are down 30% since the end of 2005.

At Yahoo's annual meeting a week ago, Semel said he was committed to reviving the company's fortunes. On a conference call Monday, he said, "This is the right thing to do for Yahoo, and the right time to do it."

Semel will remain as non-executive chairman. Sue Decker, who served as executive vice president and head of advertising, was named president.

Eric Jackson, a Yahoo investor who led a shareholder group pressuring Semel to step aside, applauded the move. "There were too many missed opportunities," he says.

Yahoo, once the No. 1 website, has steadily lost ground to rival Google (GOOG), which dominates Internet advertising. Yahoo this year introduced an overhauled search advertising program, but the company has said investors wouldn't see major gains until the end of the year.

Yahoo reported $6.5 billion in revenue in 2006, compared with $10 billion for Google. In the first quarter of 2007, Google announced record profits of $1 billion, compared with $142 million for Yahoo.

"Yahoo had to do something," says Chris Winfield, who runs 10e20, a New York firm that helps businesses run search-marketing campaigns. "I'm hoping Jerry gets in there and really tries to fight to get Yahoo back on top, so Google isn't the only option in town."

Yang started Yahoo in 1995 at Stanford University with fellow grad student David Filo, as a
directory of Internet sites. Filo, who had shared the "Chief Yahoo" title with Yang, will continue working on Yahoo technology, the company said.

Yang said his top priority was reinvigorating Yahoo. "We started with a vision and a dream, and make no mistake, the dream is still alive," he said. "We want to be a better Yahoo."

Yang isn't the only company founder recently to return to the helm. Jeffrey Citron, founder of Internet phone service Vonage, returned as CEO in April; Michael Dell returned to the head of the PC-maker that bears his name in January, after the company fell on hard times.

Investors cheered the shakeup. Yahoo stock rose 4.5% in after-hours trading to close at $29.38.

Contributing: Michelle Kessler

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San Jose Mercury News: Semel ousted in Yahoo shake-up; Yang, Decker step in

From yesterday's San Jose Mercury News:

INTERNET GIANT EXPECTED TO REFOCUS ON TECHNOLOGY UNDER NEW CEO YANG AFTER LOSING MARKET SHARE TO GOOGLE

By Elise Ackerman, Ryan Blitstein and Troy WolvertonMercury News

Article Launched: 06/19/2007 01:29:10 AM PDT

Earlier this decade Yahoo gambled that content and Hollywood would be the key to its success.
Google banked on technology.

Monday's dramatic shake-up at Yahoo, with the ouster of showbiz veteran Terry Semel as CEO and the installation of co-founder Jerry Yang and financial wizard Sue Decker at the helm, is a long-awaited acknowledgment that Yahoo's bet was the wrong one. Yang as chief executive and Decker as president are expected to refocus the Sunnyvale Internet giant on technology.

But is it too late?

While Semel, 64, oversaw a turnaround following the dot-com collapse of 2000, he has been under fire in recent years as Yahoo has been increasingly eclipsed by Google.

After failing to buy Google in 2002, Semel bought advertising technology that had inspired Google's business model - but failed to make integration a top priority until last year. The delay allowed Google to ring up $10.6 billion in advertising sales in 2006 - 40 percent more than Yahoo - while claiming 48 percent of the U.S. search market, compared with 28 percent for Yahoo, according to comScore.

Yahoo at the same time focused on content partnerships, often with the Hollywood studios that Semel used to work with. Google focused almost obsessively on improving its core search technology.

The result: Yahoo's value has fallen by more than 35 percent since early 2006. A delay of new advertising software and a steady exodus of talent have prompted concern that the company has lost its competitive edge.

These numbers prompted Yahoo's shareholders to send Semel a powerful message last week that they didn't believe he was worth his paycheck, which would have been $71.7 million if he had remained at the company.

Even California Gov. Arnold Schwarzenegger took a dig at Semel at a dinner for entertainment honchos held at the Tech Museum in San Jose last week. Schwarzenegger noted that he did not accept a salary as governor "unlike Terry," who was one of the hosts.

In a letter to the board of directors, Semel noted he had desired to step back for some time. "It is the right thing to do, and the right time is now," Semel said. He will continue to serve as chairman of the board of directors.

Yahoo said it will not be paying Semel severance and that he will forfeit any unvested options.
Semel's options, which were worth $71 million in 2006, prompted a shareholder revolt at Yahoo's annual meeting last week. About one in three shareholders voted not to re-elect three members of the board of directors who made up the compensation committee.

Pat McGurn, executive vice president and special counsel of Institutional Shareholder Services, said the vote provided a catalyst for the board to act. "I think this was all about performance," he said.

"I am excited for the company," said Eric Jackson, a shareholder who sparred verbally with Semel at the meeting. "I think Jerry Yang and Sue Decker are very capable, and they will bring a lot of energy and passion to their new, enhanced jobs and will ultimately do a great job at leading the company."

Although Yang, 38, has never been chief executive of Yahoo, he has been part of the management team - with the title "chief Yahoo" - since co-creating the site with David Filo in 1994.

"They have got the right guy," said Allen Weiner, an analyst with Gartner who has known Yang for more than a decade. Weiner said having an engineer in charge will help motivate engineers and attract technical talent.

Yahoo's stock jumped almost 3 percent to close at $28.12 after the news leaked. The stock climbed an additional 4 percent in after-hours trading after the news was confirmed.

But some analysts were skeptical that the management change would solve Yahoo's problems, which include weakness in selling advertising on Web sites not owned by Yahoo.

Indeed, Yahoo's woes led the Sunnyvale company to enter into talks with Microsoft, which reportedly drafted a $50 billion offer to buy Yahoo.

David Garrity, research director of Dinosaur Securities, said the management shake-up increases the chances that Yahoo will be bought in the next 12 months.

While Semel was a lightning rod for criticism of the company, Yang deserved some of that scrutiny, said Trip Chowdhry, a financial analyst with Global Equities Research in Half Moon Bay. As an executive officer at Yahoo since its founding and its second-largest individual shareholder, Yang had the opportunity in recent years to help steer Yahoo in the right direction.
But he didn't take action until shareholders raised a fuss about Semel's compensation, Chowdhry said.

In a conference call with analysts, Yang described Semel as a "true role model and a mentor" who had fostered an open, honest culture. Yang said he had learned to be a better leader - and a better person - by watching Semel.

Yang and Decker endorsed Yahoo's current strategy and said deals with eBay, Comcast and a consortium of 12 newspaper companies, including MediaNews, the owner of the Mercury News, would lead to significant growth in the years ahead.

"Yahoo is a company that started with a vision and a dream, and make no mistake, that dream is very much alive," Yang said during the conference call. "We intend not merely to be a strong competitor but to be an even bigger winner in our industry."

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CNET: Yahoo investors, and others, make noise on the Web

From yesterday's CNET:

By Greg Sandoval Staff Writer, CNET News.com -->

Published: June 18, 2007, 6:25 PM PDT

TalkBackE-mailPrint del.icio.us Digg this

Eric Jackson, a Yahoo shareholder, dreamed of influencing companies in the same way as billionaire financier Carl Icahn.

Icahn, one of the nation's top shareholder activists, forces change on underperforming companies by first buying up big blocks of shares. Jackson, CEO of a Naples, Fla.,-based consulting company lacks Icahn's resources. But last January, Jackson believed he had found another way to shake things up at Yahoo.

Dismayed with the portal's sagging share price and the company's failure to keep up with Google, Jackson launched an Internet campaign to convince independent investors like himself to band together and call for change at Yahoo. He blasted the company's leaders on blogs, invited other frustrated shareholders to vent on a Wiki, and posted angry videos to YouTube.

Jackson, the guy who asked CEO Terry Semel at last week's stockholder meeting whether he had a "fire in the belly" for his job, acknowledges that at best his group played only a small part in Semel's departure on Monday as CEO. Still, he notes that Yahoo's board of directors was re-elected last week with only 66 percent approval. Typically boards receive between 80 percent to 90 percent approval.

"With the Internet, we could have the same net effect as an activist hedge fund," Jackson said. "There was no one thing that led to (Semel stepping down), but certainly we were in the mix."
There are plenty of examples of how the Internet is a boon to grassroots movements. For his inspiration, Jackson noted the political campaign of Ned Lamont, the Senate candidate who defeated former Sen. Joe Lieberman in Connecticut.

In the same way, the Web could prove to be a powerful tool in the hands of shareholders at a time when activism is catching fire, said Robert McCormick, chief policy officer at Glass, Lewis & Co., an independent proxy adviser that last week issued a recommendation that Yahoo shareholders withhold votes for the company's board.

McCormick pointed to Home Depot as another example of shareholders organizing themselves via the Internet. In January, an investor rebellion led to the ouster of that company's CEO, Bob Nardelli.

But in the case of Jackson's campaign, there's some question as to how many Yahoo shareholders actually fell in behind him. He said that he spoke for more than 100 investors who owned a combined 2.1 million shares valued at about $60 million. How did he know those who pledged their shares actually owned them?

"I can't say for certain that they owned them," said Jackson, 34. "It was made on a good-faith basis. Ultimately, Yahoo respected us enough to know we weren't trying to snow anybody."
As for the future, Jackson said he expects the Web to play a large role in proxy votes.

"It makes sense to shareholders to communicate and pull together," Jackson said. "This way you don't need a $6 billion hedge fund."

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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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CII Alert: Activist Yahoo! Shareowner's Internet Efforts Help Produce Results in Vote-No Campaign

From June 15th's Council of Institutional Investors' Alert by Rosemary Lally:

Preliminary voting results from Yahoo!'s June 12 annual meeting indicate that individual shareowner activist Eric Jackson, who has been using the Internet to rally support for his "Plan B" to improve the company's performance, helped convince a significant number of shareowners to vote against Yahoo! directors. The preliminary tally shows that some of the 10 directors up for re-election received the support of just 66 percent of the votes. (The exact level of support for each director will not be available until the company releases its 10Q.) Yahoo! adopted majority voting for director elections last year. Institutional Shareholder Services, Glass Lewis and Proxy Governance all recommended that shareowners vote against the three directors up for re-election who serve on the company's compensation committee because they approved what the proxy advisory services consider excessive executive compensation.

Jackson, who owns just 100 shares of Yahoo! stock himself, managed to rally the support of shareowners representing 2 million shares to sign on to his "Plan B" strategy for turning around the company. Among other things, the plan recommends taking the following actions:

• Replacing Chairman and CEO Terry Semel;
• Replacing seven of the 10 directors;
• Introducing a 'pay for performance' plan for management and;
• Removing the company's antitakeover provisions.

Jackson promoted this plan on the Internet and used emerging technologies like blogs, videos and wikis to formulate and sell his strategy for a Yahoo! rebound.

On a large scale, Jackson says he thinks the voting results for the Yahoo! director election bode well for activist individuals. "My hope is that this is a sign of things to come for individual investors." In terms of his impact on the company, Jackson believes the tally prompted CEO Semel to suggest to him after the annual meeting that they have "a further constructive and private dialogue."

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Blog 2.0 et Marketing: Eric Jackson proche de faire tomber Terry Semel de Yahoo

From France's Blog 2.0 et Marketing:

Par Vincent Abry, vendredi 15 juin 2007 à 23:00 :: economie :: #523 :: rss article consulté 17 fois

Eric Jackson aurait voulu que ce soit cette année, ce sera sans doute l'année prochaine qu'il fera tomber les têtes de la direction de Yahoo.

L'homme qui fait trembler le CEO de Yahoo avec ses 45 actions a obtenu avec son groupe d'actionnaires mécontents (dont je fais partie) 33% des voix contre l'élection d'au moins un directeur de Yahoo (dont son CEO Terry Semel) à l'assemblée annuelle des actionnaires. Il fallait plus de 50% pour que le conseil l'accepte. 33% est un chiffre historique, typiquement le ratio de personnes votant contre la direction est d'environ 1-2%.

En tout cas les actionnaires ont envoyé un message clair à la direction, qui est maintenant condamnée à faire ses preuves. Eric Jackson est en train petit à petit de marquer l'histoire par sa nouvelle approche de mobilisation des petits actionnaires contre les grosses compagnies.

L'une de leurs propositions visait aussi à indexer le salaire de Terry Semel en fonction des résultats financiers de Yahoo (un système de Pay-For-Performance). Ce qui aurait été une bonne chose. Cette proposition a obtenu 34% des voix.

Avec les 71.7 millions de dollars de salaire que Terry Semel a gagné l'an dernier, ca le place à un salaire supérieur de +926% au-dessus du salaire moyen dans une autre société similaire.

Mais le mécontentement d'Eric Jackson réside aussi dans la contre-performance boursière du titre Yahoo et de la facon dont est gérée la compagnie. Le titre de Yahoo a perdu 35% l'an dernier pendant que Google grimpait de +11%.

En effet on ne peut pas dire que ce soit terrible.. On s'attend toujours à ce que Yahoo refasse surface et reprenne un peu de terrain sur Google mais plus le temps passe plus Yahoo semble s'enfoncer. Même le nouveau système d'enchères de mots-clés Yahoo Search Marketing (Yahoo Panama) ne semble pas très original et rentable..

Seule une rumeur de rachat de Yahoo par Microsoft a réussi à faire décoller le cours en bourse.

Voici le lien du Webcast 2007 de la conférence annuelle des actionnaires de Yahoo.

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The Daily Deal: Yahoo! Vote Looms

From Monday's The Daily Deal (before the Yahoo! AGM):

by Ron Orol in Washington

Posted 04:20 EST, 11, Jun 2007

Small-time activist investor Eric Jackson may lose his proxy campaign to oust Yahoo! Inc.'s CEO Terry Semel from the information portal's board, but his multimedia tactics, which include a blog and YouTube videos of himself, are being talked about as harbingers of investor revolts.

"Eric Jackson is at the vanguard of shareholder activism," said Anne Faulk, CEO of Swingvote LLC in Atlanta.

Jackson, a small investor of Yahoo!, launched a "just vote no" campaign to persuade shareholders of the widely used Santa Clara, Calif.-based portal to expel Semel from his chairmanship along with six others on the company's 10-person board. Yahoo!'s annual shareholders meeting is Tuesday, June 12.

What makes Jackson's campaign unique is his use of the latest digital platforms to get out his message. Jackson uploaded to YouTube a streaming video of himself outlining his grievances with the company. He also set up a blog, "Breakout Performance," a Myspace.com account and a LinkedIn Web site to spread dissent.

Jackson said he was inspired by the activist campaigns of Carl Icahn as well as Ned Lamont's successful bid to defeat Sen. Joe Lieberman in the 2006 Connecticut Democratic primary. Lamont took advantage of Internet bloggers and Web-based social-networking sites to win the primary contest. (Lieberman ultimately retained his Senate seat by winning the general election as an Independent.) Jackson said his initiatives also are mirrored on the pressure campaigns used by Icahn and other high-profile hedge fund activists.

In his Web videos and blog, Jackson argues that Semel is receiving an overly generous pay package in spite of stagnant company share performance. Another irritant: Google Inc.'s investors have enjoyed a 333% increase in stock price during the past three years while Yahoo! investors have watched their shares drop by 8%.

The Web campaign has generated a stir among Yahoo!'s retail investors. So far about 80 have pledged to support Jackson's "just vote no" campaign. It's a tiny portion of the shares; together they represent roughly 2 million Yahoo! shares worth $55 million, about 0.16% of Yahoo!'s stock market capitalization.

No major institutional investors have publicly signed on, so don't expect Semel to step down as a result Jackson's revolt.

But even if Jackson's showing is small, Institutional Shareholder Services Inc. director Patrick McGurn predicts many activist investors will follow in his footsteps, especially after the Securities and Exchange Commission's recently adopted so-called e-proxy initiative takes effect July 1. The new SEC rule will allow corporate proxy materials to be posted online — a move that would ease the considerable printing and mailing costs facing dissident shareholders waging "vote no" campaigns and traditional proxy contests against company directors.

"The SEC's e-proxy initiative is aimed at driving more voting and solicitations online," McGurn said. "We will see a lot more dissident investor campaign activity on the Internet once companies begin using it."

Activist investor Stanley Gold of Shamrock Holdings Inc. represented dissident investor Roy Disney in his campaign to oust Michael Eisner from the board of Walt Disney Co. At a recent SEC roundtable, Gold pointed out that simply the U.S. postal fees to send one proxy solicitation to Disney shareholders cost $2 million. Moving the system online would lower the costs for dissident investor campaigns, he said.

ISS, which advises institutional investors on how to vote in director elections, referenced Jackson's campaign in a recent report. It also recommended that clients vote against Yahoo! directors Ronald Burkle, Roy Bostock and Arthur Kern, all members of the Web portal's compensation committee.

Jackson said if he loses this campaign he will consider pursuing a similar endeavor against Yahoo! next year. He realizes that to succeed at a campaign to oust Yahoo! directors he will need the support of institutional investors. Jackson said he will approach high-profile activist hedge fund managers to support his campaign.

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IR Magazine: Dissident Yahoo! shareholder finds following on YouTube

From today's IR Magazine:

Jun 15, 2007

Like-minded voters come out against board slate at AGM

At this week's Yahoo! AGM, although the company's own board slate passed, at least one of its candidates got only 66 percent support. Last year, by contrast, each director got 97 percent or more of shareholder votes, according to company filings.

The exact breakdown of votes won't be known until Yahoo's July SEC filing. But the low approval may be owed in part to the rally led by a dissatisfied retail shareholder, Eric Jackson, using YouTube, blog and wiki.

Jackson, who has a PhD in management from Columbia, has only 100 shares of Yahoo!, but he attracted a group of shareholders that together own 2 mn shares to push his so-called Plan B.

The top points of the proposal called for ousting CEO Terry Semel and seven of the 10 current directors. The plan debuted on Jackson's blog, Breakout Performance, in January. He followed with YouTube postings of himself explaining the plan and campaign-style advertisements for Plan B. He invited comments via wiki. Shareholders pledged their votes on YouChoose.net.

The dissident campaign got coverage on CNBC and new media outlets and attention from Institutional Shareholder Services.

At the June 12 AGM, Jackson asked Semel a question that left the CEO admitting the company was number two to Google. 'No one ever publicly acknowledged that,' Jackson told Kara Swisher on her All Things Digital video blog.

Semel approached Jackson after the meeting. 'He suggested further dialogue between us,' he tells IR magazine. 'He asked that it be kept private, which, of course, I will respect. That dialogue has now begun. I'm confident we can find some common ground.'

by Anna Snider

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LA Times: Yahoo execs defend firm as investors lament results

From today's LA Times:

By Michelle Quinn, Times Staff WriterJune 13, 2007

SANTA CLARA, CALIF. — Yahoo Inc. co-founder Jerry Yang said Tuesday that the Internet company was entering its "teenage years." Investors complained about the growing pains.

Yahoo Chief Executive Terry Semel presided over the company's annual shareholder meeting here, emphasizing the positives but acknowledging missed business opportunities.

The pressure is on Semel, who joined Yahoo in 2001 from Warner Bros., to rejuvenate the Internet firm's business. Shareholders on Tuesday expressed dismay with a rash of executive departures, high compensation packages and the poor performance of the company's stock, which has fallen 9% in the last year while Google Inc.'s has risen 32%. Google's market valuation of $157 billion dwarfs Yahoo's of $36 billion.

Investors said the meeting was more subdued than last year's. Perhaps, they suggested, Semel was growing resigned to being No. 2 behind Google.

"Terry loves to talk and not say much," Robert Clothier, an investor from Palo Alto, said after the meeting. "But he was less combative than last year. He was really angry about people comparing Yahoo to Google then.

"In response to a shareholder question, Semel said he still had the fire in his belly needed to run the company. "Absolutely," he said. "Yahoo has more opportunity going forward than any other time in its history."

To boost revenue, he said, Yahoo plans to expand its business selling advertising on mobile phones and for other companies' websites, as it already does for EBay Inc., and to keep focus on its search-advertising technology, dubbed Panama. Yahoo trails Google in its ability to generate profit from Web searches.

"If Panama is successful, that's the guts of what will make them competitive with search," said Tony Mezzapelle, an investor from San Jose.

Three independent shareholder proposals were rejected. But, according to preliminary results released by Yahoo, one that would have tied executive compensation to performance received 34.6% of the vote — an indication of unhappiness with Semel's pay. He earned $39.8 million in 2006, mostly in stock options, even as the company's stock fell 35%.

Investors also chastised the directors who approved his compensation package; the company said at least one of the directors received just 66% of the vote even though they all ran unopposed and got 97% approval last year.

"That's a huge drop in approval," said Eric Jackson, a management consultant from Naples, Fla., who has started an online group of disgruntled Yahoo shareholders. "People want a change at the board level."

The other two independent shareholder proposals had to do with setting ethical guidelines for the company's business in other countries. The company faces a lawsuit from family members of Chinese dissidents who claim that Yahoo provided the Chinese government with information about people's online behavior, resulting in arrest and torture.

Yang read a statement defending Yahoo's policies in doing business in other countries and listing initiatives it has started, such as posting an alert on Yahoo in some countries in which governments censor information. "We the employees and executive team at Yahoo are dismayed and distressed by the impact of people imprisoned in China and around the world," he said.

Seeking to highlight Yahoo's achievements, Semel pointed to the success of Yahoo Answers, where people around the world ask and answer questions from one another. Since it launched in December 2005, he said, it has attracted 90 million users.

"Let's take credit for some of the things we did do," he said.

Semel's optimism was convincing to William Ristow, an investor from Ambler, Pa., who said he owned more than 6,000 Yahoo shares. "I leave on a positive note," he said. "They implied that things are moving forward."

Shares of Sunnyvale, Calif.-based Yahoo fell 30 cents, or 1.1%, to $27.05.

michelle.quinn@latimes.com

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CBS Evening News: CEO Salaries Soar

Anthony Mason had a piece yesterday on the results of the Yahoo! Annual Meeting.

It's here.

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Conde Nast Portfolio: Dark Days for Terry Semel

From today's Conde Nast Portfolio:

by Russ Mitchell Jun 13 2007

Yahoo, once the internet high-flyer, has been lapped by Google and hears footsteps from MySpace and Facebook. How long can Semel keep his job?

Terry Semel took his glasses off, then he put them on again. Then he took them off. On again, off. On, off. On. He paced the stage. He paused to regard the crowd. About 150 of them out there, taking their seats. They looked pretty glum.

The colors didn't help. At Yahoo, which Semel runs as chairman and chief executive officer, the corporate color is purple. Here in this small banquet hall in Santa Clara, California, the bunting was purple, the draperies were purple, and the table skirts were purple, too. The signs purple, the balloons purple, the mood lighting purple. The thick, pleated curtain hanging behind Semel, however, was inky black, a kind of theatrical frame for the C.E.O., whose performance at this, the company's 2007 annual meeting, would later be webcast.

Perhaps the video would lighten the room's unfortunate funereal look. Semel set it rolling. It was the usual fare: edgy but squeaky clean young people performing odd but well-timed body movements to a sanitary no-threat hiphop beat. At regular intervals, Yahoo's many services were promoted. In one segment, Semel, who is 64, was shown close up playing the good sport, attempting the Yahoo yodel.

The real Semel grinned, amused at his televised image. The outside members of the company's board of directors, old men in dark suits, sat squeezed shoulder to shoulder in a tight row of chairs, stonefaced. The attendees—shareholders, executives, members of the press—remained expressionless.

Well, that didn't work. And what could? These are dark days for Yahoo. Once one of the Internet's highest flyers, the company has fallen so far behind Google—and social networks like MySpace and Facebook are coming up so fast from behind-that shareholders and industry analysts are already talking about Semel's replacement.

It's no wonder that Semel was not happy when Eric Jackson, owner of 96 shares, approached the microphone. Jackson had used a blog and a YouTube video to unite 100 investors holding 2 million shares in a pledge to vote against reappointing Semel and seven other directors to the board.

Two million is less than 1 percent of Yahoo's outstanding shares, but Jackson's grassroots quest attracted media attention, and one-third of the voting shares went against at least one of the directors. A 66 percent support level is a landslide in politics, but at public corporations, where nearly 100 percent is the norm, it is an embarrassment of the highest order.

The dissident Mr. Jackson asked questions like does Semel still have fire in the belly? Is he okay with settling for second place behind Google? And shouldn't he have apologized to shareholders for his performance over the last two or three years? Semel accused Jackson of being "cute." Eventually, Semel became so defensive that he declared "I feel very good about my capabilities."

Semel would not talk to Condé Nast Portfolio, nor would any other top executive at the company. A Yahoo spokeswoman says "Terry has no intention of leaving the company." And why should he? Yahoo's board of directors has lavished Semel with enormous wealth. Since he started work in May 2001, his total compensation totals more than half a billion dollars: that's billion with a b.

Last year alone he was paid $107 million, or 14.31 percent of the company's net income, making him one of the highest paid C.E.O.'s in the U.S. He's set to receive 6 million options worth $92 million in Yahoo stock through 2008 in a "retention" incentive granted by the board of directors in last year. That is not the kind of pay package granted by a compensation committee that's thinking about replacing someone.

Yahoo has lost to Google in every way it could possibly lose. Google search is crushing Yahoo in market share. The company fell years behind Google in Web advertising technology. The bleakest statistic: Google had $10.6 billion in revenue last year, most of it in advertising, nearly double Yahoo's $6.4 billion. When Semel took charge at Yahoo in 2001, Google was still a bit player.

Now social networks like MySpace and Facebook are grabbing Yahoo users and advertisers away, and, analysts say, average time spent on Yahoo is declining. Workers inside Yahoo describe it as a bureacratic mess that a December reorganization thus far has done little to fix. A few weeks after the annual meeting, in mid-July, Yahoo reported better earnings and that ticked up its depressed stock a bit. But the attitude of analysts and investors is still wait and see.

Employees are fleeing. Over the past year, eight of the company's top 26 executives have up and left. Some were shoved out in a reorganization, but others quit voluntarily. The company's top technology officer, Farzad "Foz" Nazem, "retired" in June. More worrisome has been the diaspora of talent level or two down. They include music chief Dave Goldberg, consumer search business head Andrew Braccia and Yahoo Hotjobs general manager Dan Finnegan.

Dozens of refugees have set up camp at Google and Microsoft and Facebook and venture capital firms like Benchmark and Sequoia and Accel Partners. Others are starting new companies.

Fearful of their futures, many Yahoo employees were willing to talk about the company but not on the record. They are worried about massive layoffs around the corner, and for good reason. Semel has finally acknowledged a surfeit of duplicative projects at Yahoo, and an intention to cut them back. Revenue per employee at Google last year was $1.3 million; at Yahoo, $606,000.

All this turmoil, perhaps, explains the dissident shareholders' problems with Semel. To his cheerleaders, the 325 percent runup in Yahoo stock in 2003 and 2004 justifies his worth. To detractors, Semel was just lucky, and the miserable swoon in Yahoo stock since then is more indicative of his talent.

It's impossible to disentangle how much of Semel's early success was due to the general recovery in Internet advertising during that period, which was considerable, and how much was due to executive brilliance. There is little debate, however, that the company has been asleep at the wheel for the last two years at least, and the question now is whether Semel is capable of rousing the company from its self-induced torpor.

Curiously enough, the company's future and Semel's ultimate legacy rests on the shoulders of a woman named Sue Decker, who was put in charge of advertising and publishing, reporting directly to Semel. Fundamentally, it's now her job to attract boatloads more revenue to Yahoo.

Previously the company's chief financial officer, she is described by one recent Yahoo renegade as "the voice of the analytical side of Yahoo screaming out to take control." Although the company has taken no position on the matter, Decker is widely regarded inside the company and out as Semel's heir apparent.

Decker landed in the sweeter position than anyone the reorganization last December, which she helped plan. Out the door went the chief operating officer along with Lloyd Braun, a former TV executive brought in by Semel to bring Hollywood-style content to Yahoo, the results of which were mixed at best: The group's flashiest product to date is The 9, a quick video countdown of funny things whose quality is best left for viewers to judge.

Braun detractors say he was too Hollywood-abrasive for Yahoo's consenus culture. His supporters say Braun never got the support he needed: not enough money, not enough engineering time, not enough help from Semel when traditional Yahoos resisted his push for change.

The reorganization came quick on the heels of a memo by a Yahoo executive now famously known in Silicon Valley as the Peanut Butter Manifesto, which called for drastic action in the face of dismal Yahoo performance and a tendency to spread talent and resources over too many projects, like a dab of peanut butter over a lot of toast. The reorg didn't do much to pacify critics, however. Semel's new strategic plan: Focus on customers. The plan was accompanied by little sense of urgency. After Braun left the Hollywood group at Yahoo's Santa Monica offices, the place was left leaderless for four months before a Semel protege, Jeff Weiner, was put in charge.

The company was divided into three groups—advertising, audience, and technology—but as of mid-summer Yahoo still had not named an audience group head.

The challenge anyone put in charge of content was made clear by Ellen Siminoff, a former Yahoo executive and now C.E.O. of a company called Efficient Frontier. "Yahoo has some challenges," she says. "They need to come out with new product. I don't know what product it would be. They have to come out something other people haven't."

With someone leading the audience side or not, it's Decker who will determine the company's near term future, and possibly for a long time to come. Without a signficant boost in advertising revenue at Yahoo, nothing else matters.

So far, Decker has succeeded in getting the advertising technology system back on track, and even before the reorganization had struck two major deals: an exclusive arrangement to sell advertising for eBay, and an agreement to share content and online advertising revenue with a large group of newspaper publishers.

Decker keeps a low profile, but she's a businesswoman on the way up, and not just at Yahoo. A former analyst at Donaldson, Lufkin & Jenrette, tough in spunky Jody Foster kind of way, she serves on top-flight company boards, including Intel and Costco. In May, she was elected to the board of Berkshire Hathaway, the highly regarded Warren Buffet investment conglomerate. "She's a star, a rising star," gushes fellow Costco board member John Meisenbach.

Hamilton E. "Tony" James, vice chairman at the giant private equity firm Blackstone Group, Costco board member, and Decker's former boss, is equally effusive: "Is she C.E.O. material? Definitely. She's tough-minded. At DLJ, she managed a big group of prima donnas."

But for all the adulation, it's a big question whether Decker has the creative vision and technical chops to lead Yahoo. She'll have help on the numbers side from an old family friend, Blake Jorgensen, who came from the Thomas Weisel Partners investment bank in June to replace Decker as CFO. He was best man at Decker's wedding, and a Stanford classmate of Decker's husband, Michael Dovey, who met Decker at Harvard Business School. Dovey told friends he'd get rich by 40 and retire, which he did at Goldman Sachs. Now he takes primary care of the couple's three kids.

With all the financial talent at her beck and call, Decker surely realizes just how deep Yahoo's problems are. It's no mere coincidence that Yahoo's stock price began declining just after Google went public and transparent in 2004. Once Google started filing documents with the Securities and Exchange Commission, investors could see just hard Yahoo was getting kicked.

Yahoo's investment problems go much deeper than its stock price. Under a method of business valuation used by firms ranging from Goldman Sachs to McKinsey & Co., known as economic value added, and very familiar to people like James, Munger, Jorgensen and Dovey and Decker, Yahoo has been destroying shareholder value each year and every year since its creation.

EVA measures not only a company's return on capital; it puts a premium on a stock's risk. To earn positive returns, a company must top the return it would get by investing in a basket of stocks with similar risk. Otherwise, why have a company at all?

According to EVA Dimensions in Locust Valley, New York, companies like General Electric and Microsoft have been EVA positive since their records go back to 1989; Google and Costco have been EVA positive for their entire existence; eBay went EVA positive in 2002, Amazon.com in 2003, and the economic return on both companies has been rising since. Yahoo had one good year, in 1998; otherwise, the company returned no economic value in any year since.

If Decker succeeds in getting Yahoo back on track, her future is unlimited. At this point, Semel's star is so tarnished that she's likely to get credit for any victories while if things don't work out Semel could take the blame. But with a rich contract that runs through 2008, a compliant board of directors, half a billion dollars in the bank with more on the way, who cares?

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AllThingsD: What Happened at the Yahoo! Meeting

Kara Swisher was in Santa Clara yesterday to cover the Yahoo! AGM. She also brought her cool little, white video camera.

Here's her report from the meeting.

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Henry Blodget: Shot Heard Round the Yahoo

From Internet Outsider:



(We can only hope...)


Activist Eric Jackson and other frustrated Yahoo shareholders won big at the Yahoo! Annual Meeting yesterday, even though the company's recommended slate of directors still passed.

Persuading nearly a third of normally rubber-stamping shareholders to vote AGAINST management is a major success, and one can only hope that Terry got the message.


Terry's remaining supporters usually point to the stock's having quintupled (or thereabouts) since he joined the company and suggest that Yahoo's current woes are merely a temporary lull that all good companies go through. This defense ignores that the average stock in the industry is up a lot, too, and that a competitor that barely existed when Terry joined the company is now worth 5 times as much as Yahoo.


Yahoo's failure to maintain its lead in search and instead concentrate on more traditional media efforts was a colossal strategic error that Yahoo's shareholders will forever have to pay for.

Everyone makes mistakes, of course, and Terry's experience helped Yahoo through a challenging period after the dotcom crash. That was then, however, and the skills required to return Yahoo to Internet greatness now are different than those that helped stabilize it in the bust.


Terry believes he has the Internet-greatness skills, and he's certainly been paid as though he does. Despite his confidence, however, every day that goes by sees Yahoo fall further and further behind. It's no wonder, therefore, that some shareholders think it's time for a change.

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TheStreet.com: Yahoo! Shareholders Show Discontent

From yesterday's TheStreet.com:

By Vishesh KumarTheStreet.com
Senior Writer
6/12/2007 5:55 PM EDT

The last year has been tough for Yahoo! (YHOO - Cramer's Take - Stockpickr - Rating).
So it's no surprise that the company's annual shareholder meeting on Tuesday was hardly a cakewalk.

Shares of Yahoo! finished the day at $27.05, down 10% from where they were trading a year ago. The broader Nasdaq index, meanwhile, has gained almost 25% in the same time fame. Over the past two years, the Nasdaq has outperformed Yahoo! by more than 45%.

And the discontent showed among Yahoo! shareholders, who re-elected the company's board of directors with only a 66% vote of support. Last year, by contrast, a 95% majority voted to re-elect the board.

Some Yahoo! investors also found the company's vision for regaining momentum to be deficient in substance. "There has been a lack of detail about how they are going to win with regard to what they have communicated to the public and to shareholders," says Eric Jackson, a Yahoo! investor who has waged a high-profile battle to hold management's feet to the fire.

"A lot of the plans they have sound like motherhood and apple pie. Who can be against being a leader in mobile?" he says.

But the company may not be delivering on the rhetoric. Jackson complained to the board about the quality of Yahoo!'s Go service, which was launched at the beginning of this year to much fanfare from the company.

Despite the hype, the service was slow and cumbersome, Jackson told the board.

"Afterwards, a product manager from the mobile division approached me, told me to uninstall and reinstall it, and said it was going to get better in the future," Jackson says. "But they really need to get much beyond that."

Jackson may be one of the most vocal critics of Yahoo!'s performance under CEO Terry Semel, but he is hardly alone. With only 100 shares of Yahoo! stock to his name, Jackson has nonetheless attracted a group of shareholders that collectively control 2 million shares to his plan to make big changes at Yahoo!

Dubbed "Plan B," Jackson's group used emerging Web tools like blogs, videos and wikis to solicit suggestions for changes the company can make.

And while Jackson says he submitted the plan to the company in February, Semel said he had not reviewed it in a conversation with Jackson following the question and answer segment of the meeting.

Still, Semel said that he would be willing to talk to Jackson and that the company was receptive to ideas from its shareholders.

Yahoo! also faced motions by shareholders to enact new payment criteria for Yahoo! management and to make stronger efforts to address censorship and humanitarian issues raised in countries like China. All of the motions failed to pass.

But Yahoo! co-founder Jerry Yang did give a long speech about how important the matters are to Yahoo! and what the company was doing along those fronts.

And listening to disgruntled shareholders may be the first step to a more pleasant meeting next year -- and better performance in between.

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Yahoo CEO Faces Angry Shareholders

From KGO in the Bay Area:

By David Louie

Jun. 12 - KGO - Yahoo's chief executive faced angry shareholders today, at their annual meeting, who are pushing for big changes in management and in the way Yahoo filters Internet content in China

As shareholder meetings go, it was orderly, cordial and informative. But there was an under-current of tension as a small but adamant group of Yahoo stockholders tried to light a fire under a company they say is languishing.

Yahoo used to be one of the hottest companies in Silicon Valley. Then along came Google, and now Google generates more revenue in three months than Yahoo does in a year.

That puts CEO Terry Semel on the hot seat. He's been leading Yahoo for six years, earning an estimated $71 million dollars last year -- the most of any CEO of a public company in the country.

Eric Jackson owns 96 shares of Yahoo. He posted a plan on YouTube to oust Semel and several other directors up for re-election to the board. The proposal lost 2 to 1. Still, Jackson thinks change is in the wind.

Eric Jackson, Ph.D., Dissident Yahoo Shareholder: "I think that they can't look away from these results. There will have to be some changes in the coming days, the coming weeks, at the board level, which we think can only be positive for Yahoo shareholders."

Criticism is growing that Yahoo has cooperated with authorities in China to identify e-mail users. This has led to the imprisonment of critics of China's government.

A proposal by New York City pension funds to curb Yahoo content filtering in China was rejected.

Patrick Doherty, New York City Comptroller's Office: "They're looking to curry favor with the Chinese government and play ball with them, and they think that that's more important than preserving freedom of speech, freedom of expression."

Yahoo says the issue is too large for one company and needs to be addressed between governments.

Jim Cullinan, Yahoo Public Affairs Director: "We call on the State Department to continue to engage the Chinese government to go and free these people and also do not limit the ability for them to use the Internet and enjoy those freedoms that other people get to enjoy."

Yahoo co-founder Jerry Yang read a four-page statement about Yahoo's efforts to address Internet censorship and human rights. You can read the complete document here.

Yang says he met with State Department officials as recently as last week.

Copyright 2007, ABC7/KGO-TV/DT.

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BusinessWeek: Yahoo's Semel Faces the Music

From today's BusinessWeek:

At the annual meeting, shareholders made their dissatisfaction known, with votes on directors and executive pay

by Robert Hof

As Dottie Weber ambled into Yahoo!'s annual shareholder meeting on June 12, she was expecting fireworks. "It's going to be an angry meeting," predicted the self-described "small" Yahoo investor, who noted that Yahoo's stock has been languishing for more than a year as it has lost ground to archrival Google (GOOG). "A lot of shareholders are fed up. I'm thinking of selling."

Contrary to her prediction, the meeting proved rather sedate, as fewer than 150 shareholders attended and only a few spoke up to criticize the company. Nonetheless, no small number made it clear with their proxy votes that they're unhappy with Yahoo's (YHOO) lagging stock price—down 20% from its 52-week high of $33.74 in July—and Chief Executive Terry Semel's $71.7 million pay package last year. Nearly 33% of stockholders opposed the reelection of at least one Yahoo director.

While that means the slate was reelected, the preliminary vote indicates that investors heeded various shareholder advocates who called for "withhold" votes on some directors. Three shareholder advisory firms—Institutional Shareholder Services, Glass, Lewis & Co., and Proxy Governance—recommended opposing directors Roy Bostock, Ron Burkle, and Arthur Kern, who make up Yahoo's compensation committee. The groups said Semel's pay package was excessive given Yahoo's recent performance.

Shareholders Send a Message

The withhold votes stand out among shareholder votes of the past year, says Patrick McGurn, executive vice-president at ISS: "That's one of the higher no votes on directors that we've seen."

Moreover, nearly 35% voted for a shareholder proposal to tie executive pay more closely to company performance. While that's about average for such proposals lately, says McGurn, the vote indicates the pay issue struck a chord with a significant number of investors. Indeed, when David Collins of the United Brotherhood of Carpenters Pension Fund introduced the proposal, it was greeted by widespread shareholder applause at the meeting.

In response to a question from BusinessWeek after the meeting, Semel said the company had expected the votes because of the shareholder groups' recommendations. But Naples (Fla.) management consultant and small Yahoo investor Eric Jackson, who has mounted a high-profile campaign to remove those and other directors, says the votes sent a clear message that shareholders are impatient for better results. He said he hoped Yahoo founders and "Chief Yahoos" Jerry Yang and David Filo would respond and take a more active role in getting Yahoo back on track. Says Jackson: "I don't think there's any way that Jerry and David can ignore that."

External and Internal Challenges

The rising tide of rebel shareholders at Yahoo is emblematic of a national trend. Investors are demanding and in some cases winning changes in how directors are elected. They're also voting in increasing numbers for nonbinding votes on executive pay packages (see BusinessWeek.com, 6/11/07, "Activist Investors Get More Respect").

But Yahoo in particular also has been struggling with an array of its own challenges. Despite the release this year of a new search advertising system, called Panama, it has been unable to show it's catching up with Google on search ads, the fastest-growing online ads. Yahoo's revenue grew 7% in the first quarter, compared with a 63% jump in sales at Google.

Partly as a result, Yahoo has seen a steady stream of executive and employee departures. That has put a damper on morale since last year. What's more, the struggles have renewed persistent speculation about whether Semel will stay in the job he took in May, 2001 (see BusinessWeek.com, 5/28/07, "Even Yahoo! Gets the Blues").

Playing Offense and Defense

Semel didn't shed light on that, but his presentation at the meeting sought to reassure investors that Yahoo is on the right track. While "we have a lot more to do," he conceded, he said Yahoo still has a good competitive position. In particular, he implied that the investments in Panama and other initiatives will pay off soon and help it regain ground lost to Google. "Without any question in our mind, we are going to narrow that gap," he said. "We would have loved to do it a little sooner. [But] that's going to be a lot better business for Yahoo going forward."

Semel faced the sharpest criticism from Jackson, who told Semel, "I'm surprised that you didn't apologize to the Yahoo shareholders for the past three years' performance." He grilled Semel on how specifically he was going to execute Yahoo's strategy, concluding with this pointed question: "Do you still have the fire in the belly?"

Semel responded calmly: "Absolutely." He displayed annoyance only once, when Jackson asked whether Semel was admitting he was satisfied with Yahoo being No. 2 in search. "I think you're being a little cute about that," he said, denying any such admission. Afterward, Jackson said he's still waiting for more specifics. "We all want to know why we should stick around as shareholders," he said.

For their part, analysts also say they'll be paying close attention to what Semel has to say when Yahoo reports second-quarter earnings on July 17. "Management did draw a line in the sand," notes Rob Sanderson of American Technology Research. Yahoo will be expected to start reporting double-digit gains in the amount of revenue it gets per average search query, as executives have promised. Otherwise, he says, investors may clamor for more drastic changes at Yahoo.

Hof is BusinessWeek's Silicon Valley bureau chief.

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Dow Jones: Yahoo Holders Approve Slate Of Board Directors

From Dow Jones:

NEW YORK (Dow Jones)--Shareholders in Yahoo Inc. (YHOO) voted in favor of the Internet company's slate of directors. But with some board members winning approval with as low as 66% of the vote, it appeared that recent calls to rebuke members who were responsible for approving generous pay packages for Yahoo executives resonated with shareholders.

Last year, each of Yahoo's directors were approved with roughly 97% or greater of shareholder votes, according to a company filing. In general, approval rates of 95% or higher are common, and a withhold rate of more than 20% is considered high. As such, approvals with only two-thirds of the vote could be considered a victory for shareholder activists who have condemned high executive pay at the company.

Ahead of the company's annual meeting, three advisory firms recommended shareholders withhold their votes from three company directors that comprise Yahoo's compensation committee - Roy Bostock, a veteran advertising executive; Ron Burkle, a billionaire best known for his investments in supermarkets; and Arthur Kern, a former radio broadcast executive - due to concerns about excessive compensation for Chief Executive Terry Semel.

The results may also have been influenced by shareholder activist Eric Jackson of Naples, Fla., a small investor who has mounted an online campaign to push for a new strategy at the company as well as the ouster of Semel and the majority of the company's directors. Jackson has said he gathered the support of investors who own about 2 million Yahoo shares, or less than 1% of its outstanding stock, for a "Plan B" for the company.

The meeting included a charged exchange between Semel and Jackson during its final question-and-answer period during which Jackson said he was "surprised" that Semel didn't apologize to shareholders for the company's poor performance and asked how the company would better compete with Google. Semel at one point charged Jackson with being "cute" during a followup question, but then backed off and thanked the owner of 96 Yahoo shares for his "constructive" questions.

Semel defended Yahoo's ad business as a strong one, diversified in both search and display markets that is well-positioned to take advantage of an expanding ad market. He said Yahoo's results in search will improve, thanks to its Panama system overhaul, and that Panama's capabilities will be expanded beyond search advertising. Semel also said the company began "another large project" a number of months ago to create a platform for serving newspapers and others that will have capabilities that go beyond online advertising.

Shareholder discontent has been building as Yahoo's growth has slowed, share price has lagged and position at the center of the Internet has been eclipsed by rival Google Inc. (GOOG). Yahoo's stock has fallen 10% from a year ago, while Google's stock is up more than 30%.

The lackluster performance has fueled complaints about Semel's outsized pay package, which at a value of $71.7 million last year made him the highest-paid CEO among Standard & Poor's 500 companies that have filed with regulators this year, according to an Associated Press analysis.
As part of a three-year arrangement, Semel's salary dropped to $1 in May 2006 from $600,000 previously. He was also awarded stock-option grants (priced at the market value of Yahoo shares when granted) on 6.8 million shares as part of his 2006 bonus and the three-year retention pact. Yahoo says the package ensures that "substantially all" of Semel's compensation is tied to the company's performance.

Meanwhile, investors defeated a shareholder proposal calling for executive pay based on performance, including payouts occurring only when performance exceeds that of peers in its industry. Though the proposal failed, it received a fairly high approval level of 35% of the vote.
Yahoo investors also voted on two shareholder proposals that stem from Yahoo's disclosure of information to the Chinese government that helped lead to the imprisonment of at least one dissident, defeating both.

A proposal calling for the creation of a board committee on human rights was defeated by 81% of the vote, while another calling for new company policies related to censoring and disclosing information at a government's request was defeated by 71% of the vote. Yahoo's board recommended that shareholders vote against the proposals, saying the company is already taking measures to address such issues.

A shareholder, claiming 100 Yahoo shares, read what he said was a message from Gao Qingsheng, the mother of jailed Chinese journalist Shi Tao, who is suing Yahoo for helping Chinese officials jail her son. Shi was sentenced to 10 years in prison in 2005 after sending an email about Chinese media restrictions using Yahoo's email service.

"My son's career has been destroyed and his health is deteriorating in prison," Gao wrote. "How many more families are suffering the same miserable life I have now?"

Yahoo founder Jerry Yang addressed the meeting with a lengthy accounting of Yahoo's efforts around protecting freedom of expression, including seeking the help of the U.S. government, expressing its concerns to China, and working with academics and human-rights groups on an industry code of conduct, which he said could be completed by the end of this year.

"We remain deeply concerned about governments that imprison their own citizens," Yang said. "Yahoo condemns these actions."

He also said Yahoo has a team of people who now do formal human-rights assessments of company initiatives and come up with strategies to limit risks to free expression. In China, it also now notifies users that certain search terms may be screened and that email content is subject to Chinese law.

Yet Yang repeated Yahoo's assertions that Yahoo must abide by the laws of countries it operates in, such as China, and that, on balance, its role in countries that restrict freedom of expression is constructive.

Yahoo, he said, "can have a transformative effect" on these societies by providing access to information that hasn't been available before and improves people's lives.

Yahoo shares closed Tuesday's regular session down 30 cents, or 1.1%, at $27.05.

-By Riva Richmond, Dow Jones Newswires; 201-938-5670; riva.richmond@dowjones.com

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WSJ: Yahoo Shareholders Approve Board With Low Majority

From this afternoon's WSJ:

By RIVA RICHMONDJune 12, 2007 4:00 p.m.

Shareholders in Yahoo Inc. voted in favor of the Internet company's slate of directors. But with only 66% of votes in favor of the slate, it appeared that recent calls to rebuke board members responsible for approving generous pay packages for Yahoo executives resonated with shareholders.

Last year, all of Yahoo's directors were approved with roughly 97% or greater of shareholder votes, according to a company filing. In general, approval rates of 95% or higher are common, and a withhold rate of more than 20% is considered high. As such, an approval with only two-thirds of the vote could be considered a victory for shareholder activists who have condemned high executive pay at the company.

Ahead of the company's annual meeting, three advisory firms recommended shareholders withhold their votes from three company directors that comprise Yahoo's compensation committee -- Roy Bostock, a veteran advertising executive; Ron Burkle, a billionaire best known for his investments in supermarkets; and Arthur Kern, a former radio broadcast executive -- due to concerns about excessive compensation for Chief Executive Terry Semel.

Shareholder activist Eric Jackson of Naples, Fla., a small investor who has mounted an online campaign to push for a new strategy at the company as well as the ouster of Mr. Semel and the majority of the company's directors, says he has gathered the support of investors who own about two million Yahoo shares, or less than 1% of its outstanding stock, for his "Plan B" for the company.

Shareholder discontent has been building as Yahoo's growth has slowed, share price has lagged and position at the center of the Internet has been eclipsed by rival Google Inc. Yahoo's stock has fallen 10% from a year ago, while Google's stock is up more than 30%.

The lackluster performance has fueled complaints about Semel's outsized pay package, which at a value of $71.7 million last year made him the highest-paid CEO among Standard & Poor's 500 companies that have filed with regulators this year, according to an Associated Press analysis.

As part of a three-year arrangement, Mr. Semel's salary dropped to $1 in May 2006 from $600,000 previously. He was also awarded stock-option grants (priced at the market value of Yahoo shares when granted) on 6.8 million shares as part of his 2006 bonus and the three-year retention pact. Yahoo says the package ensures that "substantially all" of Mr. Semel's compensation is tied to the company's performance.

Meanwhile, investors defeated a shareholder proposal calling for executive pay based on performance, including payouts occurring only when performance exceeds that of peers in its industry. Though the proposal failed, it received a fairly high approval level of 35% of the vote.
Yahoo investors also voted on two shareholder proposals that stem from Yahoo's disclosure of information to the Chinese government that helped lead to the imprisonment of at least one dissident, defeating both.

A proposal calling for the creation of a board committee on human rights was defeated by 81% of the vote, while another calling for new company policies related to censoring and disclosing information at a government's request was defeated by 71% of the vote. Yahoo's board recommended that shareholders vote against the proposals, saying the company is already taking measures to address such issues.

Write to Riva Richmond at riva.richmond@dowjones.com

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Seeking Alpha: Eric Jackson Prepared to Shake Things Up at Yahoo's Shareholder Meeting

From today's Seeking Alpha:

David Neubert submits: Last night, I saw Eric Jackson talking to Maria Bartiromo on CNBC. He was getting press for his small shareholder campaign to shake up Yahoo (YHOO) management.

He said he represented over 100 investors with over 2 million Yahoo (YHOO - $27.35) shares. I am one of the investors he represents. I signed up at his website called Breakout Performance.
The Yahoo shareholder meeting is today.

Mr. Jackson has all sorts of press, and even the conservative proxy advisor used by most funds, ISS, mentions Mr. Jackson's Plan "B" in its recommendations for the Yahoo board vote.

And is Terry Semel's pay too high? Is he taking too much of a share of Yahoo's earnings as salary? It would seem Eric Jackson is not alone in thinking so.

Anyway, I wish I could be at today's Yahoo shareholder meeting, but Eric Jackson will be there speaking for me. Go kick some entrenched-overpaid-underperforming management butt for me, Eric!

Disclosure: I own Yahoo and plan to pledge my shares to the campaign. However, if the shares rise above $35, I'm likely to start selling. I'm short Jan 2008 35 strike calls against half my position of YHOO and am also short Jan 2008 30 strike puts. I like Yahoo!. I use their email and use MyYahoo as my homepage. I make extensive use of Yahoo Finance. I also like the newsreader in YahooMailBeta.

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CNBC: Activist Yahoo Investor Gunning for CEO Semel

From yesterday's CNBC Closing Bell:

Yahoo is a top Internet destination -- but that hasn't brought bliss to all of the Web portal's shareholders. One particularly disgruntled stockholder is Eric Jackson, president and CEO of Jackson Leadership Systems. He explained to "Closing Bell" viewers why he intends to hold Yahoo CEO Terry Semel's "feet to the fire" at the company's annual shareholder meeting on Tuesday.

Jackson cited Yahoo's "underperformance" compared with key rival Google: Over the past 12 months, Semel's firm lost 9.78% of its share value, while Google gained 33.19%. And the management consultant said the comparison looks even worse over a 3-year period during which Google has leaped some 300% since its IPO.

CNBC's Maria Bartiromo pressed Jackson to take a longer view: She noted that over five years, Yahoo showed a gain of 245%. But Jackson scoffed at the statistic, attributing it to the "general recovery" in the ad market that "lifted all boats." He believes that "anyone in the CEO's seat" would have enjoyed the ad rally in the months after the dot-com bubble popped.

Jackson said he's familiar with a "frustration that's palpable -- and institutional": He has spoken to "a bunch of the top ten ten holders" of Yahoo shares, including "some of the largest pension funds" in America. He said his fellow stockholders are aghast that Yahoo management "missed the boat" on acquisition targets like MySpace (bought by News Corp.), YouTube and DoubleClick (both snapped up by Google) -- and Google itself, for that matter.

The dissident investor said his coterie will urge all shareholders to vote against seven of the ten directors on the board slate Tuesday.

Click here to see the interview.

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NY Times: For Yahoo, an Ordeal of Dissent

From today's NY Times:

By MIGUEL HELFT
Published: June 12, 2007

SAN FRANCISCO, June 11 — When Terry S. Semel, Yahoo’s chief executive, faces shareholders at the company’s annual meeting on Tuesday, Eric Jackson will be there to pepper him with questions.

Mr. Jackson, who owns just a few Yahoo shares, is not happy with the company’s performance, so he has mounted a grass-roots campaign calling for changes including the removal of Mr. Semel and several company directors.

“The company has tremendous assets,” said Mr. Jackson, who began his campaign with a video on YouTube. “But there needs to be new blood and new direction.”

Mr. Jackson’s campaign has little chance of success for now, but plenty of other people have questions for Mr. Semel these days.

Three Wall Street advisory firms have criticized his pay package, which is among the largest in corporate America, saying it is undeserved given the company’s lackluster performance.

Investors remain concerned about the company’s inability to close the gap with Google in search, and about increased competition from sites like MySpace and Facebook. Then there are the members of Yahoo’s own management ranks — some of whom have not waited around for answers.

Since Mr. Semel reorganized the company into three units in December, it has experienced a steady stream of executive departures, some planned but some resulting from disagreements about how the company should be run.

Now two of those three operating units lack a permanent leader. The head of Yahoo’s technology group, Farzad Nazem, left late last month after 11 years with the company. And Yahoo has yet to name an executive to run the audience group, which was created in December and oversees many of the Yahoo’s most important Web offerings.

In addition, 17 executives at the vice president level or higher are known to have left Yahoo since the December shake-up. Some of them left after their responsibilities changed or their jobs were reduced or eliminated. Others, like Mr. Nazem, chose to move on after years at the company. But the defections include executives who were widely praised, ran important businesses within Yahoo and left for places that seemed to offer better opportunities.

Yahoo disputes the notion that it is losing people at an unusual rate, saying that it had named about 80 vice presidents worldwide this year, most of them promoted from inside. But some in Silicon Valley say that plenty of people are still looking to leave.

“It’s a buyer’s market in terms of hiring people out of Yahoo,” said a prominent Silicon Valley venture capitalist who asked to remain anonymous, in part because three of the companies he has backed are talking to different Yahoo vice presidents about possible jobs.

The departed executives include one of Mr. Nazem’s top deputies in engineering, the senior vice president in charge of HotJobs, two executives who ran Yahoo’s music business, the head of the health and food Web sites, the heads of international and European operations and an important search executive.

Jerry Yang, one of Yahoo’s founders, said that many of the departures involved people whose positions had been eliminated during the reorganization or who had planned to leave after a long career at Yahoo. He said the company has had no problem replacing those who have left with seasoned executives from inside and outside Yahoo.

“We are promoting and hiring new executives at a pretty fast pace,” said Mr. Yang, who holds the title of chief Yahoo. “People are joining us because they believe in the upside.”

The company recently named Blake Jorgensen, the co-founder of the investment bank Thomas Weisel Partners, to be its chief financial officer. The move freed Susan Decker, who had held that post, to take over Yahoo’s other operating unit, its advertiser and publisher group, which is largely responsible for the company’s advertising revenue.

The New York Times contacted a dozen executives who have left since December. Those who responded agreed to speak only if they could remain anonymous, citing confidentiality clauses in their separation agreements.

“In general, there is a pretty big morale problem internally,” said an executive who left the company earlier this year. “There are a lot of frustrated people who may not leave tomorrow, but if the right offer came along, they’d jump.”

This executive said that, among other complaints, some managers resented that over the last two years many of the company’s resources were devoted to a major overhaul of its search advertising system, an endeavor known as Project Panama — leaving their own projects starved for resources.

The dissatisfaction among some senior Yahoo managers was thrust into the spotlight last November when an internal memo written by Brad Garlinghouse, a senior vice president who oversees the company’s communications and social networking products, was leaked to The Wall Street Journal. In the memo, dubbed the Peanut Butter Manifesto, Mr. Garlinghouse complained that like peanut butter on toast, the company had spread itself too thin. It also said the company had become too bureaucratic and needed a drastic revamping.

Yahoo’s management has since said that it had long recognized that the company faced some structural problems and had begun planning a reorganization long before Mr. Garlinghouse’s memo came to light.

But some of those who have left recently said the reorganization did little to address Yahoo’s problems.

“The takeaway from a lot of the people was that this new strategy is not a new strategy,” said another recently departed executive.

Mr. Yang disputed that assertion, saying that the reorganization had focused Yahoo on its customers: its users, and the advertisers and publishers that help it generate the bulk of its revenue.

Analysts who follow the company say the executive departures are not surprising given the company’s continuing challenges and the many job opportunities in the Internet sector.

“A little turnover in the management team is probably a good thing,” said Mark Mahaney, an analyst at Citigroup. “It is not like execution has been flawless,” Mr. Mahaney said, noting, for instance, that Panama had been delayed by several months.

Others said Yahoo was simply going through changes that are common at large technology companies.

“All companies go through transitions,” said Jim Brock, a former Yahoo executive who left more than two years ago and is now chief executive of Attributor, a technology start-up. “Some people are charged up about the opportunity, and you have people who cycle in and out.”

But in light of Yahoo’s continuing difficulties and lagging performance Mr. Semel’s handsome compensation has become a focal point of dissatisfaction. Three advisory firms — Institutional Shareholder Services, Glass Lewis and Proxy Governance — have recommended that shareholders withhold votes from three directors on Yahoo’s compensation committee on Tuesday. Such votes are usually symbolic, but they are a way for shareholders to register discontent.

In its report to investors, Institutional Shareholder Services singled out grants of 6.8 million stock options given to Mr. Semel as retention and bonus pay in 2006. It estimated Mr. Semel’s total pay during the year at $107.5 million. The figure is larger than the $39.8 million that Yahoo reported, in part because the company amortizes the value of the options over some years and makes different assumptions about their terms.

“Given the size of these mega-awards they give to Terry Semel, we don’t see a link between pay and performance,” said Patrick McGurn, executive vice president of Institutional Shareholder Services.

For Yahoo shareholders, Mr. Semel’s tenure, which began in 2001, has been a mixed bag. Over the last five years, the company’s shares returned an average of 23.6 percent each year, far outpacing the Standard & Poor’s 500-stock index, according to the I.S.S. report. But in the last three years, its shares have lagged behind the S.& P. 500. And in 2006, the shares fell nearly 35 percent, as the S.& P. rose 13.7 percent.

Mr. Semel has realized gains of about $451 million from options and other pay since he joined Yahoo, according to a report by Equilar, an executive compensation firm.

In a statement, Yahoo said: “Mr. Semel’s compensation for 2006 was almost entirely equity based and is, therefore, closely aligned with the interests of Yahoo’s shareholders.”

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PaidContent: Yahoo CEO May Face Dissenting Shareholders At AGM On Tuesday

From today's PaidContent.org:

By Rafat Ali - Sun 10 Jun 2007 10:43 PM PST

Terry Semel will surely face some tough questions from investors at its annual general meeting this Tuesday. Not much will happen with these protest, but at least one activist investor believes it could add momentum to campaigns to overhaul its executives and replace Semel, reports WSJ.

Among the gripes: Semel’s annual salary, in face of continued stock and performance decline for the company. Semel’s total compensation last year of $71.7 million put him at the top of the list of highest-paid CEOs at Standard & Poor’s 500 companies that have filed with regulators this year, according to an AP analysis of the filings.

AP: “The company is drifting,” said Eric Jackson, who intends to confront Semel during the meeting on behalf of about 80 Yahoo stockholders who own a combined 2 million shares (about 0.2 percent of Yahoo’s outstanding stock) in the company. “And its problems ultimately lie at Terry’s feet.” Besides pushing for Semel’s ouster, Jackson’s group believes six other directors on Yahoo’s 10-member board should be bounced: Roy Bostock, Ron Burkle, Eric Hippeau, Arthur Kern, Robert Kotick, and Gary Wilson. Only Yahoo co-founder Jerry Yang, HP executive Vyomesh Joshi and Ed Kozel, CEO of Silicon Valley startup Skyrider Inc., have done enough to remain on the board, Jackson contends. Lots more details in the AP story.

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ISS Corporate Governance Blog: Online Communication Grows

From Friday's ISS Corporate Governance Blog:

Online Communications GrowsSubmitted by: L. Reed Walton, Staff Writer

Even before the Securities and Exchange Commission's new "e-proxy" rules take effect on July 1, shareholders and companies are increasingly using the Internet to communicate on governance matters.

Online sources like weblogs, video sites, and e-mail campaigns--not to mention company-sponsored Web sites--have emerged in recent years, sparking hope among investors for improved communication. In addition, these new forms of communication have gotten more attention since the SEC announced recently that it was studying the feasibility of "electronic shareholder forums."

Among the notable Internet efforts this season was the California Public Employees' Retirement System's (CalPERS) campaign for proxy access at UnitedHealth Group. The pension fund set up a Web site, www.healunitedhealthgroup.com, to accompany a letter sent to shareowners before the company's May 29 annual meeting.

CalPERS urged investors to vote for a proposal that calls on the company to amend its bylaws to permit investors who own at least a 3 percent stake for over two years to nominate up to two directors to appear on the management proxy statement. That proposal received 45.3 percent support, according to a company regulatory filing.

In addition, Yahoo! shareholder Eric Jackson is using a weblog (also known as a "blog") and streaming video to generate retail investor support for a "vote no" campaign against seven directors in advance of the company's June 12 meeting.

Earlier this season, ExxonMobil provided an online forum for shareholders to ask questions on proxy materials before the company's May 30 meeting. The company set a cut-off date of May 15 for all questions.

One of the primary goals of the new SEC rules is to reduce the cost to companies that mail thousands of hard-copy proxy statements--a package which, as SEC Chairman Christopher Cox has noted with chagrin, has gotten bigger with the advent of new compensation disclosure standards.

The new proxy rules stipulate that a company may--but is not required to--send proxy materials to investors via a "notice and access" model, meaning that the default method of proxy delivery will be an e-mailed notice of the annual meeting with Internet-based links to proxy materials.

The company can then send a paper proxy card 10 days or more after the release of the original notice, and shareholders are free to "opt out" of electronic delivery in favor of hard-copy materials.

In its announcement of the new rules in December, the SEC explicitly barred companies from transitioning to the predominantly electronic format until after the July 1 effective date.

Electronic Forums

The commission also has hired consulting firm Broadridge Financial Solutions to report on the feasibility of setting up secure "electronic shareholder forums" that would allow investors to discuss, debate, and potentially vote on issues.

The idea was discussed at SEC roundtables on the proxy process on May 7 and May 25. Both corporate and investor advocates raised some doubts, with some arguing that shareholders wouldn't take the idea seriously or trust such a forum if it is run by management and unregulated by the commission.

In a May 25 letter to the SEC, CalPERS General Counsel Peter Mixon praised the voluntary efforts by ExxonMobil and other firms to facilitate communications with shareholders. However, he urged the SEC not to replace non-binding shareholder proposals with "an unproven chat room concept that is riddled with concerns."

"It is doubtful that a chat room even with informal voting could adequately replace" non-binding proposals, which are taken seriously by companies and shareholders, Mixon wrote.
William J. Mostyn III, deputy general counsel at Bank of America, expressed concern about the staff resources that his company would have to devote to monitor an electronic forum if it was a supplement to non-binding proposals.

"I look at this as a parallel operation that would tie up my resources all year long," Mostyn told the commissioners at the May 25 roundtable. Evelyn Davis, a long-time shareholder activist, also spoke out against electronic forums. "You should not force the Internet on senior citizens and small shareholders," she said.

At the May 7 roundtable, Paul Neuhauser, a University of Iowa law professor, expressed skepticism that "serious" investors would use such a mechanism.

"To the extent it looks like an Internet chat room, it would be entirely useless," he said, citing examples of irrelevant postings that appeared on the Yahoo Finance chat room for General Electric.

Dissident Challenges

The new e-proxy rules are expected to reduce solicitation costs for dissidents as well. Dissatisfied shareholders have been using the Internet to win support for alternate proxy campaigns for at least seven years. In 2000, lawyer Les Greenberg used an online campaign to nominate himself and four other dissidents to the 12-member board at Luby's Cafeterias.

Greenberg attracted supporters through postings on a Yahoo online message board, including some former members of Luby's management, according to The Wall Street Journal. Greenberg said his nominees won 24 percent of the vote and received significant support for two of their proposals.

In 2005, Alaska Air dissidents tried to conduct an all-online proxy contest. They posted their alternate proxy card on the Internet and urged shareholders to scratch out the names of the incumbent directors and replace them with the dissidents'--a sort of "write-in" campaign. The bid was defeated when the New York Stock Exchange ruled that the dissidents had not physically mailed proxy cards to enough shareholders to make it a legitimately contested election. The new e-proxy rules will officially open the online avenue to dissidents.

This season, investor Eric Jackson is using several online methods to enlist support for his "vote no" campaign at Yahoo. Jackson, CEO of consulting firm Jackson Leadership, maintains a blog about Yahoo called Breakout Performance and has posted several video appeals to shareholders on streaming video site YouTube (now owned by Yahoo rival Google).

Jackson told Governance Weekly that he received several responses--many from current and former Yahoo employees--when he posted a blog entry in January speculating that Yahoo's financial recovery had more to do with market conditions than with CEO Terry Semel's leadership.

"It became clear to me that it was kind of an emotional topic," Jackson said.

Jackson, who says he has the support of investors who own about 0.2 percent of Yahoo's voting shares, said he expects significant withhold votes against seven of the company's 10 directors.

*This article appeared in the June 7 edition of Governance Weekly. Director of Publications Ted Allen contributed to this article.

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Yahoo CEO Faces Shareholder Backlash

From Today's SFGate and LA Times and others:

By MICHAEL LIEDTKE, AP Business Writer

Sunday, June 10, 2007

(06-10) 14:00 PDT SAN FRANCISCO, (AP) --

Just before Google Inc. went public nearly three years ago, Yahoo Inc. Chairman Terry Semel assured a roomful of securities analysts and money managers that his company would remain the Internet's brightest star. To punctuate his high hopes, Frank Sinatra's "The Best Is Yet to Come" played in the background.

Google has so thoroughly eclipsed its rival since then that a growing contingent of Yahoo shareholders believes the company would be better off without Semel, who could face a chorus of discontent when he takes the stage at Yahoo's annual shareholders meeting Tuesday.

Even as it has struggled, Yahoo has continued to pay Semel like a rock star — yet another sore point for frustrated shareholders.

"The company is drifting," said Eric Jackson, who intends to confront Semel during the meeting on behalf of about 80 Yahoo stockholders who own a combined 2 million shares in the Sunnyvale-based company. "And its problems ultimately lie at Terry's feet."

Although the stake held by Jackson's group represents less than 0.2 percent of Yahoo's outstanding stock, the shareholder misery is widespread, said Standard and Poor's equity analyst Scott Kessler.

"A lot of people are wondering what is going on and what management is doing to get the stock moving in the right direction again," he said. "I wouldn't want to be one of the presenters at that meeting."

Shareholders are exasperated largely because Yahoo has seemed to be meandering while online search leader Google has been stampeding farther ahead.

In the last year alone, Google has trumped Yahoo in the bidding for online video pioneer YouTube Inc. and Internet display ad service DoubleClick Inc. while widening its lead in the lucrative field of search. Google has established such a commanding advantage that the Mountain View company makes more money in a single quarter than Yahoo does in an entire year.

It's a humbling descent from the days when Semel was singing a happier tune.
After Google completed its August 2004 initial public offering, Yahoo was still the larger and more valuable company.

The IPO gave Google a market value of $23 billion compared with $39 billion for Yahoo at the time. Google's stock price has increased by more than sixfold since then, creating nearly $140 billion in additional shareholder wealth. Meanwhile, Yahoo's stock price has fallen by about 4 percent during the same period, leaving the company with a market value of $37 billion.

Semel, who ran a movie studio before becoming Yahoo's chief executive six years ago, isn't the only one on the hot seat.

Besides pushing for Semel's ouster, Jackson's group believes six other directors on Yahoo's 10-member board should be bounced: Roy Bostock, Ron Burkle, Eric Hippeau, Arthur Kern, Robert Kotick, Edward Kozel and Gary Wilson.

Only Yahoo co-founder Jerry Yang, Hewlett-Packard Co. printing executive Vyomesh Joshi and Ed Kozel, CEO of Silicon Valley startup Skyrider Inc., have done enough to remain on the board, Jackson contends.

Although still difficult to do, removing Yahoo's directors has become a more realistic option for shareholders because of a new policy adopted this year. The rules now require each Yahoo director to be approved by a majority of the votes cast. Previously, Yahoo directors only needed a single supporting vote to prevail in uncontested elections, no matter how many shareholders may have been opposed. This system — known as a "plurality" vote — still governs most publicly held companies.

Despite the change to majority vote, Yahoo's board still can refuse to accept the letters of resignation each director must submit under the new rules. The resignation letters are supposed to ensure the directors can be removed if they don't win majority support, but the guidelines give the board the discretion to overrule the shareholders.

Three shareholder advisory firms — Institutional Shareholder Services, Glass, Lewis & Co. and Proxy Governance — have all recommended opposing three directors who sit on Yahoo's compensation committee. They are: Roy Bostock, a veteran advertising executive; Burkle, a billionaire best know for his investments in the supermarket industry; and Kern, a former radio broadcast executive.

The firms concluded the trio should be punished for richly rewarding Semel despite Yahoo's recent struggles. In 2006, Semel received a compensation package valued at $71.7 million — more than any other CEO at the 386 publicly held companies covered in an Associated Press analysis of nation's top corporate paychecks.

Most of Semel's pay consisted of 6 million stock options given to him in exchange for agreeing to reduce his annual salary from $600,000 to $1. The committee awarded Semel another 800,000 stock options in February as his bonus for 2006 — a year in which Yahoo's stock price plummeted by 35 percent.

The latest awards will give Semel an opportunity to build upon the nearly $450 million in gains he has already realized by exercising stock options Yahoo gave him in previous years.
"Semel is rewarded when times are good ... and when times are bad," wrote ISS, the largest of the three advisory firms.

Yahoo believes Semel's pay package is in the company's best interest because it's structured to give him a strong incentive to boost the stock price.

That's because stock options only yield profits when their exercise price is below the underlying shares' market value. For now, at least, the options that Semel got last year are worthless because their exercise prices exceed the stock's market value, which was hovering around $27 last week.

In its analysis, Proxy Governance questioned whether Semel needed any more incentive to boost Yahoo's stock price. As of April 1, Semel held 17.7 million stock options eligible for exercise and 7.1 million stock options that hadn't fully vested.

"Based on his ownership in the company, Semel already should have the proper incentives ... to work toward building long-term shareholder value," Proxy Governance wrote.

Yahoo says its confidence in Semel hasn't wavered.

"Under Terry's leadership, the company has a clear strategy to create stockholder value, and the company is well-positioned to capitalize on the substantial growth opportunities ahead for the Internet," Yahoo spokeswoman Helena Maus said in a prepared statement.

But Semel, 64, may be on a short leash after Yahoo suffered an 11 percent drop in its first-quarter profit while Google's earnings soared by 69 percent. Many analysts believe Semel will face even greater pressure to surrender the reins unless Yahoo's profits accelerate during the second half of this year.

A pivotal upgrade to Yahoo's system for distributing text-based ads alongside search results and other Web content is supposed to start paying off by then. The improved formula — dubbed "Panama" because it's supposed to open new moneymaking corridors — adopted many of the measures Google has been using for years.

Semel also is counting on recent advertising partnerships with more than 260 newspapers and Viacom Inc. to revive earnings growth.

Jackson, a Naples, Fla. management consultant who owns about 100 Yahoo shares, doubts the company will regain its stride as long as Semel is calling the shots.

That's why he turned to the Internet earlier this year to recruit Yahoo shareholders to support a plan to shake up the company. Besides gaining the support of 80 shareholders, Jackson said about 25 current and former Yahoo employees disillusioned with the company's direction have contacted him to support his cause.

Besides finding a new CEO, Jackson wants Yahoo to close its entertainment and news division in Santa Monica, lay off employees with overlapping responsibilities and institute a cash dividend.
Jackson also thinks the board should be more open to takeover overtures, particularly since last month's media reports of a possible bid by Microsoft temporarily lifted Yahoo's sagging stock.

But first he would like to see what a new leader could do with the tarnished Internet icon.

"It's frustrating because you can see so much unlocked potential in the company," Jackson said. "If it were managed in the right way, this company could be worth $150 billion."
___
On The Net:
Eric Jackson's blog devoted to Yahoo issues:
http://breakoutperformance.blogspot.com

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A Yahoo Investor Hopes to Provide Impetus for Change

From today's WSJ:

By KEVIN J. DELANEY
June 9, 2007; Page A2

Yahoo Inc. shares have dropped about 10% from a year ago, and its revenue growth has fallen every quarter. That has disgruntled some investors, who plan to confront the Internet company's management at its annual meeting Tuesday.

That shareholder confab isn't expected to produce any immediate changes to the Sunnyvale, Calif., company's management or strategy. But at least one activist investor believes it could add momentum to campaigns to overhaul its top brass and shift tacks.

High on the list of shareholder complaints is the allegedly outsize compensation of Chief Executive Terry Semel, a former Hollywood executive who joined Yahoo in 2001. Mr. Semel's total compensation last year of $71.7 million put him at the top of the list of highest-paid CEOs at Standard & Poor's 500 companies that have filed with regulators this year, according to an Associated Press analysis of the filings.

Proxy-advisory services Institutional Shareholder Services Inc. and Proxy Governance Inc. are recommending that shareholders vote against re-electing members of Yahoo's compensation committee to its board because of concerns about what they see as excessive awards to Mr. Semel. "Semel is rewarded when times are good -- pay for performance -- and when times are bad -- retention," wrote ISS in its report. Mega options grants to the CEO are "particularly troubling in light of the company's recent poor stock performance and corporate performance," it added.

Speculation has swirled for years around the timing of the retirement of Mr. Semel, who is 64 years old, but Yahoo has always dismissed it. A Yahoo spokeswoman said the company's executive compensation is designed to "attract and retain key executive and employee talent and to link compensation to the company's performance and increases in long-term stockholder value." As part of a three-year arrangement, Mr. Semel's salary dropped to $1 in May 2006 from $600,000 previously. He was also awarded stock-option grants (priced at the market value of Yahoo shares when granted) on 6.8 million shares as part of his 2006 bonus and the three-year retention pact.

Shareholder activist Eric Jackson of Naples, Fla., says investors holding about two million Yahoo shares, or less than 1% of its capital, have agreed to back his "Plan B" for the company. That plan includes replacing Mr. Semel and the majority of the company's directors for missteps, including failing to gain on rival Google Inc. in search advertising. Mr. Jackson predicts heated questions from shareholders during Tuesday's meeting. But he says his main hope for change is for co-founders Jerry Yang and David Filo, who each hold smaller-than-10% stakes in Yahoo, to look at the shareholder-meeting votes and the company's performance and "come to the decision themselves that the company needs to move in a new direction."

The Yahoo spokeswoman said the company is always interested in its shareholders' views. But she said that Mr. Semel had outlined a clear strategy focused on three key priorities: "narrowing the gap in search monetization, extending our lead in display advertising and securing leading positions in the major emerging areas of social media, video and mobile access."

Yahoo investors Tuesday will also vote on two shareholder proposals that stem from Yahoo's disclosure of information to the Chinese government that helped lead to the imprisonment of at least one dissident. One proposal calls for the creation of a board committee on human rights and the other for new company policies related to censoring and disclosing information at a government's request. Yahoo's board has recommended that shareholders vote against the proposals, saying the company is already taking measures to address such issues.

Write to Kevin J. Delaney at kevin.delaney@wsj.com

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Struggling Yahoo's Leadership Challenged

From the AP:

Associated Press
Jun. 9, 2007 12:00 AM

SAN FRANCISCO - Just before Google Inc. went public nearly three years ago, Yahoo Inc. Chairman Terry Semel assured a roomful of analysts and money managers that his company would remain the Internet's brightest star. To punctuate his high hopes, Frank Sinatra's The Best Is Yet to Come played in the background.

Google has so thoroughly eclipsed its rival since then that a growing contingent of Yahoo shareholders believes the company would be better off without Semel, who could face a chorus of discontent when he takes the stage at Yahoo's annual shareholders meeting Tuesday.

Even as it has struggled, Yahoo has continued to pay Semel like a rock star, yet another sore point for frustrated shareholders.
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"The company is drifting," said Eric Jackson, who intends to confront Semel during the meeting on behalf of about 80 Yahoo stockholders who own 2 million shares in the Sunnyvale-based company. "And its problems ultimately lie at Terry's feet."

Although the stake held by Jackson's group represents less than 0.2 percent of Yahoo's stock, the shareholder misery is widespread, said Standard and Poor's equity analyst Scott Kessler.

Shareholders are exasperated largely because Yahoo has seemed to be meandering while online search leader Google has been stampeding farther ahead. "It's frustrating because you can see so much unlocked potential in the company," Jackson said. "If it were managed in the right way, this company could be worth $150 billion."

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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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What Would You Ask Yahoo! CEO Terry Semel If You Could?

I'll be attending the Yahoo! annual meeting in Santa Clara on June 12th.

Every shareholder there will be given the opportunity to ask some questions to Terry Semel.

This morning, I asked users on LinkedIn and Yahoo! Answers: "What would you ask him as a shareholder if you were there?"

The responses have been great. Here are a few. Keep them coming - and, if you're going to the meeting, feel free to use any of these.

1. What are Yahoo's most valuable strategic assets and how do you plan to leverage them to strengthen your strategic position?
2. If there were one asset or competency (that you don't have) that you wish Yahoo had, what would it be?
3. What do consider Google's weakness (Achilles' heel)?
4. What are the 3 reasons I should be a shareholder of Yahoo rather than Google ?
5. Why is Yahoo perpetually afraid to innovate and would rather follow then lead?
6. Why is Zod leaving?
7. Why did you not buy Google all those years ago when you had the chance?
8. What is the plan to beat Google? Is there even a plan?
9. When are you going to return the $50,000,000 million you owe the company as a result of the March 10, 2004 backdated spring loaded grant of 2,900,000 options?
10. If you could put one corporation, anywhere in the world, out of business, effective today, which would it be, and why?
11. How Dow, Braun now?
12. What capacity and resource planning is underway to move Yahoo! from a reactive, outmaneuvered position to a strategic, flexible advantage?
13. Where does Yahoo plan to claim its own space online for its groundbreaking developments once again, amid constant speculation of its eventual acquisition (or demise) and scrutiny of the "catch up" it must do on search, ads, and content?
14. Why don't you step down already?
15. How are you concretely engaging your management team around defining an inspiring vision and strategy that will not only stop the brain drain out of Yahoo but also attract key talent away from Google and other competitors?

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