Friday, February 08, 2008

San Jose Mercury News: New Yahoo chairman arrived at critical juncture

By John Boudreau

Mercury News
Article Launched: 02/08/2008 04:39:17 PM PST

In an Internet moment, retired advertising executive Roy Bostock was thrust in the middle of a high-stakes Silicon Valley drama.

Minutes after Bostock was appointed Yahoo's chairman on Jan. 31, Chief Executive and co-founder Jerry Yang received the surprise phone call from Microsoft Chief Executive Steve Ballmer, who offered to buy the Sunnyvale Internet giant. Facing Microsoft's $44.6 billion takeover bid, Yahoo now has a new chairman who knows a thing or two about deal-making.

Bostock, 67, oversaw the consolidation of the advertising industry decades ago. And Bostock is also chairman of Northwest Airlines, now reportedly in merger talks with Delta Air Lines.

At Yahoo, he replaced Terry Semel, who had resigned as Yahoo's chief executive in June after shareholders protested his compensation as the company's results faltered. As a member of Yahoo's compensation committee, Bostock came under fire, as well, for Semel's nearly $72 million salary in 2006.

During last year's annual meeting, one-third of shareholder votes were cast against re-electing Bostock and two other committee members.

Now, though, Bostock's past experience with mergers is seen as a plus, at least by Eric Jackson, a shareholder who led the revolt against Semel and the compensation committee.

"It's kind of ironic," he said. "He's now fighting to maximize shareholder value on behalf of shareholders after a large number of them didn't want him re-elected to the board last year."

"He's not unfamiliar with board room drama," Jackson added.

Bostock joined the Yahoo board in 2003, taking over the seat that had been occupied by the company's original chief executive, Tim Koogle. As someone not involved with the founding of Yahoo, or part of the management team, Bostock brings a certain independent perspective to the board, said Charles Elson, chairman of the University of Delaware's Weinberg Center for Corporate Governance.

"It was a smart move on Yahoo's part to bring in an outsider," he said. "An outsider can objectively view the circumstance to maximize shareholder value."

Yahoo declined to make Bostock available for an interview.

Those who know him describe the former advertising executive as an astute strategist and candid boss who played nice with those around him as he built an empire.

"He has demonstrated time and again that he doesn't rattle easily," Duke University President Richard Brodhead said in an e-mail. Bostock, a former university trustee, headed a committee to advise Brodhead in 2006 when members of Duke's men's lacrosse team were falsely accused of raping an exotic dancer at an off-campus party.

Bostock, who has a campus library named after him, has donated more than $8 million to his alma mater.

He began his rise in the advertising industry in 1964 at Benton & Bowles and was involved with its merger with D'Arcy Masius in 1985, when he became president of the combined firm. Five years later, he rose to chief executive and chairman of D'Arcy Masius Benton & Bowles and its successor company, The MacManus Group, and was involved with numerous acquisitions. Renamed the Bcom3 Group, the firm, which included the Leo Burnett Worldwide agency, was sold to France's Publicis for $3 billion in 2002.

"He's got a lot of capacity," recalled John Pepper, chairman of the board of Walt Disney. He has known Bostock for 30-plus years, dating to Pepper's days as an executive at Procter & Gamble.
"He has a razor-sharp intellect," added Pepper, the former chairman and chief executive of Procter & Gamble. "He's very open to other people's ideas, but very clear in his own views."

Former advertising executive Craig Brown said Bostock has a "calming" effect on colleagues amid the thrust and parry of a competitive industry. He met Bostock in 1985 when his company, D'Arcy-MacManus Masius, merged with Benton & Bowles. They are now co-owners of the Greenville Drive minor league baseball team, a Class A affiliate of the Boston Red Sox.

"He's a collaborative kind of person," Brown said. "He has an ability to take on difficult issues and see through to some of their fundamental root causes and focus people on them."

In 1999, Linda Kaplan Thaler sold her agency, known for such successful ad campaigns as the Aflac duck, to the MacManus Group. "I had many people interested in buying our company," she recalled. "I had an instinctive feeling (Bostock) was somebody I could trust. It proved correct. He is one of those people with the rare combination of intellect, experience and generous nature."

At Yahoo, Bostock doesn't have much of a grace period as shareholders expect decisive action to repair the Internet giant's dramatic decline.

At the start of 2007, Google commanded 52.6 percent of the search market, Yahoo had 26.9 percent and Microsoft had 10.4 percent, according to comScore. By December, Google's share had edged up to 58.6 percent while Yahoo's slipped to 22.4 percent and Microsoft was at 9.8 percent.

From the beginning of 2006 through Jan. 31, the day before Microsoft's bid of $31 a share, Yahoo's stock price dropped by about half, closing at $19.18. On Friday, shares of Yahoo closed at $29.20.

Shareholder Jackson believes a sale may be the only option for Yahoo.

"A year ago, I had hoped this company could move faster to remain a strong, independent player," he said. "But they haven't moved fast enough."

If Yahoo, Jackson added, "comes up with some crazy alternative in which shareholders have to take it on faith that this management would produce some synergies down the road - I just don't think they have the credibility to sell it. And if they do try to sell it, I'll be the first in line to point out the flaws in that strategy and try to whip up support as we did last year."

Contact John Boudreau at or (408) 278-3496.

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