SF Chronicle: Yahoo faces takeover bid with new board chair

Ellen Lee,Verne Kopytoff, Chronicle Staff Writer

Thursday, February 7, 2008

From a beleaguered airline emerging from bankruptcy to a college rape scandal, Roy Bostock knows how to manage a crisis.

The latest challenge for the seasoned advertising executive is leading Yahoo Inc. through the Web portal's toughest decision to date - how to respond to Microsoft Corp.'s $44.6 billion takeover bid.

That surprise offer came last Thursday, the same day Bostock, 67, replaced Terry Semel as chairman of the Sunnyvale company. Now, Bostock's job is to lead Yahoo's board as it decides whether to merge with the technology titan, find another suitor or stay independent.

Exactly how he will guide the board through the unsolicited buyout proposal is unclear, but certainly much of the weight of how to respond is on his shoulders. In the past, Yahoo executives have made no secret of their desire to keep the company intact.

"It's probably the most critical role at this juncture for the company," said Patrick McGurn, special counsel with the RiskMetrics Group, an investor advisory service. "It's a collective decision by the board, but when you select a chair in a situation like this, you're charging him with the responsibility of leading the board to make the right decision."

Yahoo is in a financial slump that has prompted a major reorganization and plans for 1,000 job cuts. Investors are clamoring for aggressive action to prop up the company's share price, which - until Microsoft's mega-marriage offer - had hovered near a four-year low.

Jerry Yang, Yahoo's co-founder and chief executive, also sits on Yahoo's board and is playing a key role in deciding what to do. As with many companies these days, Yahoo chose an outsider to be its chairman, perhaps to avoid concentrating so much power with an insider like Yang.
It's not Bostock's first brush with a high-profile quandary.

Just last year, Bostock, who declined to be interviewed for this article, was appointed chairman of Northwest Airlines during a board shakeup as the airline came out of bankruptcy. Soon after Bostock's ascension, Northwest was forced to cancel hundreds of flights because of a crew shortage.

Pilots blamed mismanagement and understaffing; airline executives said pilots were calling in sick. In response, Bostock tried a less confrontational and contentious tack with managers and employees.

Two years ago, Bostock, a Duke University alumnus and former trustee, also stepped in as the school faced an embarrassing rape allegation against members of its men's lacrosse team. Bostock co-chaired a committee that advised Duke President Richard Brodhead on the university's responses to the scandal and on its campus culture.

"He's enormously well respected and admired here," Brodhead said in an interview. "Everything we've asked him to do, he'll take it on and throw himself into it.

"He brings a lot of energy to the task and makes sure to get to the deeper level," Brodhead said. "He doesn't just come and chair a meeting. He tries to help people understand what the deep task is and how you can step up to it."

In 2005, Bostock joined the board of Morgan Stanley as the brokerage firm struggled financially. After recovering, the company fell on hard times again recently when the subprime mortgage crisis forced it to write off $9.4 billion in bad loans.

Laura Tyson, a UC Berkeley business professor who served in the Clinton administration, helped recruit Bostock to Morgan Stanley's board.

"An important thing about a good board member is just the willingness to speak up and say what you think," she said. "He certainly does that, and I mean that as a positive statement."

Tyson described Bostock's style as "more of a trends and strategy guy - the human connection guy," adding that "you'd expect that from someone in advertising - communications and outreach."

Bostock has served on Yahoo's board since 2003, replacing Tim Koogle, Yahoo's former CEO. Bostock is part of the company's compensation committee, which awarded Semel a package worth $71 million in 2006.

In the wake of that decision, Eric Jackson rallied a group of shareholders calling for the ouster of Bostock and several other Yahoo directors because they felt the board had awarded Semel years of overly rich salary packages. Though he believes Bostock's advertising background suits Yahoo, Jackson said that Bostock and the board could have done more to prevent a takeover bid from happening.

"If they had been more proactive in the last few years, they wouldn't find themselves in the situation they do now," said Jackson.

Bostock also served on Northwest Airlines' compensation committee, awarding CEO Doug Steenland a $26.6 million bonus in stock and options, another move that drew criticism, particularly from airline employees who picketed the decision. But Bostock defended the plan.

"This plan aligns executive compensation at Northwest with the financial performance of the company," he said in a statement at the time.

Bostock spent nearly four decades in advertising. He started at Benton & Bowles in 1964, rising through the ranks to become chief executive officer of D'Arcy Masius Benton & Bowles and its successor company. More recently he served as chairman of the BCom3 Group, which was acquired for $3 billion by Publicis in 2002, making it one of the world's largest advertising companies.

"Maybe because of his years in advertising, he has the ability to take very complex issues and reduce them to issues with clarity," said Craig Brown, who worked under Bostock during his advertising career.

Bostock, who has donated more than $8 million to Duke, comes from a family of Duke alumni. He is the son of a Duke graduate, and his wife and three children also graduated from the university.
A library addition was named in his family's honor in 2005. He played varsity baseball and football at Duke and recently helped the university pick a new football coach. Bostock graduated with honors and went on to Harvard to earn his MBA.

Bostock continued his athletic pursuits after college. Brown, who co-owns the Greenville Drive minor league baseball team with Bostock, recalls how they attended a Detroit Tigers fantasy baseball camp where Bostock, in his late 50s at the time, ran the bases, fielded balls and hit with the team's coaches.

"He did have to leave one day for work but he came back," Brown said.

Brown said he believes Bostock can help Yahoo, given his experience handling so many complex and difficult situations. In navigating the Microsoft bid, he will no doubt have to use a palette of skills to placate Yahoo's investors, employees, advertisers and its hundreds of millions of users.

"He's always been able to drive a very thorough process and build consensus," Brown said. "My personal view is that he is ideal to lead the process."

Roy Bostock

Position: Chairman of Yahoo

Age: 66

Years on Yahoo board: 5

Other board affiliations:
-- Chairman, Northwest Airlines
-- Director, Morgan Stanley
-- Chairman, Partnership for a Drug-Free America

E-mail the writers at elee@sfchronicle.com and vkopytoff@sfchronicle.com.

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