Wednesday, May 14, 2008

Reuters: Yahoo's board brought this on themselves

Wed May 14, 2008 6:04pm EDT

(Eric Jackson was instrumental in a successful campaign for a change of leadership at Yahoo last year. This year, he continues to lobby against the current board but has opted not to mount his own proxy campaign. The opinions expressed are his own)

By Eric Jackson

NAPLES, Fla. ( -- It's seven weeks until Independence Day.

On July 3rd, Yahoo holds its annual meeting. These gatherings are usually mere formalities, where incumbent directors get re-elected with 99% of the vote.

Yahoo's shareholders won't be so kind this year. The break down in discussions with Microsoft is the latest disappointment they have had to endure. Yahoo's stock has been flat for four years, while the NASDAQ has climbed 30 percent and Google is up 440 percent. Yahoo has also steadily lost search market share, paid lavish executive compensation, missed the opportunity to buy Facebook, and endured steady executive turnover.

Yahoo's board is ultimately responsible for this but it is essentially unchanged over this time period.

Last year, I successfully mounted a "vote no" campaign leading up to the annual meeting. People were upset then about the rudderless direction of the company. More than 34 percent of the votes were cast against three directors, including current Chairman Roy Bostock. Six days later, CEO Terry Semel announced his resignation.

With Microsoft and their reported $33 / share offer now out of the picture, Yahoo holders are preparing to democratically voice their opinions at the July 3rd meeting.

I'm arguing again for an "against" vote for all directors. This "protest vote" will send a message clearly that we hold this board accountable for the lack of results in the past four years. We want significant changes in the composition of the board with replacements who better represent our interests.

It's likely that activist investor Carl Icahn will also file his own slate of nominees for the board by the end of today. (Ed's note: Sources told Reuters on Wednesday that Icahn planned to run a slate). I welcome him or any other shareholder willing to do this. It will truly give us a choice over who represents our interests on the board.

If Icahn is successful, which is likely given investor sentiment, the dynamic at Yahoo board meetings will be changed forever. Tougher questions will be asked, assumptions will be tested, and decisions revisited.

That's no guarantee that Microsoft will come back to the negotiating table (although in my eyes, the strategic logic of a deal is as clear as ever) but Yahoo holders will welcome some new blood on the board.

The Yahoo board can try to make the argument (as they have already) that they did everything right throughout the Microsoft negotiations, but it is tough for a Yahoo holder to believe it, given the track record of the last 4 years. It's a credibility problem that this board brought on itself.

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