Monday, June 16, 2008

San Francisco Chronicle: Investor proposes middle ground in Yahoo election

Oust only 4 board members, he says

Last updated June 16, 2008 7:54 p.m. PT

Yahoo Inc. shareholders should take a middle ground in the Web portal's upcoming board election fight, an investor activist proposed Monday in the wake of the recently failed Microsoft Corp. takeover bid.

Rather than supporting the status quo (as the company wants), or a full house cleaning (as billionaire investor Carl Icahn wants), shareholders should vote for a compromise: the ouster of four members of the nine-member board, said Eric Jackson, who leads a group of Yahoo shareholders who together own 3.2 million shares.

"It sends a signal to the existing board and existing management that change is needed," he said.
Yahoo, based in Sunnyvale, Calif., is facing a high-profile battle for control of the company after rejecting a $47.5 billion acquisition proposal by Microsoft. Many investors are angry at Yahoo's board for how it handled the negotiations, which collapsed May 3 when Microsoft withdrew its offer.

Shareholders will decide the board's future at Yahoo's annual meeting, to be held Aug. 1 in San Jose. Icahn, who has a long history of agitating for corporate change, has proposed a rival slate of directors.

But Jackson, who agrees with many of Icahn's criticisms of Yahoo, is campaigning for the election of only four of the billionaire's nominees, saying that large institutional shareholders are concerned about what an entirely new board would do. Icahn's plan is to sell the company to Microsoft, which Jackson said is unlikely given that Microsoft has repeatedly said it is no longer interested in a takeover.

Jackson is advising Yahoo shareholders to approve the following Icahn nominees: Adam Dell, a venture capitalist and younger brother of Dell Inc.'s Michael Dell; Lucian Bebchuk, a Harvard University law professor; John Chapple, former CEO of Nextel Partners; and Edward Meyer, a former advertising industry CEO.

The incumbent Yahoo board members who should stay, according to Jackson, are Vymesh Joshi, a Hewlett-Packard executive, Activision CEO Robert Kotick; Citizens Communications CEO Maggie Wilderotter, investor Gary Wilson and Yahoo CEO Jerry Yang. Notably absent is Yahoo Chairman Roy Bostock, whom Jackson holds largely responsible for the breakdown in talks with Microsoft.

By limiting Icahn's slate to four seats, Jackson said, Yahoo's employee severance plan -- which could cost up to $2.6 billion -- would not be triggered. At the same time, the infusion of new blood would make the company more accountable to shareholders while keeping experienced management in place, Jackson added.

Jackson's history with Yahoo dates to its last shareholder meeting, when he campaigned for the ouster of the board over the company's sluggish financial performance and what he described as excessive compensation. Investors failed to toss out any board members, but they succeeded in loudly voicing their complaints.

Last week, Yahoo signed a search engine advertising deal with rival Google Inc. that it billed as a solution to some of its financial struggles. Icahn weighed in on the agreement for the first time Monday, saying in an interview with Reuters that he continues to be disappointed with Yahoo's management, "but the Google deal might have some merit."

He said he would study the deal, but didn't comment on whether he would continue with his boardroom fight, known as a proxy contest. Still, he got some support in his effort to unseat Yahoo's board when Mithras Capital, an investment firm that holds 1.7 million Yahoo shares, said in a letter that it would vote for his slate, following the lead of several other large investors, including T. Boone Pickens.

Separately, a Delaware judge rejected an effort by two Detroit pension funds to expedite a shareholder suit they filed against Yahoo and have it decided before the company's shareholder meeting.

Also Monday, Jeff Weiner, an executive vice president of Yahoo, confirmed he is leaving to
become executive in residence at Greylock Partners and Accel Partners venture capital firms.

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