Proxy Governance Advises "Against" Bostock, Burkle, and Kern at Yahoo!
Proxy Governance has announced this morning that it is advising institutional and pension fund clients to vote "against" the re-election of Roy Bostock, Ron Burkle, and Art Kern at this Friday's Yahoo! annual meeting.
I have previously spoken out against their re-election. I also have argued that Eric Hippeau should not be re-elected, based on the fact that he and Art Kern have served on this board for 12 years. In my opinion, they have ceased to be "independent" due to such length of tenure.
Here's an excerpt from the report:
We have concerns regarding the company's executive compensation, which is high compared to peers and given the company's financial performance relative to peers. Historically the company has relied heavily on equity incentive awards combined with relatively modest cash compensation. In 2006 equity grants played an even larger part than usual in senior executives' compensation packages. The board justified these grants by noting that the company began developing a new strategic plan and launched its new advertising system, Project Panama. Consequently, the Compensation Committee argued, it was imperative to ensure that current management remain with the company throughout the reorganization. It therefore approved performance and retention agreements with former Chairman/CEO T. Semel, former COO D. Rosenweig, CFO and Head of Advertiser and Publisher Group S. Decker and former CTO and Head of Technology F. Nazem. Under these arrangements, in 2006 each executive received a large grant of options, which would vest over periods ranging from two to four years.
The actual effectiveness of the grants is somewhat in doubt: Rosenweig resigned from the company in March 2007 and both Semel and Nazem resigned in June 2007. Under the terms of Rosenweig's separation agreement, the company accelerated the vesting of 600,000 options to the date of his separation, and will allow him to exercise those and certain other options (currently underwater) for an extended period of up to three years. Nazem's separation agreement provided similar accelerated vesting of all his option grants.
In 2007 option awards were more modest, ranging from $4.5 million to $1.3 million. Incoming CFO B. Jorgensen received 425,000 options valued at $4.1 million as part of his recruitment package, and S. Decker received 300,000 options valued at $3.1 million when she was promoted from CFO to president.
We note, however, that little of the reduction in executive pay is attributable to the Compensation Committee, which has announced no changes in its compensation philosophy such as performance-vesting criteria for equity awards and no plans to restructure
compensation in line with peers and company performance. CEO compensation dropped only because founder Yang, stepping in to replace Semel as CEO, accepted a purely nominal compensation of $1 per year. Among the other named executives, compensation
dropped largely because three of the four most highly-compensated executives left the company (in some cases taking portions of their retention grants with them); the fourth, Decker, again received a large equity grant on top of the previous year’s retention grants.
Given the company’s historically high executive compensation, the fact that high executive attrition rather than Compensation Committee restraint drove 2007 compensation lower, and the lack of changes in the company’s compensation strategy or practices which would keep compensation more in line with peers and performance, we recommend shareholders withhold votes from the three members of the Compensation Committee, R. Bostock, R. Burkle, and A. Kern, to signal their concern over the company’s compensation practices.
