Monday, July 21, 2008

Why I Will Vote "Against" Bostock, Burkle, Kern, and Hippeau at Next Week's Yahoo! Annual Meeting

Today's news that Yahoo! and Carl Icahn have reached a truce is good news for Mr. Icahn (who was facing long odds after he wasn't able to convince enough large shareholders that he had an operational plan for the company). It's also good news for Yahoo!'s incumbent Board which has been under fire from its own shareholders since Microsoft walked away from its generous buyout offer on May 3rd.

But is this truce good news for Yahoo! shareholders? No. It simply doesn't go far enough.

Yahoo!'s board has been dysfunctional for too long. More changes are needed, which is why I will vote "against" the re-election of Roy Bostock, Ron Burkle, Art Kern, and Eric Hippeau at next week's annual meeting.

Carl Icahn speaks for his 4% of Yahoo! he owns. He might speak for other shareholders like Boone Pickens, John Paulson, and Dan Loeb. But all Yahoo! shareholders -- large and small -- will get their chance to express their views next week.

Why I'm Voting "Against" Bostock, Burkle, Kern, and Hippeau:

  • Yahoo!'s stock price is at the same level it was 4 years ago. That's a zero % return for loyal shareholders, while the market has gone up and their largest competitor has soared.

  • Excessive compensation continues to persist at Yahoo! Last year, the focus was on Yahoo!'s CEO compensation and how it ranked among the highest for Fortune 500 companies, even as the stock had dropped 30% that year. Jerry Yang has agreed to be paid $1 a year since he took over as CEO, yet Yahoo!'s Compensation Committee has continued to pay its outside directors approximately $500,000 per year. Google's outside directors on average receive pay of $250,000 per year.

  • Last year, Yahoo! shareholders voted 34 - 36% against the re-election of Messrs. Bostock, Burkle, and Kern (the members of Yahoo!'s Compensation Committee). To put that vote in perspective, remember that Michael Eisner (the year he battled Roy Disney) received 42% of votes cast against his re-election. Yahoo! chose to ignore the will of shareholders and keep all 3 men on. Based on what's occured in these past 12 months, I believe that choice was unwise.

  • Kern and Hippeau have served on this board for 12 years. That's too long. It would be next to impossible for anyone to remain "independent" after serving on a group for so long. There are other voices with experience on this board.

  • The breakdown in talks with Microsoft still baffles shareholders. The visceral outrage all Yahoo! shareholders felt when discussions broke down with Microsoft on May 3rd still leaves a bad taste in all our mouths as shareholders. This board claims Microsoft never was serious in its buyout offer for the entire company. Yet, they chose not to engage in discussions with Microsoft for 5 weeks after the offer was made - instead, scurrying around to approve a lavish severance package so as to increase the costs to Microsoft of completing the acquisition.

Yahoo! shareholders deserve better than the track record of this board in the last 4 years. Putting 3 new faces on this board is an improvement to the status quo, but we have to power as shareholders to remake this board so that it never again repeats these many mistakes.

I plan to vote "against" Bostock, Burkle, Kern, and Hippeau. By doing so, I believe I will be voting "for" a better Yahoo! board which will lead to better shareholder returns.

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