Tuesday, June 12, 2007

WSJ: Yahoo Shareholders Approve Board With Low Majority

From this afternoon's WSJ:

By RIVA RICHMONDJune 12, 2007 4:00 p.m.

Shareholders in Yahoo Inc. voted in favor of the Internet company's slate of directors. But with only 66% of votes in favor of the slate, it appeared that recent calls to rebuke board members responsible for approving generous pay packages for Yahoo executives resonated with shareholders.

Last year, all of Yahoo's directors were approved with roughly 97% or greater of shareholder votes, according to a company filing. In general, approval rates of 95% or higher are common, and a withhold rate of more than 20% is considered high. As such, an approval with only two-thirds of the vote could be considered a victory for shareholder activists who have condemned high executive pay at the company.

Ahead of the company's annual meeting, three advisory firms recommended shareholders withhold their votes from three company directors that comprise Yahoo's compensation committee -- Roy Bostock, a veteran advertising executive; Ron Burkle, a billionaire best known for his investments in supermarkets; and Arthur Kern, a former radio broadcast executive -- due to concerns about excessive compensation for Chief Executive Terry Semel.

Shareholder activist Eric Jackson of Naples, Fla., a small investor who has mounted an online campaign to push for a new strategy at the company as well as the ouster of Mr. Semel and the majority of the company's directors, says he has gathered the support of investors who own about two million Yahoo shares, or less than 1% of its outstanding stock, for his "Plan B" for the company.

Shareholder discontent has been building as Yahoo's growth has slowed, share price has lagged and position at the center of the Internet has been eclipsed by rival Google Inc. Yahoo's stock has fallen 10% from a year ago, while Google's stock is up more than 30%.

The lackluster performance has fueled complaints about Semel's outsized pay package, which at a value of $71.7 million last year made him the highest-paid CEO among Standard & Poor's 500 companies that have filed with regulators this year, according to an Associated Press analysis.

As part of a three-year arrangement, Mr. Semel's salary dropped to $1 in May 2006 from $600,000 previously. He was also awarded stock-option grants (priced at the market value of Yahoo shares when granted) on 6.8 million shares as part of his 2006 bonus and the three-year retention pact. Yahoo says the package ensures that "substantially all" of Mr. Semel's compensation is tied to the company's performance.

Meanwhile, investors defeated a shareholder proposal calling for executive pay based on performance, including payouts occurring only when performance exceeds that of peers in its industry. Though the proposal failed, it received a fairly high approval level of 35% of the vote.
Yahoo investors also voted on two shareholder proposals that stem from Yahoo's disclosure of information to the Chinese government that helped lead to the imprisonment of at least one dissident, defeating both.

A proposal calling for the creation of a board committee on human rights was defeated by 81% of the vote, while another calling for new company policies related to censoring and disclosing information at a government's request was defeated by 71% of the vote. Yahoo's board recommended that shareholders vote against the proposals, saying the company is already taking measures to address such issues.

Write to Riva Richmond at riva.richmond@dowjones.com

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