Hypocritical Yahoo! Says Icahn Fit to Serve as Director But Loeb Isn't

Here are all the ways that Yahoo! and Scott Thompson are being hypocritical and disingenuous in not inviting Dan Loeb to join the board immediately.

Read the full Forbes post

Sphere: Related Content

Yahoo!'s Board Can Run But They Can't Hide from Shareholders

The Silver Lake low-ball offer is making many Yahoo! investors despair. This isn't over yet though.

Read the full post in Forbes.

Sphere: Related Content

If You Liked Yahoo! with Einhorn at $18, You'll Love Yahoo! with Loeb at $14

Yahoo! is about to face its first read test from an activist investor in Dan Loeb. I'll bet on Loeb.

Read the full post in Forbes

Sphere: Related Content

'Whale' Watching: What Does Soros' Latest Mean?

By Eric Jackson, Senior Contributor to TheStreet , On Tuesday July 26, 2011, 10:04 am EDT

NEW YORK (TheStreet) -- George Soros announced that he's returning outside capital yesterday. That makes him the third first-generation hedge fund manager to do this this year, joining the ranks of Carl Icahn and -- former Soros protege Stan Druckenmiller.

Don't feel too bad for George though. He'll still be overseeing an estimated $24 billion of his family's money.

Are there any conclusions to draw from this action?

The media and perhaps some smaller investors spend too much time tracking the moves of these "whales." There have probably been no other hedge fund manager moves that the media has spent more time reporting than those of George Soros.

These reports all imply, "If this is what George is doing, well, maybe you should be doing this too, you poor slob."

There are even Web sites that have been set up with names such as "Whale Watching" that report on the holdings of these big hedge fund names as they change quarter to quarter.

The reality is that these "big name" hedge fund managers get it wrong just like the rest of us do. Global Macro printed money as a strategy four years ago but has been a dog's breakfast this year.

The media breathlessly reported over the last couple of months that Soros had "gone to cash." If you mimicked those moves, yesterday's announcement of his returning outside capital now puts that move into perspective.

He isn't necessarily expecting the market to collapse soon. He simply needs an extra billion in cash to redeem his outside investors. Whale watching would have caused you to ape a move that's for a reason very different than you think.

And remember when Icahn returned his $1.76 billion in outside capital to investors last March? The reason cited by Icahn was specifically an imminent market downturn.

"While we are not forecasting renewed market dislocation, this possibility cannot be dismissed," Icahn said at the time in his letter. That's a nice hedge, Carl. If the market tanks, you can say you didn't dismiss the possibility. If it zooms up, you can say you didn't forecast a downturn.

In any case, the Nasdaq is up 3% since Icahn's ominous letter.

The truth is that Soros has been one step removed from the day-to-day activities of his fund management for a while. The 80-year-old essentially has been doing marketing for the fund for some time.

I watched him doing a sit-down with Thomson Reuters global editor Chrystia Freeland a few months ago. Soros does these kinds of events all the time. Davos, New York, London, Shanghai. He could spend all the days of the year traveling around and talking about his macro views on Greece, China, the U.S., and Europe.

To be fair, Soros is good at it. However, at this particular conference during the Q&A, someone rose to ask him about a midmarket U.K. mortgage lender that his fund owned. "Huh?," Soros responded. "I didn't hear it." When the guy repeated the question, Soros waved his hands. "I don't know about that. You'll have to ask the guys that work at my fund."

The media will keep interviewing Soros and other "whales" because it will generate page views, but they should be a little more honest that the "Soros" circa 2011 is not the same "Soros" circa 1992.

What's really behind these moves of returning capital? In all likelihood, these guys don't need the hassle of more reporting requirements to the Securities and Exchange Commission , thanks to new postcrisis rules.

For a guy like Soros, with his family's assets of an estimated $24.5 billion, why keep the extra billion if, by getting rid of the outside capital, you'll avoid more regulatory scrutiny? Same thing for Icahn. Even after getting rid of almost $2 billion from outsiders, it's still believed he has more than $5 billion of his own money that he'll still manage.

The money management game has also certainly changed over their careers. Today, limited partners are more impatient than ever and wanting a steady stream of updates.

If you can manage your own money, without the hassle, why not? Maybe Soros will start trading his billions out of his Ameritrade account in his pajamas and bunny slippers.

Sphere: Related Content

After Quitting on Icahn, why is Keith Meister still on the Motorola Mobility Board?

By Eric Jackson

Carl Icahn no longer manages outside investors' money. This prompted his former right-hand man, Keith Meister, to leave last December to start a new hedge fund. So why is Meister still serving on the Motorola Mobility board as Icahn's representative?

Read my full post at Forbes.

Sphere: Related Content

Soros' Opinions Given Too Much Weight

By Eric Jackson, Senior Contributor11/17/10 - 06:00 AM EST

George Soros is arguably the most famous first generation hedge fund manager in the world.

A quick search of the 80-year-old's name yields 2.5 million hits on Google. Julian Robertson, 78, yields 740,000 hits. Carl Icahn, 74, generates 400,000 hits. (If you want to characterize Warren Buffett as also a first- generation hedge fund manager, the 80-year-old wins the popularity contest with 3.6 million Google hits.)

Of the current set of modern hedge fund managers, only John Paulson yields more Google hits than Soros, with 2.6 million hits. Soros has about 10 times the number of hits as the man David Rosenberg calls the best money manager in the world: Paul Tudor Jones. David Einhorn has only 225,000 hits and Bill Ackman generates only 84,000 hits. Eddie Lampert, who was once declared the next Warren Buffett, has only 32,000 hits.

Of course, past performance -- and hits on Google -- by no means indicate future performance. Yet, these hits indicate how often the broader media pay attention to the views of these managers as a part of the public discourse on our financial markets.

Popularity of these managers is why CNBC and other media outlets pay so much attention to their 13-F filings, which disclose how their portfolios change each quarter. For example, earlier this week, we found out that John Paulson trimmed his Bank of America(BAC_) stake last quarter and sold his entireGoldman Sachs(GS_) stake. David Einhorn bought more Apple(AAPL_).

In a Wall Street Journal story yesterday, we also learned that Soros "reduced his direct ownership stake in the SPDR Gold Trust(GLD_)" and he "reported no stake in Best Buy(BBY_)."

To the Journal's credit, it also referenced that it was Soros' hedge fund -- Soros Fund Management -- which made other moves. In one paragraph, the Journal uses Soros and his fund interchangeably: "The value of Mr. Soros's stockholdings was $6.7 billion at the end of the third quarter. The fund reported stockholdings worth $5.1 billion at the end of the second quarter."

However, in an hour long discussion with Reuters' Chrystia Freeland in September, where he discussed his macro views on gold, the U.S. deficit, and Europe's debt problems, Soros admitted during a Q&A session afterwards when asked about one of his fund's stock positions that he wasn't involved in the day-to-day decisions of the fund. Therefore, he couldn't discuss a specific stock.

........

[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

Sphere: Related Content

Does Icahn Still Make Them Tremble?

Carl C. Icahn likes to be called an activist investor, not a raider. He has, however, just made a hostile bid for one company, and is in multiple court battles.

By JULIE CRESWELL

Published: March 21, 2010
The New York Times

HE is a billionaire several times over. He has spent the better part of four decades terrorizing corporate chiefs and battling entrenched boards. His name is emblazoned on a stadium on an island in the East River, a laboratory at Princeton, a science center at the Choate Rosemary Hall school in Connecticut and charter schools in the Bronx.

Yet, for all of his high-profile successes, Carl C. Icahn says he feels misunderstood.

"There's a misperception out there that we bust up companies. Or that I believe that all people on boards are bad," growls Mr. Icahn, the 74-year-old investor, as he sets a coffee cup on a small mahogany table in his office on the 47th floor of a Midtown Manhattan tower. "It's just that, in some cases, the C.E.O.'s are so wrong," he grumbles, then quickly flashes a big smile and laughs at his own joke.

While Mr. Icahn likes to pull out his Rodney Dangerfield-esque why-can't-I-get-any-respect? routine, he has over the years perfected the art of stirring up trouble for companies and making money - sometimes lots of it - for his investors and himself.

And while many of his peers from back in the day - names including T. Boone Pickens, Saul P. Steinberg, Robert M. Bass - keep significantly lower profiles these days, Mr. Icahn has not gone quietly into the night.

"He is a survivor," said Chris Young, a director at Institutional Shareholder Services, a Rockville, Md., proxy advisory firm. "If you look at the proxy pipeline, he's involved with a bunch of contentious situations."

On Friday, Mr. Icahn made a hostile offer to buy the Hollywood studio Lionsgate Entertainment; meanwhile, through the $8 billion hedge fund and other assets he oversees - $6 billion is his money - he is waging proxy fights to get new or additional board seats at the biotech companies Biogen Idec and Genzyme.

They are also warring with Donald Trump and debt holders in a New Jersey bankruptcy court over ownership of three casinos in Atlantic City that bear Mr. Trump's name.

In recent months, Mr. Icahn has bought a partly built casino on the Las Vegas strip and the Tropicana Casino and Resort in Atlantic City from bankruptcy.

It is too early to tell whether he will prevail in these battles. But after all these years, a career of victories and occasional misses, one thing can certainly be said of Mr. Icahn: He is one of Wall Street's most colorful, controversial and complicated characters.

Wearing slightly rumpled khakis and waving his eyeglasses to punctuate key points, Mr. Icahn is constantly jumping from one topic to another in an endless stream of dialogue. In that respect, he more closely resembles an absent-minded professor than a master of the universe. Corporate executives visiting his offices walk through hallways adorned with paintings of battle scenes and sculptures of cowboys on bucking broncos. One large painting in the conference room features a lion gazing at the bones of an animal in a desert.Yet he bristles at being labeled a "raider," despite the fact that he is widely viewed as a founding member of the clan that roamed Wall Street in the 1980s, occasionally pursuing hostile takeovers with ruthless abandon.

He prefers to paint his role in those years with the same "activist investor" brush he holds today, arguing that he has created tens of billions of dollars of value for shareholders in companies in which he invested. (In conversations, he declares that he has created $30 billion, $40 billion and even $50 billion worth of value for shareholders. What is a few billion among friends?)

Last year, his hedge fund, highly concentrated in a handful of stocks and bonds, soared 32 percent, after fees, according to a letter sent to investors. That's a reversal from 2008, when it fell 36 percent, including fees. Mr. Icahn's firm declined to provide an after-fees figure.

To some people, Mr. Icahn and activist investors of his ilk are the heroes of the financial system. "They are the ones who are holding corporate America's feet to the fire and incentivizing companies to perform better," said Frank Partnoy, a professor of law and finance at the University of San Diego. Mr. Partnoy contributed to a study that examined activist investing from 2001 to 2006 and found that activists held stocks longer than others and that the companies they pursue often outperform the market. But some fellow activists contend that Mr. Icahn's strong-armed methods of arguing to get on a board and then pushing for a quick change - such as paying a dividend, buying back stock, merging with another company or cleaving off an underperforming unit - are sadly out of date in today's corporate boardrooms. "There are times when you push back and be harsh and times when you roll up your sleeves and work with management, getting more involved with operations," said Eric Jackson, an activist investor in Naples, Fla. "Carl's record on that score hasn't been as successful."

Mr. Icahn and his defenders say he has improved several companies he has invested in or owns. (Besides the hedge fund, he oversees Icahn Enterprises, a hodgepodge of companies he has collected over the years in the automotive, metals and real estate industries.) Late one recent Friday afternoon, Mr. Icahn, a workaholic night owl who rarely appears at glittering high-society functions, dismissed thoughts about going out to dinner with his wife, Gail, or - gasp - taking a bigger break from the business altogether. "What else am I going to do?" Mr. Icahn asked before returning to his office for a meeting on his real estate holdings. "Play shuffleboard?"

IN the spring of 2008, Roy J. Bostock, the chairman of Yahoo, and his fellow directors were coming under a barrage of criticism from investors after Microsoft abruptly broke off merger talks. Mr. Icahn, who had a large stake in Yahoo, jumped into the fray. In a scathing letter to Mr. Bostock, he said the board had "acted irrationally" and "completely botched" the merger. Mr. Icahn's solution included putting up a slate of 10 directors picked by him. (The company eventually settled, placing Mr. Icahn and two of his other nominees on the 11-member board.) What Mr. Icahn did or did not accomplish in his 15 months on the Yahoo board - he stepped down last fall - is the subject of hot debate. But what's surprising about that debate is that one of Mr. Icahn's biggest detractors is Mr. Jackson, a fellow activist investor. And his biggest supporters are some other Yahoo directors.

"I think in the first couple of meetings, there was a lot of trepidation: Will he just be disruptive and not constructive? Can this work?" said Maggie Wilderotter, the C.E.O. of Frontier Communications, who resigned from Yahoo's board last year. "Carl doesn't worry about what people around the table think about him. He's blunt. If there's an elephant in the room, he puts it on the center of the table." And while Mr. Bostock recalled with humor at least one conversation with Mr. Icahn that involved many "four-letter words going back and forth," he said he appreciated Mr. Icahn's persistence and the different point of view he brought to discussions.

"Carl brought financial acumen to the board and a good, solid understanding of the strategic imperatives that faced the company, particularly what it would take to compete longer term with the likes of Google, Microsoft and others from a capital-expenditures point of view," Mr. Bostock said. "It was one of the reasons he was pushing for a Microsoft deal."

But Mr. Jackson, who manages a small activist hedge fund called Ironfire Capital, says Mr. Icahn blew it with Yahoo.

"There was a sense that shareholders were going to go to Sunnyvale with pitchforks," Mr. Jackson said, referring to Yahoo's California base. "He saw that and thought he could ride in on a horse and take control of the company. He didn't realize that he had to articulate to investors what it was he was going to do if he actually had the keys to the car and was driving things." "He's the granddaddy of activist investing. Anyone who practices activist investing has to pay homage to him and the trail that he's blazed," Mr. Jackson added. But "I would say his involvement with the company did nothing for shareholders and hurt his own investors in the stock."

Mr. Icahn said that while his firm did not make money in Yahoo, it was supportive in bringing on board Carol Bartz, the company's C.E.O., and instrumental in eventually forging an Internet search and advertising partnership with Microsoft. As for the criticism from Mr. Jackson that his methods do not work, Mr. Icahn said, "To say that we don't add value is absurd."

MR. ICAHN grew up in a middle-class neighborhood in Queens, and started his first business at the age of 13, when he snapped pictures of neighbors' homes. He developed the photographs in his basement and glued them to the covers of matchbooks that he would buy for 50 cents a box. He sold the boxes to homeowners for $1.50. When he turned 15, he played his own version of the ice futures market as a cabana boy at a beach club, ordering extra ice on hot mornings to sell to visitors who would run out later in the day. After graduating from Princeton with a degree in philosophy and briefly serving as a medic in the Army, Mr. Icahn landed on Wall Street, opening his own brokerage firm in 1968. In the late 1970s, he waged his first proxy battles.

When the buyout barons and corporate raiders ruled Wall Street in the 1980s, he was one of the kings. He made plays for some of the largest companies in America, including Phillips Petroleum, the steel giant USX, Texaco and T.W.A. Some were big victories for Mr. Icahn; others were perhaps more trouble than they were ultimately worth.

"He had a very devil's-advocate way of reviewing investments," said Gary Siegler, who worked with Mr. Icahn from 1985 to 1990. "You had to be able to support your point of view."

After the junk bond market collapsed and boards adopted anti-takeover measures, some raiders moved on in the early 1990s to other things. Mr. Icahn stayed the course, battling for control of the comic book publisher Marvel Entertainment and badgering RJR Nabisco to split its food and tobacco units. Some of his fights in recent years have involved technology and entertainment companies, including Time Warner, Motorola, Blockbuster and the video game maker Take-Two Interactive Software. "He's had a mixed record on returns" and in understanding the evolution of the media business, said Matthew Harrigan, an analyst at research firm Wunderlich Securities who is watching Mr. Icahn's moves against Lionsgate. Among other things, Mr. Icahn is angling to get his son and fellow chess player, Brett, who works at Mr. Icahn's company, on the studio's board.

Associates of Mr. Icahn say that his company made money on its Time Warner investment and that while his Motorola investment has not gone as well, they believe it will eventually pay off.

"We hold these things for a long time and the jury is still out," Mr. Icahn added.He has fared better in some of his biotech holdings, which make up a big chunk of the hedge fund's investments.

"The biotechs have been his big winners recently," particularly investments in ImClone Systems and MedImmune, said Mr. Young at Institutional Shareholder Services. "His thesis, which is no secret, is that biotech firms should be purchased by Big Pharma, which is always in need of new products. In his mind, that's a match made in heaven." Mr. Icahn says he has also made money in industrial and gambling companies he has acquired out of bankruptcy and nursed back to health.

He said that a couple of years ago, for instance, his company booked a $1 billion profit after selling gambling properties, including the Las Vegas Stratosphere hotel and casino, that it had picked up largely in bankruptcy proceedings. Similarly, he made an additional $1 billion or so selling energy companies he had acquired years earlier.

In those cases and others, Mr. Icahn argues that he is not given enough credit for holding companies for long periods and investing even more of his own money into the businesses to help them grow. He specifically cites his investments in a rail-car business and the automotive parts supplier Federal-Mogul. "What gives me the greatest excitement and joy is building a company," Mr. Icahn said. "By the way, it's also the way to make the most money."It may not, however, be the easiest way to make a buck. One of the companies in which he owns a majority stake - XO Communications - has been fighting lawsuits by R2, a Fort Worth, Tex., fund controlled by a hedge fund called Q Investments. The hedge fund is run by Geoffrey Raynor, a former investment banker who worked for the Bass family of Texas. R2 accuses Mr. Icahn of engaging in "sweetheart" transactions and "self-dealing" in his oversight of the communications company.

In another suit against Mr. Icahn, Mr. Raynor, through another fund, contends that "material misinformation" was included in a recent $2 billion bond offering. Mr. Raynor declined to comment for this article.Mr. Icahn, who denies all of the accusations made against him, filed his own $100 million lawsuit against Mr. Raynor recently, saying Mr. Raynor's lawsuit caused economic harm to the bond offering. Mr. Icahn called Mr. Raynor a "serial sue-er," and in a court document he contends that the hedge fund has filed 45 lawsuits against various parties in the last four years.Disputing that figure, a spokesman for Mr. Raynor says that in the last 10 years, the firm has been a plaintiff in 16 non-bankruptcy proceedings, along with the two legal disputes with Mr. Icahn.

"I've put $1 billion into this company. I don't get a salary, and I spend hours on it each week," Mr. Icahn said, his tone rising in frustration. "About $80 million of the company's revenues each year are coming from introductions I brought in."

Later, as further proof of his involvement with the communications company he proudly showed off the latest addition to a row of awards arrayed on a cabinet just outside his office. It is a large glass cup engraved with his name, declaring him XO's "salesman of the decade."

LATE last year, Donald Trump was sitting in his office when he was alerted that Carl Icahn was on the phone. Mr. Icahn told him that he had joined the Texas banker D. Andrew Beal in his effort to gain control of three Atlantic City casinos bearing Mr. Trump's name, acquiring a majority of the first-lien mortgages held by Beal Bank."He told me he was doing it because he heard I wasn't involved, but he knew I was involved, that I had a deal with bondholders," Mr. Trump said. "I was very surprised and also very disappointed that Carl got involved," Mr. Trump added. He said the two had been friends for years and that Mr. Icahn had sought his advice when he was divorcing his first wife. Mr. Trump said the two had not spoken since the call."I should be the one that is surprised he is upset," Mr. Icahn said. "I might possibly feel bad had I interfered at a time when he was running the business," but that's not the case, he added. "Additionally I find it odd that he's now claiming to be my good friend," Mr. Icahn said. "I was not surprised when I was not invited to his daughter's wedding precisely because we are not good friends."

The Trump casino deal shows that Mr. Icahn is not afraid to take on big names if there is money to be made. He also makes it clear in other dealings that he is aggressive in protecting his interests.

Consider the case involving the activist manager William A. Ackman. Mr. Ackman's fund, Gotham Partners, has sued a company owned by Mr. Icahn over a profit-sharing agreement between the men that was made about seven years ago.

According to court documents, Mr. Ackman sold his investment in Hallwood Realty to Mr. Icahn in 2003 with an agreement that if the assets were sold or transferred at a profit within three years, Mr. Ackman and his fund would get a share of the action. The assets were sold about a year later and, in an interview, Mr. Ackman said Mr. Icahn owed him about $4.7 million. The New York Supreme Court found in favor of Mr. Ackman, and the First Department appellate court affirmed that decision. Mr. Icahn has not paid any of the money and is disputing the legal fees, which with interest bring the total owed to $8 million Mr. Ackman said. "I call it my Carl Icahn money market account," he said. "I don't get these sort of rates anywhere else." Mr. Icahn responded that "I never agreed to give him the profit he now claims, and the case will be appealed."

Mr. Icahn does not seem to let anything, including a very close friendship, get in the way of protecting his and his investors' profits. Late in 2008, through his hedge fund, he sued Realogy, a real estate company controlled by Leon Black, the head of the private equity firm Apollo Management. Mr. Black was trying to reduce Realogy's hefty debt load by offering to exchange some of the debt with bondholders. Mr. Icahn, a bondholder who has known and been friends with Mr. Black for decades - the two have been longtime tennis partners - objected to some terms of the exchange and sued.

"Carl and I have been good friends for over 25 years," Mr. Black said in an e-mail message. "Occasionally we skirmish as couples are wont to do, but I believe we both feel that when the chips are down that the friendship is paramount."

How, exactly, does one sue and still be good friends with someone on Wall Street? Mr. Icahn smiles sagely over his cup of coffee: "The two of us have a saying that we always use whenever there is friction in our business dealings. We always say, 'there's only one Maltese Falcon.' "At one point in that classic 1941 film, a character chasing a valuable figurine says to a close associate, "You've been like a son to me," Mr. Icahn explains, paraphrasing from the movie.Then, lowering his voice with mock intensity, Mr. Icahn adds that the character says that if you lose a son, it's possible to get another - "but there's only one Maltese Falcon.' "

Sphere: Related Content

Intellectual Activism's Impact On General Growth

By Eric Jackson

12/23/09 - 06:01 AM EST

Stock quotes in this article: GGWPQ , SPG

NEW YORK (TheStreet) -- It used to be that activism was conducted by poison letters to management from Dan Loeb, or by acerbic rhetoric leaked to the mainstream press from Carl Icahn. But a new kind of activism is being waged by leading hedge funds with positions on both sides of the trade in bankrupt mall owner General Growth Properties(GGWPQ Quote).

Pershing Square Capital Management, Hovde Capital, and T2 Partners are taking turns exchanging their analyses on why they think the stock is under- or over-valued. These intellectual arguments aren't just academic pursuits. They're having large effects on the stock price. Some of the smart money will be right, while others won't look so smart a year from now. Here's what you need to know to take advantage of this new kind of activism.

General Growth started in 1954, when two brothers founded a strip mall in Cedar Rapids, Iowa. The company hit a $20 billion market capitalization in April 2007 and is now one of the top mall owners in the country today. But General Growth took on a lot of debt in the credit expansion and was unable to roll over this debt when the lending markets froze, leading to their bankruptcy in April.

The company entered bankruptcy on April 16 with its common shares trading then at 60 cents each The shares have had quite a run since then, touching $12 two weeks ago.

Back in May of this year, Bill Ackman of Pershing Square profiled the bullish case for General Growth at the Ira Sohn Research Conference. He laid out a convincing case for the unique value embedded within General Growth. Unlike the vast majority of bankruptcies, Ackman argued General Growth's was unusual because its net assets were greater than its net liabilities. The company had a liquidity issue, not a solvency issue, Ackman said. Occupancy rates were still high, net operating income (NOI) was steady, and the company owned some of the more prestigious malls in the country across a wide footprint, he contended.

In the extremely conservative scenario, Ackman suggested that the equity value of General Growth was $10 per share at that time. With more normalized assumptions, giving value to the management company and several undeveloped properties and assets, Ackman said the equity value per share would be above $30. As long as the broad economy didn't sink into a severe recession, Ackman said he expected there would be value for equity holders after creditors were compensated.

[This post is an excerpt of the full article, which available on TheStreet.com by clicking here.]

Sphere: Related Content

Icahn't Should Hang It Up

By Eric Jackson 10/28/09 - 06:01 AM EDT

Stock quotes in this article: YHOO , MSFT , MOT , CIT , BBI , TELK , GFGFQ , CSCO

NEW YORK (TheStreet) -- After a string of disastrous investments and his departure from Yahoo!'s(YHOO Quote) board last Friday, it's time for Carl Icahn to hang it up running other people's money. Here's why.

Icahn's decision to leave the Yahoo! board comes a year after mounting a costly and distracting proxy contest to get elected. That's his right, of course. After all, investors in his Icahn Partners hedge fund were the ones who footed the bill for his efforts.

Those same investors -- including Icahn himself -- are also sitting on a loss on their Yahoo! investment. We don't know the exact magnitude of the loss but it appears, based on a review of the SEC filings, to be on the order of -23% or roughly $320 million on 60 million shares held at the end of June. Icahn's stated reasons for stepping down from the board were that he no longer had the time and Yahoo! no longer needed an activist.

If he's right, then someone should inform Icahn's buddies John Chapple and Frank Biondi, who came on Yahoo!'s board last year with Icahn. Their whole legitimacy for serving on this board is now in question based on Icahn's comments. They should make like their buddy and head home to Manhattan. And with Yahoo!'s stock at less than $17, far less than Microsoft's(MSFT Quote) offer of last year, it seems incorrect and premature to declare the company a success and not in need of further changes.

Yahoo! investors might correctly wonder: Why the heck did we elect you to represent our interests in the first place, if you're now leaving?

It's true that Icahn's busy tending to other investments in his portfolio with the aim to turn around the performance of Icahn Partners. The fund, which had a three-year positive run starting in 2004, reportedly showed its first loss in the third quarter of 2007, due to poor bets on Florida condo developer WCI and auto parts maker Lear(LEARQ Quote). Since then, WCI and Lear have gone bankrupt, costing Icahn's fund at least a couple of hundred million dollars.

Icahn's hedge fund performance continued to drop in 2008 (down 22% in Q4 alone) and 2009 (down 33% in January). His 60 million Motorola(MOT Quote) shares -- owned since at least December 2007 -- look to be down about $660 million. Motorola's decline came despite Icahn having fought for and winning board seat representation last year.

Icahn Partners was hit by $1 billion in redemption requests at the end of last year and Icahn injected $250 millionof his own money earlier this year. Even today, Icahn Partners' long positions total $2.7 billion through the end of June . That's significantly less than the $4.9 billion in long positions he heldone year earlier .

Icahn's strategy is to take large long concentrated equity positions without using options or pair trading to manage the additional risk, as well as buying up cheap debt. You can ride that train up when markets are good, but get crushed in a down year like last year.

The biggest thing taking up Icahn's time these days is an investment in CIT(CIT Quote). Some are reporting that he will become the biggest shareholder of the company under reorganization. Creditors will decide by Oct. 29 whether to push the company into bankruptcy or accept an offer to refinance its debt. Icahn wants the company to refinance its debt through him, saying the fees he'd collect from the company would be less than the other offer on the table.

Icahn likes buying up debt and bringing companies through the bankruptcy process. He followed a similar path to the one he's on with CIT at XO Holdings(XOHO Quote). In that instance, he effectively gained control of the company as a large debt-to-equity owner.

But he's being sued right now by R2 Investments, an 8.8% holder in XO. R2 contends Icahn turned down at least one buyout bid for the company higher than its then share price in favor of refinancing its debt by purchasing $780 million of preferred stock. In doing so and gaining 80% control of XO, R2 alleges Icahn was able to use the company's losses to offset taxes he would have otherwise had to pay on other businesses he owned. XO, which was trading at $1.27 at the time of the buyout offer that R2 says Icahn turned down, is now trading at $0.77 - a 39% decline.

Besides recent poor investments in Blockbuster(BBI Quote), Telik(TELK Quote), and Guaranty Financial(GFGFQ Quote), his entire Yahoo! foray since last year has been an unqualified failure. It will make future activist campaigns he launches more difficult to execute.

From the moment he launched his proxy fight last year, after Yahoo! turned down Microsoft's $34 a share verbal offer, investors were skeptical of Icahn. They perceived him as a quick flip artist wanting to juice the stock from $23 to over $30, without technology experience to effectively advise the company as a director.

Because he lacked support from institutional investors, Icahn knew his proxy fight might fail to get any of his nominees elected when put to a vote. Therefore, he accepted three seats on the board as a compromise. If you can't win against the wildly unpopular Yahoo! board after making a mess of the Microsoft negotiations last year, what does that say?

Icahn says he helped select Carol Bartz for the top job. Really? Wouldn't Jerry Yang have done it anyway? After all, it was Jerry who offered Terry Semel the top job in 2001. It was Jerry who got to be CEO in 2007, when he told his board he wanted it. And, it was Jerry who knew Carol from Cisco's(CSCO Quote) board and, by Carol's account, offered her the job.

Icahn's friend, Frank Biondi, got to hitch a ride on to Yahoo!'s board on Icahn's coattails. Biondi also joined Yahoo!'s compensation committee and approved Bartz's employment contract. This is the contract that will pay Carol $187 million for four years of work, if she hangs around that long, maxes out her possible annual bonuses, and if Yahoo!'s stock price rises above $25 for 20 consecutive trading days before 2016. That's a good deal for Carol -- not so great for Yahoo! shareholders.

We know that Icahn Partners' investors didn't get a great deal on Carl's involvement with Yahoo! over the last year. However, Icahn, Biondi, and Chapple seem to have done pretty well. According to Yahoo!'s proxy filing, the day these three men were elected to the Yahoo! board, Yahoo! gave each an option to purchase common stock with a grant data fair value of about $250,000 and restricted stock units with a grant date fair value of about $200,000.

This half-a-million-dollar payment went to them personally. Nowhere in the filing does it say that this money went back to Icahn Partners, which funded the expenses related to the proxy contest -- which most estimate cost at least $1 million.

In that same proxy filing, Yahoo! disclosed that, last year, "transactions in the ordinary course of business between the Company and entities for which the following directors served as an executive officer, employee or substantial owner, or an immediate family member of an executive officer of such entity" included "Mr. Icahn". No more information is given, but it would be interesting to know just what transactions were conducted, with whom, for how much, and for what services.

To most outsiders, it appears as though Icahn was summarily ignored by the parties around Yahoo! before and after he was elected to the board. He assumed that he could force a shotgun marriage between Microsoft and Yahoo! He assumed his initial $23-a-share investment could be quickly goosed to $32 or higher. He was wrong.

Steve Ballmer politely listened to him and then apparently stopped taking his calls. Carol Bartz has dissed him from the get-go of her tenure as CEO. She proclaimed to Forbes last year : "Icahn is just another shareholder. What's he going to do, fire me?"

Whether he realizes it or not, this attitude is probably the most damaging thing to Icahn going forward as an activist investor. CEOs and corporate boards will no longer see him as "Carl Icahn: Corporate Raider of the 80s" but "Carl Icahn: Has Been." In their eyes, he'll be Icahn't, not Icahn.

Carl Icahn will always have a reputation as a successful investor. Forbes recently pegged his net worth at $9 billion. Yet, it's unclear whether his hedge fund, Icahn Partners, will continue after his death.

While George Soros, 79, and Julian Robertson, 77, have repeatedly developed talented managers (like Stanley Druckenmiller, Lee Ainslie, and John Griffin) who go on to successful careers, Icahn, 73, has not. If Icahn was hit by the proverbial bus tomorrow, it's unclear that Icahn Partners could or would continue.

Icahn will always be able to grab the headlines with some outrageous comment about a CEO because he's become the "poster boy" for activist investing. He could keep running money and probably will. However, as he takes his leave from Yahoo!, it appears as though his most influential days as an activist investor are behind him and not in front of him.

-- Written by Eric Jackson in Naples, Fla.

At the time of publication, Jackson's fund was long Microsoft.

Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.

Sphere: Related Content

Maggie Wilderotter Quits Yahoo! Board

Maggie Wilderotter -- the most recent addition to Yahoo!'s board, joining in July 2007 (not including Carl Icahn and his band of merry men who joined last September) -- is now its most recent departing director. She gave the company notice last week that she plans to step down at the end of the year.

The fact that she's leaving is "not due to any disagreement with the Company on any matter related to the Company’s operations, policies or practices."

When asked if she quit because of new CEO Carol Bartz, Wilderotter added in an email exchange with the FT that "I think Carol is terrific." The lady doth protest too much.

Of course, it is true that Wilderotter has trouble on the homefront with the company she's actually still the CEO for: Frontier Communications (FRT). She has only been able to squeeze in a few hours for that job over the past few years, while she's been serving as a director for Yahoo (YHOO), Xerox (XRX), and Proctor & Gamble (PG) -- whose board she joined this year to take Meg Whitman's slot who is now seeking to become California's next Governor.

Wilderotter's directorships pay well. In addition to the $5.5 million she made last year in her real job as CEO, she made $400,000 as a Yahoo! director, $132,000 as a Xerox director and she'll likely get $250,000 this year as a P&G director -- what the average director last year made there. Why give up the money?

I generally don't like former CEOs sitting on boards, as they help perpetuate the "I'll-scratch-your-back-you-scratch-mine" attitude that dominates most boards when it comes to compensation and really challenging the CEO. If you've been a CEO yourself, you would feel sympathy for the current CEO on whose board you sat. You wouldn't want to show him or her up.

But if former CEOs are bad directors, current CEOs are worse. From a shareholder's perspective, they have a job to do and they should be eating, sleeping, and drinking that job -- not flitting off to board meetings across the country. CEOs take on these directorships to network and further their own careers -- not bring back insights from another company to their home company.

Wilderotter is a good example. She joined Xerox's board in 2006. There, she met Robert McDonald, then COO of P&G. They hit it off. When Meg Whitman stepped down from the P&G board and AG Lafley decided it was time to hand the keys of P&G to McDonald, he called his old buddy from the Xerox board, Maggie Wilderotter.

Yet, all this learning, monitoring, and advising that Wilderotter has done as a director in these past few years has not translated well to performance at Frontier Communications -- or for the companies on whose boards she sits. Since she joined Yahoo!'s board in July 2007, Frontier's stock is down 52%, Yahoo!'s is down 36%, and Xerox's is down 60%. The NASDAQ over this time is down 20% (and Frontier's direct competitors have outperformed Frontier's stock by about 20% over this time). (Yet, Wilderotter's total compensation is up about 150% in the last two years.)

So there is an argument to make that she needs to make time for turning around Frontier. Yahoo! would have to feel a little hurt though that Wilderotter seems to see Xerox as having a brighter future than the Web portal (as she's staying on the Xerox board).

However, I think there's more going on here. When you join a big-time board like Yahoo!'s, you don't grab your ball and go home after 2 years. You look like a quitter. Heck, becoming a Yahoo! director is like getting tenure as a Professor -- except it pays much much better. You can settle in for as long as you like at Yahoo! -- just ask Art Kern and Eric Hippeau who are about to embark on their 15th year as a director there.

I think it's obvious that Bartz and Wilderotter didn't see eye to eye on something. This is Carol's board now -- and, if you're not on her team, you're off (as would be the case on virtually every other board in America today).

Wilderotter has no business being on any outside boards when her own company's stock is going down the tubes. However, compared to others on Yahoo!'s board, she looked like one of the stronger directors. I specifically recall Chairman Roy Bostock going out of his way at the 2008 shareholders' meeting extolling Wilderotter's virtues as a director.

As bad as Wilderotter was as a Yahoo! director, the remaining directors are worse.

Sphere: Related Content

Are these Disclosures Conflicts of Interest for Yahoo!?

If I told you that Yahoo! had made a charitable contribution to an American University in the last year, which one would you guess? Stanford University, where Jerry and David dreamed up the company in the computer labs more than a decade ago? Cal? San Jose State? Try Duke.

You probably weren't familiar with a long fabled relationship between the Silicon Valley-based Internet company and the fine academic institution on the other side of the country on Tobacco Road. Let me connect the dots for you. Yahoo!'s Chairman, Roy Bostock, and fellow director, Gary Wilson (both appointed by former CEO Terry Semel), serve on the board of the Fuqua School of Business at Duke.

Unfortunately, we don't know exactly how much Yahoo! gave to Duke. I don't see why shareholders shouldn't know the amount. The fact that it's the only university named in Yahoo!'s most recent proxy filing as having received such a contribution from Yahoo! last year, when there is this obvious relationship with two directors, calls for more disclosure -- not less.

It's also strange that the only other non-profit institution receiving a charitable contribution last year was The Partnership for a Drug-Free America, for which Mr. Bostock is also a director.

These donations are fully disclosed in the proxy under "Related Party Transactions" but are they right and proper? I don't think so. In my view, Mr. Bostock shouldn't be able to leverage his job as Chairman (which paid him $568,449 last year in total comp) to access the company's Treasury (the shareholders' money -- not his) for his pet causes.

Full disclosure: I don't think Mr. Bostock is fit to serve as the Chair of this dysfunctional board. He led the charge in the famously disastrous Microsoft merger negotiations last year. Then, he spoke at length at the 2008 shareholders' meeting, about just how hard Yahoo!'s board had worked to secure a deal. His words to the audience dripped with condescension.

I attended the meeting and asked him if he thought he deserved to make $500,000 for his Yahoo! job. He told me he didn't make that much money in the prior year and I had my facts wrong (they were the facts). I followed up by asking him to resign off the board based on how nearly half of shareholders had voted against his re-election at the prior year's shareholder vote. He told me I was a guy who looked at the glass half-empty and he saw the glass half-full with the number of "for" votes he did receive.

Given Mr. Bostock's rose-colored glasses, I have no doubt he saw no problem in seeking out a charitable contribution for his two affiliated non-profit organizations. How much were the contributions, Roy?

Perhaps more troubling for Yahoo! shareholders is that, in that same section of the proxy filing, there was the following disclosure:

- Transactions in the ordinary course of business between the Company and entities for which the following directors served as an executive officer, employee or substantial owner, or an immediate family member of an executive officer of such entity: Mr. Icahn, Mr. Joshi, Mr. Kotick, and Mrs. Wilderotter.

VJ Joshi runs the printer division at HP, so I can imagine that Yahoo! bought some ink cartridges from them last year. Bobby Kotick runs Activision, so maybe the company bought some recreational copies of "Guitar Hero" for the senior officer and director lounge. Maggie Wilderotter runs Frontier Communications which sells cheap phone and DSL service in upstate New York and the surrounding area. So, I have a harder time understanding Yahoo!'s need to do business with them -- although maybe there are some remote workers in Rochester who can't get AT&T access (with whom Yahoo! has a large strategic partnership).

It's the Carl Icahn connection that I have a harder time understanding. Certainly there shouldn't be any business dealings between Yahoo! and Icahn's hedge funds, where he's an executive officer and employee. Do his hedge fund investments qualify as him being a "substantial owner" even if they're relatively small? Even still, did Yahoo! do business with Blockbuster, Lions Gate Entertainment, Motorola, American Rail Car Industries, Biogen, Federal Mogul Corp., PSC Metals, or Endzon Pharmaceuticals? The company should more completely spell out the business dealings between Yahoo! and Carl Icahn. How much were they? To whom? And for what?

Later in the same section, they state:

- Relationships and transactions in the ordinary course of business involving aggregate payments greater or equal to $10,000 with companies and their applicable subsidiaries, for which the following directors served as non-employee directors during all or part of 2008: Mr. Biondi, Mr. Bostock, Mr. Burkle, Mr. Hippeau, Mr. Kozel, Mrs. Wilderotter, and Mr. Wilson

We've discussed the ties of Roy Bostock and Gary Wilson to Duke and The Partnership for a Drug-Free America. Now, we've expanded the relationships where Yahoo! paid these directors' companies to include Mr. Kozel (no longer on the board), Mr. Hippeau who makes investments for Softbank and took a job earlier this year for the Huffington Post (in which he's an investor), Mr. Burkle who is on the boards of Occidental Petroleum & KB Home, as well as the Frank Lloyd Wright Building Conservancy, and Mr. Biondi (friend and colleague of Carl Icahn) who is a director for Amgen, Cablevision, Hasbro, and Seagate.

Again, shareholders should fully understand the exact amounts of the payments being made and to whom they are being made in these related-party transactions.

Maybe these payments are all legitimate and above board. If they are, let's disclose them and let sunlight be the best disinfectant.

[Jackson's fund holds no position in YHOO at the time of publication.]

Sphere: Related Content

Bartz's Pay Package Egregious

09/16/09 - 07:00 AM EDT

By Eric Jackson

YHOO , MSFT

Yahoo!(YHOO Quote) CEO Carol Bartz didn't get the "boatloads of cash" for her shareholders from Microsoft(MSFT Quote) as she vowed in May, but she'll take home a boatload of cash herself out of Yahoo! for her work in 2009.

A review of her total compensation plan reveals that Bartz is on track to make $20 million to $30 million this year in cash and stock (depending on if the share price rises 13% by December and stays there for the rest of the year or not); and $187 million for her first four years on the job, assuming the stock can get back to $25 by then.

In last week's Activist column, we shined a spotlight on the large amount of insider selling which has occurred at Yahoo! in the past two years (based on our study of the Securities and Exchange Commission filings leading to other media reports on this topic), including Bartz dumping $2 million in shares in March and June.

Since that column appeared, Bartz, Yahoo!'s PR SWAT team and Bartz' defenders have claimed that there was "no story here," as these were "routine" share sales made to pay taxes on generous Restricted Stock Unit (RSU) grants. Bartz went so far as to say "I didn't sell anything" on television and there have also been vague references to her shares being "reacquired" again. They have not - as the actual Form 4 SEC filings show. They state only "disposals" of $2 million in Yahoo! shares, which of course immediately lower the company's earnings per share.

Contrary to what any PR flak says, these kinds of tax-related share dumps when RSUs vest may be common at lower levels of the company, but they are not at the highest level, where executives have more than ample means to pay their taxes out of their own pockets. Bartz made $45 million in 2007 alone just from exercising her Autodesk(ADSK Quote) options, so she could have easily scratched together $2 million to pay the tax man if she'd wanted to hold on to her Yahoo! shares.

It turns out that, when you start to peel the onion around Bartz' CEO employment contract, there are many interesting details which Bartz would likely not want discussed. Prior to negotiating with Yahoo! for the top job, Bartz hired an unnamed financial advisory firm to help her. Later, when the deal was done, she got Yahoo!'s board to agree to Yahoo!'s shareholders paying "up to $150,000 for advisory fees" for her use of that savvy firm (which is outrageous and she should immediately reimburse Yahoo! shareholders for that with interest).

That negotiated agreement is a good one for Bartz, as this analysis shows. Making reasonably conservative assumptions, Bartz should get $187 million for her planned four years of work at Yahoo!

One small part of that agreement is something Yahoo! calls the "Make-Up Grant." Because of "forfeiture of the value of equity grants and post-employment medical coverage from" leaving her old executive chairman job at AutoDesk, which has one-fourth of the market cap of Yahoo!, Yahoo!'s board said she was due $10 million.

As part of that grant, she'll get $2.5 million in cash this year and 639,386 RSUs (or shares). The cash and shares vest at a rate of 25% quarterly in 2009. By the end of this year, those shares and cash will be worth about $12.5 million (not the $10 million grant date fair value; see this breakdown for more detail .

Yahoo! states later that they are providing "post-employment medical coverage for Bartz, her spouse and eligible dependents" on top of her grant, so that should not be linked to the value of the "Make-Up Grant." Therefore, the only thing to be made up for is the value of her unexercised AutoDesk equity options.

Yet when you go back and review the unexercised options she possessed in the 2008 AutoDesk proxy statement and the ones she subsequently exercised and sold in share sales through the rest of last year, I calculate Bartz' value of her unexercised equity grants at far less than $10 million.

On the date her Yahoo! employment agreement was announced (Jan. 15, 2009), AutoDesk was trading at $16.14. That means, her remaining 250,912 $11 strike price, her 36,420 $8 strike price, and her 993,056 $14.40 strike price unexercised options had a fair value on the date she took the Yahoo! top job of $3.3 million -- not $10mm.

This major "Make-Up Grant" discrepancy between what Yahoo! chose to award Bartz and what it appears -- according to her AutoDesk SEC filings -- she was in fact walking away from should be explained to shareholders immediately.

Setting this problem aside, Bartz -- like any other employee who gets RSUs -- has to pay tax on stock grants whenever she receives them. To pay the tax, Bartz must make a choice to write a check to the government from her personal account to cover this or sell part of these Yahoo! shares from the RSUs. In the first and second quarters, Bartz sold $2 million in Yahoo! stock to pay her taxes. It's very likely she'll do this again later this month and in December, when the rest of her "Make-Up Grant" shares vest.

Which brings us to the core problem: given her leadership role at Yahoo! and given her generous Yahoo! compensation and sizable wealth she's amassed from her time at AutoDesk, why would she dump Yahoo! shares instead of paying her tax bill herself? It sends the wrong message to employees and shareholders that she wouldn't be kicking and screaming to keep every last Yahoo! share in her possession.

I think there's a simple answer to this question: Carol Bartz is used to getting generous tax gross-ups from companies she works for and likely she (or her high-priced advisors) negotiated this in as part of the deal.

A tax gross-up is when an executive wants to receive a certain amount of compensation award or benefit but knows they'll have to pay taxes on it. Rather than pay that tax bill themselves, the executive asks the company to bump up the value of the award in the amount of any taxes they would otherwise have to pay. They end up getting the amount of money they want tax-free -- with taxes paid for by the company's shareholders rather than the executive.

For an example, let's go back to the 2008 AutoDesk proxy statement : "During fiscal 2007, Ms. Bartz's other compensation included post-employment health and dental benefits with an actuarially determined present value of $631,986 plus a $421,324 tax gross-up, and a Company gift for appreciation of years of service as CEO costing $67,500 plus an associated $33,889 tax gross-up." Have you ever heard of a gross-up on a gift for years of service?

Tax gross-ups are completely unacceptable and any well-governed company doesn't allow them. If you make money or a benefit of some kind, you should pay tax on that -- not the shareholders who gave you the benefit in the first place. To use one of Bartz' favorite words, tax gross-ups are stupid.

Bartz has clearly become used to tax gross-ups at AutoDesk and likely she or her high-priced advisors were thinking of this "Make-Up Grant" in the same way. They might have negotiated her $3.3mm fair value (as of mid-January 2009) unexercised AutoDesk options into a $10mm make-whole grant from Yahoo! That's a tax gross-up and then some.

Yahoo!'s compensation committee is to blame here. First, they pay Terry Semel over $570 million for his six years as CEO; then, they award Bartz a four-year $187 million pay package with up to $30 million in year one; then, they see their ineffective incentive plans lead to Yahoo! insiders selling $233 million in stock over the past two years versus insider purchases of only $103,000. Now, we learn of these discrepancies in the reasoning for different elements of Bartz' pay.

Where is Carl Icahn in all this? It turns out he was right at the negotiating table when all this went down. His colleague, Frank Biondi, has served on Yahoo!'s compensation committee since joining the board in September 2008. He directly oversaw the design and approval of Bartz' pay plan, which, in my view, wasn't in the shareholders' interests.

Of course, Bartz is at fault here too. She's gotten too used to high pay and tax gross-ups over the past few years -- both for herself and for CEOs she has socializes with.

Examine this table below for a comparison between the average annual total compensation for several popular tech CEOs vs. ones in Bartz' social network. Bartz doesn't suffer fools -- or CEOs who don't bank a lot of coin.

Popular Tech CEOs
CEO	Most Recent Avg. Annual Total Compensation
Eric Schmidt, Google	$500,000
Jeff Bezos, Amazon.com	$1.3mm
Steve Ballmer, Microsoft	$1.3mm
Steve Jobs, Apple	$1
Carol Bartz' Network of CEOs by Employment or Directorship
CEO	Most Recent Avg. Annual Total Compensation
John Chambers, Cisco	$11mm
Paul Otellini, Intel	$12mm
Dan Warmenhoven (Ex-CEO), NetApp	$5.7mm
Carl Bass, AutoDesk	$7mm
Carol Bartz (when Executive Chairman), AutoDesk	$4.5mm

Source: Company proxy statement SEC filings

Several things should be done to fix this mess:

• To avoid these questions about her commitment, Bartz should put some skin in the game. I think she should buy stock in Yahoo! that represents a significant chunk of her net worth. I would suggest at least half the value of her 2007 exercised options from AutoDesk or $23.5 million. This is not that large relative to the upside she should make from her 4 years at Yahoo!
• Bartz should immediately pay back the $150,000 to Yahoo! shareholders for her financial advisors who helped her negotiate a $187 million four-year deal for her.
• The Comp Committee (Art Kern, Ron Burkle, and Frank Biondi) should all resign off the board. Enough is enough.
• Someone else from Yahoo!'s board should explain why Bartz' $3.3 million in unexercised AutoDesk options had to be "made up" for by Yahoo! shareholders to the tune of $10 million.
• Yahoo!'s board should also provide much more transparency on Bartz' employment contract. For example, what cash flow and total shareholder returns targets does she exactly need to hit in order to receive her 4 times base salary annual bonus and other equity grants and options. If shareholders can't trust the details around the "Make-Up Grant," why should they trust the board's decisions on these other compensation matters?
• Yahoo! should change their comp plans going forward for all executives and directors so that base and target bonuses are quite low -- even lower than the often cited "peer group." How will they attract people? Load up the incentives on the back-end. And, instead of having those incentives be triggered by 20 consecutive trading days at a certain stock price level (as Bartz' are), require that the stock stay there for two years (with clawbacks in case it drops back done). This will eliminate short-termist thinking.
• Finally, Bartz should refrain from going on TV in the future saying she "didn't sell anything" after she has sold $2 million in shares.

At the time of publication, Jackson had a net long position in Microsoft.

Eric Jackson is founder and president of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd.

Sphere: Related Content