Reading Marc Andreessen's Tea Leaves About Yahoo!

Marc Andreessen's blog post today, likely means that Blackstone and Bain Capital are in the lead for Yahoo!

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How Yahoo! Could Trip Up Facebook's Grand IPO Plans

Will Yahoo! get a do-over to extract maximum value from Facebook prior to its IPO, as it should have down with Google 7 years ago?

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How A Leveraged Recap of Yahoo! Could Actually Work

It's more complex, but there many ways to create value for Yahoo! shareholders should they go down the minority stake leveraged recap path.

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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.

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David Kenny Won't Be the Next CEO of Yahoo!

Chatter that Kenny might be the next CEO of Yahoo! now that he's left Akamai is way off base.

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HP's Board of Directors Is Pathetic

This HP Board has screwed up so many times, it's a joke.  They need to be completely dismantled.

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The Most Likely Buyers for Yahoo!

Which folks are likeliest to buy Yahoo! and at what premium?

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Why Yahoo!'s Next CEO Should Be Marc Andreessen

To maximize the price of Yahoo!'s stock, the board shouldn't go private or hire a dull CEO. They should hire Marc Andreessen.

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The Problem With Hewlett-Packard's Board

"May I have your attention please?
Will the real Slim Shady please stand up?
I repeat, will the real Slim Shady please stand up?
We're gonna have a problem here.."

- Eminem

Last week, I said that investors should give new Hewlett-Packard (HPQ - commentary - Trade Now) CEO Leo Apotheker a chance. I stand by that statement. But one group that doesn't deserve a second chance is the company's board of directors.

Within the past few weeks, Hewlett-Packard's board has been criticized by Oracle (ORCL -commentary - Trade Now) CEO Larry Ellison, former General Electric (GE - commentary -Trade Now) CEO Jack Welch and New York Times columnist Joe Nocera. On Friday, Ben Horowitz responded to the critics with a long blog post. Who is Ben Horowitz? He started a company called Loudcloud a couple of years ago with Marc Andreessen of Netscape fame. They later sold this start-up to Hewlett-Packard for $1.6 billion. Horowitz is now partners with Andreessen in an early-stage venture capitalist firm. Andreessen is now on Hewlett-Packard's board and played a central role in removing Mark Hurd and hiring Leo Apotheker.

Half of Horowitz's blog post is spot-on. He goes after critics who have said that the company's board was wrong to fire Mark Hurd for the small infraction of fudging expense reports and lusting after some staffer. Horowitz rightly points out: If you don't fire a CEO for lying about expenses, where do you draw the line?

If Horowitz had left his article at pointing out how silly it is for critics of Hewlett-Packard's board to mock the group for firing Hurd, it would have been fine. So what if he's clearly sticking up for his buddy Andreessen? So what if he's probably sold all his stock in the company and therefore has no skin-in-the-game basis for making this argument? I'd give him a pass, slap him on the back and say Ellison and Welch are clearly wrong on this (although I'd guess Ellison doesn't care given what Hurd's hiring has done for Oracle's stock price).

But Horowtiz didn't stop there. He goes on to pat the board on the back for being ethical, far-sighted and doing what's right for the hard-working men and women at Hewlett-Packard, because Horowitz got to know them so well from doing his time there (the way parolees have to do community service) for a couple of years as a condition of him getting his share of $1.6 billion. (I'm sure Ben really thinks he gets the struggles of the working men and women at the company from his long and protracted tenure.)

It was reading this second half of his blog post that made me immediately want to write this response. Horowitz would do well to remember that Hewlett-Packard's board is a badly governed board, which, in the case of firing Mark Hurd, made a good decision (for the reasons he spells out) but is still one of the most truly awful boards in large-cap corporate America.

Were the "ethical" directors doing right by the employees when they approved a plan to unilaterally cut all workers' pay by 5% a couple of years ago and committed that the senior executives would cut their own base salary by 10% but then doubled the total compensation (and perks) for Mark Hurd, Ann Livermore, Todd Bradley and other senior execs? Was that taking the long view?

And don't try to suggest that the board only knew about Hurd's shenanigans with this woman this past summer.

According to Hewlett-Packard, the board fired Hurd after it hired outside counsel to investigate claims of sexual misconduct. It was during the course of the investigation that the problematic expenses were uncovered that led to the firing. Yet, the company's originally filed 2008 proxy statement (which the board approved, so they either knew about it or were completely asleep when they rubber-stamped it) said that Mark Hurd charged almost $300,000 to shareholders that year for "personal meals" plus an additional $70,000 in tax gross-ups. Hmmm. Did the audit committee really think that Hurd (or even Hurd and his wife) could rack up that much in personal food expenses in a year? Even if they did, why the hell were Hewlett-Packard's shareholders paying for it? Either the members of the audit committee knew about what was going on with Hurd back then and chose to do nothing because (let's face it) Hurd was a popular CEO on Wall Street, or they were completely incompetent at their jobs of making sure all expenses are reasonable and legitimate, especially during a year of turning the screws on remaining employees with a 10% forced pay cut.

It was only after Michelle Leder of Footnoted and I complained publicly about these expenses, that Hewlett-Packard magically edited and refiled its proxy, claiming that the expenses were a clerical error.

Let me tell you, no SEC filing from a large company like Hewlett-Packard gets filed without about 15 levels of lawyers touching it first. There is never a mistake in a filing. Everything is there that's meant to be there. My belief is that this board knew stuff was going on a full two years ago -- that, at the least, warranted further investigation. Yet, they didn't act.

So don't even try to hold this board up as these thoughtful wise men doing right by shareholders.

This is a board in which no one seems to own any stock that they purchased out of their own pockets. They all have token shares that they received from options or grants. It's found money for them. If Hewlett-Packard's stock goes up, great; if it tanks (like it has since Hurd left), what do the directors care? It's not their money they lost.

Marc Andreessen (Horowitz's buddy) owns zero shares in Hewlett-Packard. Even after he sold his company to Hewlett-Packard for $1.6 billion in cash and stock a few years ago, he sold all his Hewlett-Packard shares. Even after being asked to join the board, he couldn't find the time to buy a few shares for himself. This is a guy who (conservatively) has a net worth over $1 billion. And he can't buy a few lousy shares? This is shameful. And it's not going to stop until Hewlett-Packard's shareholders (of which I am one, by the way) stand up and start screaming bloody murder.

Don't forget that this is a board with Ken Thompson sitting on it, the former CEO of Wachovia who killed his company and will never be able to work in financial services again because of it.

Hey, members of Hewlett-Packard's nominating committee, I hear that Jeff Skilling of Enron got a bad rap and deserves a second shot at being a director. Pay no mind to the fact that he's in jail. Or what about Chuck Prince or Angelo Mozillo or Dick Fuld or Stan O'Neal? So what if they all destroyed their companies? Those were all flukes. There aren't that many qualified directors around. Let's fill the board with such guys. The hard-working employees deserve these paragons of virtue representing their interests on the board. Thanks for taking such a long view for shareholders by nominating the guy who bought Golden West Financial and its mountain of California subprime mortgages for $26 billion.

I am sure that the hard-working Hewlett-Packard employees would feel much more comfortable about their board if each director committed to investing 5% of his/her net worth in open-market Hewlett-Packard stock purchases. If they believe Leo's the guy to take the company forward, great. Let's see them put their money where their mouth is.

I'm sure Horowitz supports his friend. But, next time, Ben, don't try to defend a truly awful board. Investors need investors representing their interests on the board. They don't need impartial rubber-stampers.

At the time of publication, Eric Jackson was long Hewlett-Packard.

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[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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HP Directors Lack Skin in Game

By Eric Jackson, Senior Contributor09/29/10 - 05:59 AM EDT

Stock quotes in this article:HPQ, ORCL

By the time this article appears, we will likely know the next CEO of Hewlett-Packard(HPQ_). [Actually, we didn't find out yesterday.]

And leading the committee who selected the new CEO is Silicon Valley wunderkind Marc Andreessen. Andreessen was the public face of HP when it ousted former CEO Mark Hurd in August (after granting Hurd an estimated $35 million severance package to get him through in between jobs).

When HP and Oracle(ORCL_) crossed legal swords after Hurd became Oracle's next co-president 30 days after leaving HP, it was apparently Andreessen who called Larry Ellison to smooth things over.

HP shareholders might be surprised to learn, however, that Marc Andreessen owns exactly zero shares in HP. As an HP shareholder, I'm very disappointed that Andreessen and most of his colleagues on the HP board haven't dug into their own (deep) pockets to buy some HP stock.

I'd prefer feeling that my representatives on the board feel the same pain that I do when the stock tanks. For this reason, I've recently filed a shareholder resolution with HP to adopt high stock ownership requirements for all directors. I hope that HP will allow its shareholders to vote on this matter at the spring annual meeting.

Long-term shareholders have been disappointed in HP's stock returns relative to the S&P 500 index return over the last decade. As of Sept. 22, 2010, HP's 10-year stock return was 25.14% vs. -22.64% for the S&P 500.

Over that time period, HP's board has been criticized for lax governance practices, including (1) the recent decision to oust Mark Hurd for questionable behavior, while still paying him a rich severance package, (2) the decision to use "pretexting" to gather information on a Wall Street Journal reporter and some of HP's own directors in 2006, and (3) the decision to pay Hurd $98 million in total compensation (before severance) for the three years prior his departure even though HP's stock return for the three years prior to Aug. 6, 2010, was -2.33%.

The Corporate Library, a corporate governance ratings firm, has consistently rated HP's board as "high risk" for its inability to manage incentive compensation. Nell Minow, co-founder and executive editor of The Corporate Library, has called HP's board "a serial corporate governance offender."

I believe that HP's outside directors would be more vigilant and effective monitors of management, as well as better judges of effective compensation packages (including executive perks such as personal use of corporate aircraft, personal travel and meals expenses, and gross-ups at the expense of shareholders for these executive taxable benefits), if all of them owned a significant equity stake in HP which they had to dig into their own pockets to buy, rather than being granted stock or stock options.

........

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