ZDNet: Will Yahoo's board also get a makeover?

From today's ZDNet:

Will Yahoo's board also get a makeover?

By Stefanie Olsen, and Dawn Kawamoto,
CNET News.com
Published on ZDNet News:
June 22, 2007, 4:00 AM PT

After months of criticism, Terry Semel is gone from the corner office at Yahoo, and Jerry Yang is finally back to running the company he co-founded.

But in the aftermath of the executive shakeup at the Internet's No. 2 search site, a big question remains: will the board of directors that recently gave Semel a $71 million yearly compensation package answer for its mistakes as well?

It could happen, despite the outcome of last week's annual Yahoo shareholders' meeting: as unhappy as investors may have been with Semel's compensation, which the Associated Press said was the largest deal received by a chief executive among the 386 publicly traded companies it tracks, the board survived the meeting last week intact.

Many believe the meeting ultimately led to Semel stepping down. Still, the lowest voting percentage any of the 10 board members received was 66 percent, according to Yahoo. The company did not say who got the low vote or break out percentages for each board member.
Also, Semel will still be the nonexecutive chairman of the company.

But that meeting could be just the first act in a long-running boardroom drama at Yahoo. A number of influential organizations, such as the advisers at Institutional Shareholders Services, think a shakeup isn't such a bad idea. ISS has taken Yahoo's board of directors to task for the last two years for Semel's compensation package, asking that it be tied more to the company's performance. But the board argued that the package (Semel has reportedly earned $450 million in six years at Yahoo) was justified in order to retain his talent.

"They just furnished a massive compensation package to Terry and then turned around and terminated his tenure. It begs the question about whether there's some intelligent design behind the program," said Patrick McGurn, executive vice president at ISS.

"Problems on the compensation front can be a window into the boardroom," McGurn added. "A second part of the process could be in looking at succession among the directors."

So how exactly would that happen, and when? Like other public companies, Yahoo is mindful of ISS' recommendations. ISS clients such as pension funds, mutual funds and other institutional investors will often vote their shares in lockstep with recommendations received from ISS. As a result, what the advisers say can greatly sway shareholder votes, especially for companies with a large base of institutional investors rather than mom-and-pop investors.

ISS advised its clients to vote against the re-election of Yahoo's compensation committee: Ron Burkle, managing partner of private investment firm the Yucaipa Companies and friend of former president Bill Clinton; Arthur Kern, co-founder of radio group American Media; and Roy Bostock, former chairman of ad agency BCom3 Group. Burkle and Bostock joined the Yahoo board after Semel in 2001 and 2003, respectively. Kern has been with Yahoo's board since the company was founded in 1995.

Yahoo shareholder Eric Jackson, president of the consultancy Jackson Leadership Systems, believes 7 out of the 10 directors should go, and he wrote as much in a proposal earlier this year. The three members Jackson's group wanted to see remain were Yang, Skyrider CEO Ed Kozel and Vyomesh Joshi, an executive vice president in imaging and printing for Hewlett-Packard.

Calls to Yahoo board members were not returned, but Helena Maus, Yahoo's senior director of corporate communications, sent a statement. The "Yahoo (board) is wholly committed to increasing shareholder value and will be working closely with Jerry Yang and (new president) Sue Decker to help accelerate execution and further strengthen Yahoo's leadership in order to capitalize on the enormous growth opportunities ahead."

But given the negative sentiment on display at the shareholders meeting, the board could remake itself before next year's annual shareholder meeting. One or more of the members could decide to step down, or Yang could nominate new members before 2008.

Majority rulesYahoo's directors are subject to re-election each year, and under changes to the company's bylaws the board enacted in January, the stage is set to allow shareholders to vote a director out of office, even if no opposition candidates are running for that seat.

Under the "majority vote" system, which a number of corporations are increasingly embracing, Yahoo directors are required to draft a resignation letter and have it waiting in the wings. If directors have more "against" and "withhold" votes than "for" votes, they are required to tender their resignation to the board, following the annual meeting.

Although the board's nominating and governance committee, comprised of independent directors, can make a recommendation to reinstate the ousted director, the board would be required to make its final decision public.

"The majority vote is one way companies can show they are listening to shareholders," said Jerry Mucha, proxy manager with proxy solicitation firm Morrow & Co. in Connecticut. "If you have a lot of withholds, or did not act on a shareholder vote that passed, this is one way to show you are listening to shareholders."

Mucha, as well as other proxy solicitors, note that a 33 percent withhold or against vote may be
considered high if shareholders are weighing their decision solely on the financial performance of the company. But if a company has a large percentage of institutional investors who rely on recommendations from proxy advisory firms, then a figure of a 30 percent withhold vote is not uncommon.

Board members who aren't facing any withhold vote recommendations by a proxy advisory firm are typically re-elected with a 90 percent approval margin, said Mucha. Jackson, however, believes the figure is around 98 percent.

Changes to the board can come via a director's resignation and a replacement nominated by the board of directors, or the board can change its bylaws to expand its size. Shareholders can also wage a proxy fight and nominate their own slate of opposition candidates for election at the next shareholders meeting.

Jackson said he had wanted to run for the board earlier this year but wasn't a registered stockholder at the time he filed papers. Whether it's him or not, Jackson wants some fresh perspective.

"The whole board has been guilty of being a little bit complacent," he said. "The board could benefit from some more youth and varied perspective and people who will ask tough questions of Jerry and (new Yahoo President Sue Decker)."

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AllThingsD - Voices: A New Day for Yahoo

From today's Voices section of AllThingsD:

(Thanks to Kara Swisher for the invitation.)

A New Day for Yahoo

June 20, 2007
by Eric Jackson
President, Jackson Leadership Systems

I hadn’t expected Terry Semel to step down on Monday. Less than a week before, after Yahoo’s annual meeting in Santa Clara, Calif., he approached me. He was quite affable, considering that we had had a pointed exchange during the earlier Q&A session and that I led a group of 100 shareholders owning 2 million shares who had submitted a nine-point “Plan B” to the company for creating additional value, where point No. 1 was to remove him as CEO. Despite that, he said he was interested in holding a “constructive dialogue” with our group of shareholders. He gave every indication that day that he intended to fight on (with, yes, “fire in the belly”).

Several commentators didn’t think that Yahoo would change all that much following the shareholder vote, partially because Jerry Yang (and also co-founder David Filo) is “not a boat rocker.” (Kara Swisher did acknowledge that she was wrong in this post.) Something obviously had changed between last week’s annual meeting and Monday’s closing-bell announcement. Jerry Yang is the new CEO, with Sue Decker as the company’s president.

In the wake of this news, analysts, commentators and pundits started reading the tea leaves about what the changes signified. Some saw Yang as purely an “interim” CEO who didn’t really want the job. Some said that he was too close to Semel and wouldn’t deviate from the prior strategy. Others inferred that Yahoo was more likely to put itself up for sale (including–surprise–a few investment bankers). One big complaint leveled against Yang was that he’d never run a 12,000-person company before. No, he just helped create and build a 12,000-person company.

As a shareholder, I couldn’t be happier with the leadership moves announced Monday. Yang will be extremely successful in his new role. He wants this now–not for himself, but for the users, employees and shareholders of the company. What’s more, he can and will be successful.

Here’s why: In the weeks leading up to the shareholder vote in Santa Clara, I was contacted by email or phone by almost a dozen current or recently departed Yahoo employees. What’s clear is that Yang and Filo are universally beloved. “David Filo would send out IMs to others on the product/engineering side when some bug turned up at 2 a.m.,” boasted one very impressed ex-Yahoo. Several people asked me: Can we “draft” them to play even bigger roles at the company? They’re getting their wish.

So, let’s go over the case for Yang as CEO:

1. Nobody knows the business as well as he and Filo do. These two guys are the corporate DNA. When you walk into the lobby at Yahoo, you are inundated with an internally focused marketing/morale-boosting campaign called “We Were; We Are,” complete with black-and-white shots of the early days at the Stanford computer lab, contrasted with colorful modern images of Yang and Filo. They have continued to be intimately involved in the business and know where it needs to go.
2. He’s already off to a fast start. For a guy who some say was reluctant to take the job, he appeared remarkably energetic in Monday’s analyst call announcing the changes. His instincts and alacrity will serve him well.
3. He knows how to do deals. Yang architected the very significant partnership with SBC (now AT&T) in early 2001. More recently, in 2005, he did the deal with Alibaba.com. Critics have pointed to Broadcast.com and GeoCities as examples of expensive acquisitions he was involved in that didn’t pan out. This was a different time, however, when Yahoo had a different market cap itself. His instincts were correct (on video and social networking, way before they were seen as “growth” areas). He won’t be shy to do deals in the months ahead, which the company will benefit from.
4. He’s got the mental strength. It would not have been easy for Yang to go through the last few days leading up to Monday’s announcement. Semel is a friend. Yang wanted it to work. But he was obviously ready to take on this responsibility.
5. It’s his time. None of us has experience until we get experience. Yang hasn’t run a 12,000-person company, but he’s worked there every day of his professional life. He’s 38, not 25. And he–like Filo–loves this company more than anyone else. More important, though, the two co-founders feel a responsibility for the company. It’s a critical time and Yang’s ready. Back in business school, I took a class in which we read and discussed key passages from Shakespearean plays and the business lessons they taught. Yang reminds me of Prince Hal, the 20-something, fun-loving prince from “Henry IV.” Hal’s father and courtiers worry that he won’t be ready later to ascend to the throne. Yet, when fate calls, Hal closes one chapter of his life and becomes King Henry V–one of the most revered in the monarchy’s history. My sense from watching Yang at the meeting and since then (and the same goes for Filo) is that the flip has switched. These guys are all-in, in a way they haven’t been before.
6. Sue Decker’s there to help. As a leader, you rely on those around you to help you in areas where you are weaker. Yang’s lucky to have someone as capable as Decker working closely with him.

So, what does this mean for Yahoo’s shareholders? Unlike some, I strongly believe that Yahoo will remain independent. Yang and Filo built this company. They aren’t there to flip it. Yahoo will be much more aggressive in acquiring other companies. And they will look to win on new battlegrounds with Google. It was encouraging to read that they will release the next version of Yahoo! Go (their mobile product) on Friday.

The two most important competitive advantages any company has are its culture and its people. Yahoo’s been blessed with great people through the years, but morale has taken a hit of late. With Yang ensconced as CEO, and with Decker’s and Filo’s support, people are excited again in Sunnyvale. It’s about We Were, We Are, but also what We Will Be.

Eric Jackson is president of Jackson Leadership Systems, a leadership, strategy and governance consulting firm. This year, he led a “Plan B” group of 100 Yahoo shareholders with more than 2 million shares in an Internet-based activist campaign to unlock value at the company.

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The Guardian: Founder Yang takes over after Semel quits

From tomorrow's Guardian:

Bobbie Johnson, technology correspondent
Wednesday June 20, 2007
The Guardian

Investors and analysts backed the surprise departure of Yahoo!'s chief executive, Terry Semel, yesterday but gave a mixed response to news of his successor.

Mr Semel announced late on Monday that he was stepping down after six years in the job, after mounting pressure in recent months. In a letter to the board, Mr Semel admitted that "none of us is at all satisfied with the company's recent financial performance" and that he had decided the time was right to step aside.

He will remain on the board as non-executive chairman but has been replaced by Jerry Yang, who started Yahoo! with his fellow college dropout David Filo in 1995. Mr Yang, 38, said that it was "a great honour" to be taking the position, while admitting that the past year had "obviously not been an easy one for us".

But the decision to appoint him to the top job received a lukewarm response from investors and analysts. Some said they doubted whether he had the experience or new ideas to revive the company.

"We would have liked to see a more radical departure from the past but Yang clearly thinks he can turn this thing around," said Ben Schacter of UBS.

The reshuffle also moves the fast-rising executive Susan Decker into a more influential position. Ms Decker, a former Yahoo! chief financial officer who was recently promoted to head of advertising, was widely seen as Mr Semel's successor but will become company president.

Eric Jackson, leader of a group of small shareholder activists, said: "Mr Semel brought much-needed stability to Yahoo! in the early days but we weren't the only ones who were critical over the past three years. I don't agree that Jerry Yang is a stopgap or that he's inexperienced - in the technology industry the founders of any company cast a major shadow."

Mr Semel, a New Yorker who was chairman and chief executive of the Warner Bros studio, was seen as an outsider when he took over at the pioneering dotcom company in 2001. He quickly set about trying to turn Yahoo! into a global media company and under his charge the company expanded from 3,500 staff to 12,000.

However, a series of mis-steps in recent years has seen the share price fall and his fate was sealed by the stifled launch of the much-heralded Panama advertising system last year. Touted as a competitor to Google's immensely successful advertising scheme, Panama was met with muted enthusiasm, putting Mr Semel's position into question among investors.

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Jim Cramer's Three Ways to Win with Yahoo!

This came from yesterday's TheStreet.com article by Jim Cramer with his take on Yahoo! after this past week.

Reluctantly, with full recognition of their own incompetence, it is time to buy Yahoo! (YHOO - Cramer's Take - Stockpickr - Rating) again -- if only for a trade back to $30.

Hear me out on this.

First, there are two people at the company who are not incompetent bozos: Jerry Yang and David Filo. These are the founders. I believe they must have a degree of pride.

I know that they have been told that the problems at the company were related to a couple of underlings who were messing up. They were all fired. It turns out that the problems had little to do with these underlings at all. The problems were in the stars: Terry Semel and Susan Decker.
Yang and Filo can fire them and see the stock back up at $30, when it can be sold.

Second, the aggressive, emotional selling of this week is simply too panicky. The stock doesn't belong at $32. It also doesn't belong at $27, given the potential, Google (GOOG - Cramer's Take - Stockpickr - Rating)-wise, to ever get it right and the scarcity of Net properties.

Finally, while the company is very expensive, once again the expectations have been washed out of the stock, just as when it was at $23.

Worth it to start buying this hated monster on the "three ways to win" theory.

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Sue Decker's First Act in her new Role

As reported yesterday in TechCrunch and elsewhere, Sue Decker has sent out her new Org Chart/Org Design for the newly created Advertising Group which she now heads up (in addition to her CFO duties until Yahoo! hires her successor).

The email is long and detailed. Mike Arrington complained that there was too much "corporate-speak" in it. But it is polished, thorough, and politically sensitive. So, my congratulations to Sue on this initial step.

My biggest two suggestions for her continued leadership development is:

(1) Watch the acronyms and the over-referencing to the various Yahoo! departments. Sue, as indicated in her memo but also in the last analysts' call, is very bright and moves at a fast pace. She has a tendency to fall into over-using the acronyms and having listeners (like Arrington) get lost with the references to the various different Yahoo! groups. She always needs to be clear that she's explaining what the various groups do and how they are delivering value to Yahoo!'s customers/users/shareholders, so that we all understand it.

(2) Slow down. Sue speaks very quickly. This can accentuate issue 1 above. She needs to slow down to more effectively communicate.

She will obviously be judged over the coming months for her ability to have Advertising deliver the goods. I predict she will be successful.

Her memo demonstrates what's lacking in the Audience group without a leader in place. However, Yahoo! is better off in the long-run to take the time to find the right person rather than have had Dan take the spot. I hope they'll announce someone very soon.

I would finally encourage Sue to consider giving up her board seats with Intel and Costco. While they signify how highly regarded she is by these two companies, as a Yahoo! shareholder, I don't understand where she finds the time to effectively do her new job, still do her old job, and also do the paperwork required to sit on those two boards. Yahoo! and its shareholders would be better off if Sue Decker had one job and could focus solely on that.

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Inside Yahoo: Behind the Purple Curtain

Time Magazine came out yesterday with a special on "Inside Yahoo: Behind the Purple Curtain." Here is one of the articles in the special mentioning our dissident shareholder activity.

T H E B I G S E A T

Analysts expect that if CEO Terry Semel succeeds in wringing profits out of the company's new Panama advertising system, the project could be his last hurrah as leader. "Terry has no plans to leave the company and is energized about the future," says Helena Maus, Director of Corporate Communications. But others expect a change. "It looks like Sue [Decker] is going to get the prize when Terry decides to leave," says Youssef Squali, Internet analyst for Jeffries & Co. "My best guess is Terry puts Yahoo! on the growth path on the search side, sees the stock react favorably, and then he leaves. When? By the end of this year, or early next year." Dissident shareholder Eric Jackson says if the company looks beyond Decker for a leader from outside, other candidates could include Jonathan Miller, formerly of AOL, or Tom Freston, former Viacom CEO.

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What's New at Yahoo!?

A week has passed since the reorg at Yahoo! The reaction has taken two forms: (1) impatience and calls for more dramatic steps including a change at the top and (2) satisfaction that this has set a chain reaction that will ultimately lead to better days ahead.

The mainstream blogs has covered the tension-racked moments of last Tuesday, when many Yahoo!s were emailing TechCrunch with their updates on what was being announced at the reorg, and the feel-good and action-packed holiday party moments of last Saturday night (great pic from Valleywag above). The business press has also chimed in with some suggestions on how to fix what ills Yahoo!.

However, a week later, what's really changed at Yahoo!? Let's summarize:

- There are now 3 main divisions: Audience, Advertisers, and Technology -- or, if you like, Programming, Sales, and Technology supporting both. Is this really all that different from the previous structure? No. The old management bios (still up on Yahoo's website) state that there are 6 execs who are really at a level above the other managers: Terry, the 2 founders, Dan, Susan, and Zod. The new structure was to give new titles to Dan, Susan, and Zod - with the founders continuing to do their thing apart from this. It's obvious that Dan saw this as a step down from COO (which had him above Susan and Zod), and decided to depart. (He'll take $1.4MM with him for 2+ months of work next year.) Now, the search is on for an external person to head Audience. From a day-to-day perspective: new titles, same stuff under each.

- Susan Decker is elevated. It appears this wasn't the original plan. The thought was to make Dan, Susan, and Zod a triumvirate, which would have been very awkward and eventually led to someone leaving later when Terry's successor is announced. Regardless, it is a great opportunity for Susan. Yet, as Henry Blodget said, will she really be empowered to do what she wants to do in this position? Not yet. Should she be? Yes.

- Dan Rosensweig is gone. I don't blame him for leaving and am sure he'll land on his feet somewhere. (Until then, he can hang out with Steve Case, Bob Pittman, Ross Levinsohn, and Jonathan Miller - a growing list of new media execs looking for the next big challenge to restore prominence to their good names.) It's interesting that I've seen no positive comments from current or former Yahoo!s about Dan. The only positive story came from his old Ziff-Davis colleagues at CNET. My concern for Yahoo!: why is he hanging around until March? If someone offered his resignation at my company, and I couldn't convince him otherwise, I'd want him gone immediately. It's best for all concerned for a quick exit. My suggestion for Dan: Go to CNET now. You'll find no better chance to turnaround a company you know as well. That will set you up nicely for your next adventure after that.

- Accountability and Speed of Decision-Making is supposed to be Increased from the change. However, two big problems: (1) there is no head of the Audience group to speed decision-making or hold others accountable and (2) Susan Decker is doing her old job plus her new job until a new CFO is found. It also remains to be seen how the change in structure really changes anything in Technology. It's still organized as it was pre-Dec. 5th.

- Yahoo! is entering a Third Phase. In the media interviews and his blog posting following the announced reorg, Terry described Yahoo! as now being ready to move into its third phase as a company. Phase One was "get big fast," Phase Two was "Focus," and Phase Three is about "Customers." It's a great sound-bite, but what does it really mean? Were they not focused on customers before?

Not much has really changed at Yahoo! with this reorg. In fact, until a new Audience head and CFO are hired and brought up to speed (a process which will take at least 2 months post-hire), decision-making and "through-put" should slow, not quicken.

What does need to happen? At the risk of Jonathan Strauss saying I'm "Monday-morning quarterbacking," here are some further suggestions on top of the ones I've made in previous posts:

- Elevate Decker to President - now. Audience, Advertisers, and Technology should all report in to her. She will have to oversee Audience, at least until the new person is brought on.

- Buy Baidu.com. Want to make a game-changing acquisition that shows that Yahoo! is back and ready to play? Buy Baidu with stock and merge it into Alibaba.com. Google would be back on its heels in the fastest growing market in the world.

- Start paying a Dividend. Remember all the yakkity-yak about Microsoft's refusal to pay a dividend? It's still a rare thing to do in the tech world. That's why it would send a strong signal to Wall Street and other stakeholders that Yahoo! is bullish on its future. It will also immediately give some juice to the stock price.

- Articulate a Vision for Yahoo! Social Media and hire Lloyd Braun's replacement immediately. Obviously, Yahoo! wants to make its mark here. However, that's like saying every network exec wants to find the next Lost, Friends, or Desperate Housewives. No one expects Yahoo! to say which companies they are going to buy or specific products they're going to develop. However, some vision statement about how Yahoo! is going to build on successes in Fantasy Sports, del.icio.us, Flickr, and The Nine (which combines video, personality, current events, and Web in an entirely new way) would be helpful. A vision is not saying "We were really smart to buy del.icio.us and Flickr and they're now very popular today." A vision is saying what you're going to do differently in social media which will cause all your competitors to play catch-up.

- Articulate multi-form Search Vision. Yahoo! rightly should crow about its leadership in banner and "rich media" advertising search and Yahoo! Answers. Don't get caught in a direct comparison shoot-out with Google on general search. Explain and articulate all the facets of search and how you are leading in a number of them. Tell us how search will be a different game two years from now than today. Even if you're wrong, no one ever goes back and checks.

There are a number of other product fixes/upgrades that different people have mentioned in previous posts and, of course, the requisite plea to ship Panama asap. Everyone at Yahoo! understands that stuff already.

As long as Terry's around, let's also hope he drops the scripting points from Corporate PR and gets mad and gets real every chance he gets. Although not perfect, I thought he made some good impressions in his appearances last week. Clearly, the criticism has stuck in his craw. He's thinking legacy and he wants to go out on a high, not a low (who can blame him?). He's going to fight to preserve his legacy and that's probably a good thing for all concerned. But it's going to take more than a press release reorg. It's going to take real action and change. You don't build or rebuild a culture overnight.

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Industry Insiders Praise Yahoo Choice for Key Post

Interesting commentary from today's NY Times:

SAN FRANCISCO, Dec. 6 — Shortly after Susan L. Decker was appointed chief financial officer of Yahoo in mid-2000, the bottom fell out of the Internet business. Within a year, Yahoo’s shares lost more than 90 percent of their value, as scores of Yahoo’s dot-com advertisers went bust.

Throughout that challenging period, Ms. Decker played a leading role in helping reset expectations on Wall Street and inside the company. She was also instrumental in helping recruit a management team that put the company on a path to renewed growth.

Those accomplishments earned her a healthy dose of credibility and loyalty, according to people inside and outside Yahoo.

“The last time they went through a challenging period, she was very effective at helping rebuild the team,” said Mary Meeker, an analyst with Morgan Stanley. “She was very aggressive internally about forcing the company and the employees to be realistic about the business and she was extraordinarily candid.”

Now, as Yahoo faces challenging times again, Ms. Decker’s credibility is being rewarded and tested.

On Tuesday, in an attempt to compete better with faster-moving rivals, the company announced a restructuring of its operations into three business units. As part of the reshuffling, Terry S. Semel, the company’s chairman and chief executive, tapped Ms. Decker to run the unit that arguably faces the biggest challenge: reducing Google’s lead in Internet advertising.

Some analysts say the appointment of Ms. Decker to head the advertiser and publisher group may indicate that she is being groomed to succeed Mr. Semel as chief executive.

The company declined to comment or to make Ms. Decker or other executives available for this article.

Those who know Ms. Decker, 44, say that despite her lack of extensive operational experience, she has the skills to do the job.

“It would be difficult to find a job for which she is not intellectually capable,” said Geoff Ralston, Yahoo’s former chief product officer, who left the company in April. “That doesn’t mean there aren’t a lot of challenges for her. But she is one of the clearest- thinking minds at Yahoo.”

Rob Solomon, a former senior vice president at Yahoo who is now chief executive of SideStep, a travel-oriented search business, added: “I was always in awe of her brilliancy. Any time I interacted with her, she didn’t need much explanation. She understood things quickly, and then she would start tearing through the numbers and seeing where the opportunities and the risks were.”

Indeed, whenever the subject of Ms. Decker came up in interviews with nearly a dozen former colleagues, analysts and other people who know her, Ms. Decker’s keen intellect was the first thing cited.

“She is truly one of the smartest executives I ever worked with,” said Jana Rich, a managing director at Russell Reynolds, an executive search firm with Yahoo as a client.

Ms. Rich also credited Ms. Decker with strong personal and leadership skills. As Ms. Rich searched for the right candidates to present to Yahoo, Ms. Decker was always hands-on, helping her understand not only the qualities needed in a person but also working through detailed analyses of companies to find which ones were facing challenges similar to Yahoo’s — and hence might have candidates with suitable skills.

Ms. Rich now credits Ms. Decker’s approach with teaching her critical lessons about leadership. “Involve your key people strategically, set a high bar and work with them to solve the problem,” Ms. Rich said.

Mr. Solomon said, and others confirmed, that Ms. Decker once rode to an all-staff meeting on a Harley-Davidson motorcycle.

“She is pretty cool and very affable,” he said. “For her to ride into this all-hands corporate meeting on a Harley says that she is a very different type of C.F.O.”

Ms. Decker joined Yahoo from Donaldson, Lufkin & Jenrette, where she worked for 14 years, first as a publishing and advertising research analyst and eventually rising to become head of global research.

Since joining Yahoo, her successes have been noticed throughout Silicon Valley. In 2004, Ms. Decker was appointed to the board of Pixar Animation Studios, and last month, she joined the board of Intel, whose chairman, Craig R. Barrett, referred in a statement to her “extensive business background, leadership and understanding of the technology industry.”

Ms. Decker also serves on the board of Costco Wholesale.

In recent months, she was put in charge of Yahoo’s marketplaces business unit, where she recruited Hilary Schneider, a former newspaper industry executive with Knight Ridder. The two helped broker a landmark deal to share content, advertising and technology with a consortium of publishing companies representing more than 175 daily papers.

Ms. Decker’s success may ultimately hinge on her ability to broker more such deals and improve the company’s ability to turn its existing audience, the largest on the Internet, into more advertising dollars.

“I don’t think she gets credited enough with how good she is at understanding businesses,” said Ellen Siminoff, the chief executive of Efficient Frontier, an Internet marketing firm, and a former senior vice president at Yahoo. “She will have to go to her top advertisers and publishers and understand what it is going to take to get more dollars.”

Ms. Siminoff said that her success in cashing in on Yahoo’s audience will depend, at least initially, on things that may already be outside Ms. Decker’s control. Project Panama, an overhaul of Yahoo’s advertising system, whose delays have been a symbol of the company’s troubles, is already being rolled out, Ms. Siminoff noted. “The train has left the station,” she said.

It is not clear whether Yahoo’s shake-up will be enough to turn around the business. On Wednesday, its shares dropped 57 cents in regular trading, to $26.86, or more than 2 percent.

Part of Yahoo’s challenge in catching up with Google is technological. Yet despite Ms. Decker’s lack of technology background, associates say she is up to the job.

“What I was really impressed with Sue over the years is that she moved from a very nuts-and-bolts approach to management to a much more strategic perspective,” Mr. Ralston said. “She really shifted over time. I’m sure that in the end is why Terry gave her this job.”

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What Didn't Happen at Yahoo!

An article from today's TheStreet.com by Vishesh Kumar:

What Didn't Happen At Yahoo!

By Vishesh Kumar

TheStreet.com Senior Writer

12/6/2006 3:15 PM EST

Click here for more stories by Vishesh Kumar

Despite the hype, the most important piece of news to come out of Yahoo! (YHOO - news - Cramer's Take - Rating) recently is what the company didn't do.

The intrigue swirled Tuesday evening as news of a Yahoo! senior-executive meeting spread through the blogosphere. And while speculation ranged from the company announcing that it would be acquired to the eagerly gamed resignation of CEO Terry Semel, the end result was seemingly lackluster.

Chief Operating Officer Dan Rosensweig, Senior Vice President Jon Marcon, and Media Group Chief Lloyd Braun will be departing. The company also said it would reorganize itself into two separate business units.

The news may have rattled -- or soothed -- investors at other tech behemoths. But Yahoo! is a company with recent antics such as the famed Peanut Butter manifesto, a leaked internal memo urging a firing of up to 20% of the workforce, and another claiming last quarter that the Internet-advertising sector was facing an overall slowdown -- only to see rival Google (GOOG - news - Cramer's Take - Rating) blow away its numbers.

Investors shrugged off the news, with Yahoo! shares decreasing a modest 50 cents to $26.93 in midday trading Wednesday.

Still, investors should be relieved by a few predictions that did not pan out Tuesday.
First, Yahoo! CFO Sue Decker did not get promoted to the top CEO spot, as a growing chorus of commentators was hoping for. Decker, who will now head up a new group responsible for ad sales, deserves kudos for her solid performance as a CFO and more.

But much of the gushing support for the former Wall Street research analyst comes from people who are accustomed to thinking about Wall Street first -- not the least of whom are other research analysts.

"Institutional investors love Sue Decker," Laura Martin, an analyst with Soleil/Media Metrics, told Forbes in November. "She was there as the stock plummeted, providing a very material piece of information that the prior management team didn't give out," Mark Mahaney, a Citigroup analyst, said in the same Forbes article.

When CFOs Take the Reins

Though Decker may have done a top-notch job managing Wall Street and giving research analysts the data points they need to do their job, there's no guarantee that this translates into the ability to take the helm of one of Silicon Valley's iconic tech companies.

In fact, there are virtually no examples of CFOs with research-analyst backgrounds who have gone on to run tech companies as CEOs in the tech field, with the closest example perhaps being Charles Phillips, who garners the number two spot as co-President of Oracle (ORCL - news - Cramer's Take - Rating).

But the nearly 30-year-old Oracle is a much more mature business than Yahoo!, with more predictable revenue streams that lend themselves to a CFO's acumen.

More importantly, the last thing Yahoo! needs to elevate as a priority right now are Wall Street's concerns. Just take a look at the roaring success of rival Google, famous for snubbing Wall Street and putting the long-term prospects of its business ahead of all else.

Shares of Google, which does not provide quarterly guidance and has mocked analyst concerns about its growing technology spending, continue to march forward, trading up $3.99 at $490.99.
How Yahoo! is thought about in Silicon Valley will have much more bearing on the company's success in the long term than Wall Street's daily machinations. Yahoo! is increasingly seen as a technology laggard when compared with Google and the hundreds of cutting-edge startups blossoming in Silicon Valley's latest renaissance.

The company will need to enlist the best and brightest technologists to thrive in an industry famous for dependence on the innovativeness of its rank and file. A companywide push toward the short-term, cookie-cutter metrics Wall Street considers paramount will only alienate these people.

Google, an engineers' paradise famous for encouraging employees to spend 30% of their time working on ambitious pet projects, again provides a useful foil.

Yahoo!'s already-stifling posture would only be furthered by a greater orientation toward Wall Street. "We believe Yahoo!'s myopic focus on protecting its margins has come at the expense of technology investments, as evidenced by two consecutive quarters of R&D spending declines," writes Jeetil Patel, an analyst at Deutsche Bank, which has a banking relationship with Yahoo!

"In contrast, its competitors continue to aggressively spend on R&D and product innovation as a means of user growth," writes Patel.

That said, Sue Decker may demonstrate the makings of a fine Internet CEO over time, even if she is the first to come from a financial background. "Her's is not seen as the traditional background to come from, and when you are working with a board to find candidates, there is often the hope you will come up with a magic bullet," says Eric Jackson, CEO of consulting firm Jackson Leadership Systems and among the first to call Decker the odds-on favorite to succeed Semel.

"But all candidates have their strengths and weaknesses, and when you look at Decker, she is the top person from an internal perspective on balance."

That's why Yahoo!'s wait-and-see approach -- giving Decker a promotion and a good chunk of operational responsibility, without vaulting her to the top spot -- is the best of both worlds.
The position will test Decker's operational ability, leaving the door open to an outside CEO down the road if things don't work out. And it will give Decker, who is lately being noticed more and more, greater incentive to stay with Yahoo! in what promises to be an uphill battle.

The other piece of good news was that Yahoo! signaled that it would not be cutting any jobs, despite the Peanut Butter memo's pushing for one-in-five employees to be canned.
Instead, Semel wrote on the company's blog that Yahoo! was positioned for growth and would be hiring -- not firing -- in the near future.

While Wall Street often reacts positively to the cost-cutting that comes with layoffs, the announcement could prevent many Yahoo! employees who were previously afraid of losing their jobs from preemptively jumping ship.

And at a time when it's imperative for the company to deliver its new advertising platform, dubbed Project Panama, on time, Yahoo! needs those people more than it needs Wall Street.

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New Day for Yahoo!

Congratulations to Susan and the rest of the organization. They are a great company with a great future.

Reuters

Yahoo reorganizing, CFO Decker gets key role

Tuesday December 5, 11:45 pm ET By Eric Auchard

SAN FRANCISCO (Reuters) - Yahoo Inc. (NASDAQ:YHOO - News) on Tuesday announced a reorganization that marks Chief Financial Officer Susan Decker as a potential successor as CEO and simplifies its structure as it battles faster-growing rival Google.Decker, 44, will take the lead of a new unit focused on advertising, which is Yahoo's main source of income but has also seen growth slow in some areas. Media, communication, and other product groups will be merged into a unit focused on marketing and international businesses.

Chief Operating Officer Daniel Rosensweig, a possible rival to Decker for the mantle of successor to Chief Executive Terry Semel, will leave the company in March.

Also leaving is Yahoo Media Group chief Lloyd Braun, a former ABC TV executive hired two years ago to help Yahoo blend its Internet services with Hollywood-style showmanship.

Ushered in to help the company define a new hybrid that blended Hollywood and Silicon Valley, Yahoo was caught out by the explosive rise of video-sharing phenomenon YouTube, which was recently bought by Google Inc. (NASDAQ:GOOG - News) for $1.65 billion.

"This is just the beginning of what Yahoo needs to do," said RBC Capital Markets analyst Jordan Rohan in New York.

"It may take all of 2007. Change like this is evolutionary, not revolutionary. The new division heads will need time to grasp the enormity of the task at hand."

A spokeswoman said Yahoo does not publicly discuss its succession plans. Semel, 64, who is also Yahoo's chairman, has no plans to leave the company and is re-energized by the changes under way, she said.

SHIFT IN AD MARKET

Yahoo, a 12-year-old Internet pioneer, has struggled with a shift in the online ad market as corporate advertisers chase younger customers on new social networking sites such as MySpace and YouTube.

In its latest quarterly results, Yahoo posted a 37 percent drop in quarterly profit, prompting Semel to say he was not satisfied with the financial performance of the company.

Google, by contrast, said its profit nearly doubled as it tightened its grip on the online search market.

Shares of Yahoo are down about 30 percent this year, while Google shares are up about 17 percent.

Some of the details of the reorganization were prefigured in an internal memo written in October and leaked out in November, which was dubbed the "Peanut Butter Manifesto."

The memo argued Yahoo's investment strategy was like spreading peanut butter too thinly on bread -- and argued for "radical reorganization" and job cuts of 15 percent to 20 percent of Yahoo's 10,000 employees.

Yahoo said on Tuesday that no layoffs were planned in the restructuring. "As far as layoffs go, we are absolutely organizing for growth," Semel told Reuters in an interview to discuss the moves. "We continue to hire."

The company is reorganizing into two business segments: Audiences, which will oversee search, media and communication products and services, and Advertisers and Publishers, which makes money from ads aimed at the audiences. Yahoo's e-commerce business will join the ad group.

Decker, who will head the latter, was a top-ranked Wall Street media analyst, who joined Yahoo in 2000. She has emerged as one of Silicon Valley's most high-profile woman leaders.

As Yahoo moves to serve customers not only within its own network of properties but also via partnerships on other online properties, the need to restructure grew apparent, Semel said.

He pointed to high-profile advertising and Web services partnership deals Yahoo has struck in recent months with online auctioneer eBay Inc. (NASDAQ:EBAY - News), 170 U.S. daily newspapers and mobile phone powerhouse Vodafone (London:VOD.L - News) in Britain.

RBC's Rohan argues that Yahoo faces less competition from Google, but, like Google, it must become more nimble in order to grasp emerging opportunities on the Internet, where two- or three-year-old companies frequently set the industry's agenda.

"The competition with Google in search is done. Google won," Rohan said. "But Yahoo has a real audience advantage in everything except Web search," he said of its vast audiences for e-mail, instant messaging, news and other properties.

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Laying Odds on Semel's Successor for the Corner Cube at Yahoo!

*Updated6/20/07: Congratulations to Jerry Yang who was announced as Yahoo!'s next CEO on Monday.*

After the pre-turkey "Peanut Butter" memo, speculation is swirling on who's in the running for Terry Semel's corner cube in Sunnyvale.

Here are Breakout Performance's odds on the front-runners:

1. Susan Decker: 3 - 2. Positives: Insider; well-respected by most Yahoo!s, well-liked by street. Question Marks: Technical enough?, too 'analysis paralysis'?, technical vision for company.
2. Dan Rosensweig: 4 - 1. Positives: Insider; technical enough background; COO tenure on the surface makes him first in line. Question Marks: Arrongant?, will the Yahoo!s trust/follow him?, too close to Semel?
3. Steve Berkowitz, SVP at Microsoft: 8 - 1. Positives: Knows search from Ask, MSN experience, relevant industry leadership experience with views of big and small companies, learned from Diller, Gates, Ballmer. Question Marks: Vision for company?, What are the big accomplishments he can point to on his resume.
4. Ross Levinsohn, Ex-President of Fox Interactive: 9 - 1. Positives: Great Internet track record: Fox, Altavista, Sportsline; Ideal time in his career trajectory to take that next step; He's gone from Hollywood, FL, to Hollywood, CA, and now he's ready for the Hollywood of Northern California; Available. Question Marks: He's a deal-maker, but can he integrate?, No turnaround experience with a company the size of Yahoo!, Another guy from Hollywood? Would the Yahoo!s get on board? Would this be as attractive to him as starting a hedge fund? Raising a fund while at Fox -- can the board trust him?
5. Shona Brown, EVP BD, Google. 10 - 1. Positives: Rhodes Scholar, PhD, McKinseyite, Best-Selling Business Author before coming to Google -- i.e., bright!; Been studying/working in this industry for 12 years. Question Marks: Too junior for CEO slot; Why leave when Google's on a roll?
6. Joanne K. Bradford, new head of MSN: 15 - 1. Positives: Got online Ad religion before anyone else at MSFT, helped turn culture around at MSN, big company experience and ad experience, lives in Bay Area. Question Marks: Seasoned enough for top slot?, could use more time leading major team at MSN.
7. Bob Pittman, ex-head of AOL: 35 - 1. Positives: Disciplined; holds others accountable; large media company experience; Internet experience; 53 years old -- still time left on the clock. Question Marks: Does he want to get back in to the spotlight?, His departure from AOL was tied to his lining up with the aggressive AOL targets - credibility with Wall Street? Does the Yahoo! board want this baggage, especially from a competitor?
8. Jonathan Miller, ex-head of AOL: 45 - 1. Positives: Relevant CEO-type experience at Yahoo! competitor; can point to some content innovations and general turnaround of that group; fiercely loved by some ex-employees. Question Marks: Vision?; too slow; could he gain loyalty of Yahoo!s?
9. Jerry Yang, Chief Yahoo!: 50 - 1. Positives: 1 of the co-founders; well-respected; knows the culture; technical vision. Question Marks: Too junior? (37); Does he want it?; What leadership experience does he have to take on this role?
10. Jeff Mallett or Anil Singh, ex-Yahoo!s: 250 - 1. Positives: There from the start; Who doesn't love a "prodigal son"/redemption story?; Yahoo!s would rally round the old guard; Think John Mack at Morgan Stanley. Question Marks: The Board and Jerry Yang would be reluctant to go back on an old decision (although it's not inconceivable, especially if there was board turnover as well); Would the new Yahoo!s rally as much as the old? -- old guard/new guard culture conflicts; Yahoo! is much bigger today than it was and -- as much as I love a "feel good" story -- what have these guys done since leaving to keep their management skills sharp?
11. Guy Kawasaki, The House of Kawasaki: 275 - 1. [Squeaked in ahead of Calacanis.] Positives: Visionary to the extreme; Who doesn't love this guy?; He's local. Question Marks: Not an operator (but a great blogger); Why would he want the stress - he's got a pretty good gig as it is.
12. Jason Calacanis, ex-AOL: 285 - 1. Positives: Well-known among the Valleywag set; Small & large company experience at Weblogs and AOL. Question Marks: Too young; not ready for prime-time CEO.
13. Marissa Mayer, Google: 10,000 - 1. Positives: Well-known/respected by tech folks. Question Marks: Too junior; little leadership experience.
14. Brad Garlinghouse, Yahoo! VP: No Chance. No board would ever pick him after leaking the memo.

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