The biggest impediment to Yahoo!'s success in the last 4 years has been Roy Bostock - not Jerry Yang. Hopefully, Roy will soon be gone as Chairman. Here's a summary of his ridiculous statements over the years.
Read the full post on Forbes
Current executives take board seats to pad their prestige and build their social connections for future jobs. They're also soft on other executives. There are better choices for directors. Yahoo!'s one company that should clean up its act on this.
Read the full post on Forbes here.
It's time for change at the top of Yahoo! On June 23rd, investors will get a chance to do just that.
Read the full post here at Forbes.
By Eric Jackson 
Stock quotes in this article: HPQ , DELL
NEW YORK (TheStreet) -- Mark Hurd was brought in to take the helm at Hewlett-Packard(HPQ Quote) in 2005.
He's well regarded by Wall Street for turning the company from a bureaucratic has-been to a market leader again. In the first 2 1/2 years of Hurd's tenure as leader, H-P's stock increased 137%. For the last two years, however, H-P's stock performance has been mediocre, dropping 5%. Although that was better than the Nasdaq, it tracked that index very closely over that period.
While Hurd deserves credit for turning this company around in the early part of his tenure by slashing costs and increasing focus, there are some very troubling aspects about how he, his management team and his board approach executive compensation and governance that suggest investors should steer clear of this Silicon Valley icon until it gets its act together.
Although H-P's performance has hit the wall in the past two years, Hurd's pay -- and the pay of his management team members -- has dramatically increased. For 2008, Hurd's total compensation reached $43 million, which made him the fourth highest paid CEO in America for 2008. Hurd's total compensation increased 73% from his $25 million in 2007, even though H-P's stock price declined 29% in 2008.
On his senior management team, the sharp compensation increases in 2008 were also noteworthy. CIO Randy Mott's total compensation went up 400% last year to $28 million. Imaging EVP VJ Joshi's total compensation jumped 83% to $22 million. Personal Systems EVP Todd Bradley's total compensation jumped 263% to $21 million. Technology Solutions' EVP Ann Livermore enjoyed a 31% bump in total compensation to $21 million. And CFO Catherine Lesjak got a 49% increase in total compensation to a more modest $6 million.
What also raises eyebrows about these sharp executive raises, aside from it happening in the face of a sharp stock price drop for the year (and the general market uncertainty which remained at the end of the year), is that 2008 was also a year in which these same leaders imposed mandatory 10% pay cuts for other executives and 5% cuts for the rest of H-P's workforce. It hardly seems like this select group is shouldering the pain like the rest of the employees.
At Dell(DELL Quote), the magnitude and the general direction of total compensation were far different than H-P for 2008. Michael Dell's total comp dropped 9% in 2008 from the previous year to $2 million. Other senior executives on Dell's management team decreased or modestly increased to an average total compensation for the year of $9.5 million -- or less than half of what their H-P counter-parts took home for the year.
But what should be most rankling to H-P shareholders -- and a very good reason to avoid the stock in the near term, as it speaks to the values by which this board and management team operate -- are the perks these executives are asking for and receiving from the board.
For example, last year H-P shareholders paid $7,472 for travel expenses related to Mark Hurd's family accompanying him to business meetings. Expenses for Hurd's security service roughly doubled to $256,000. Shareholders paid $500,000 combined in 2007 and 2008 for legal fees associated with bringing over CIO Randy Mott from arch-rival Dell. All senior executives availed themselves of about $18,000 worth of financial advice in 2008 (about four times the amount Dell senior executives received that same year).
Perhaps the biggest bonus for being an H-P senior executive is getting access to the fleet of corporate jets for personal use. Shareholders forked over $136,000 for Mark Hurd's personal use of the aircraft in 2008. Todd Bradley's personal use of the aircraft cost $128,000 in 2008, which was actually down from $327,000 worth of personal travel in 2007.
H-P explains in its proxy filing that for "purposes of reporting the value of such personal usage in this table, H-P uses data provided by an outside firm to calculate the hourly cost of operating each type of aircraft. These costs include the cost of fuel, maintenance, landing and parking fees, crew and catering and supplies."
I think it's completely unacceptable for shareholders to pay for this personal use perk. However, this explanation left me with more questions about these numbers. Who is this outside firm that provided this estimated hourly cost? What in fact was the hourly cost? How do shareholders know that the hourly cost was a fair market rate? Finally, what were these personal trips?
I'm not even sure how it's possible for Todd Bradley to have racked up $327,000 worth of personal travel in 2007. Did he have time to show up for work that year? Call me a conspiracy theorist but isn't it possible that this outside firm vastly under-stated the actual (fair market) hourly cost of using these aircraft for personal use? How will shareholders actually know unless the company releases the flight logs and numbers?
Dell and his senior executives charged no personal use of their aircraft to its shareholders.
A later footnote in the proxy filing for Hurd's personal travel says that the first 25 hours of personal travel are included and are "grossed up." Hurd owes taxes on the value of that perk, but H-P's board has decided that HP shareholders should pay Hurd's taxes instead of Hurd.
The same footnote later says that if Hurd's spouse is "requested by H-P" to travel with Hurd, then the company "grosses up" that amount, too. The internal process that goes on in determining the company request is not described. It could be as simple as Mark Hurd leaning over and saying to his assistant: "I'd like to go play golf in Hawaii this weekend with the CEO of one of our clients on business. Can you write me a quick email saying that, on behalf of H-P, you're requesting that my wife fly with me?"
And don't forget the minor scandal the erupted last January, when blogger Michelle Leder of Footnoted noticed that H-P had "grossed up" Hurd $79,814 for taxes he paid on meals involving his family. (Ann Livermore and VJ Joshi also got "grossed up" $10,000 apiece for meals with their families.)
Michelle estimated that, to receive a "gross-up" of this amount, Hurd and his family would have had to run up food bills during the year of more than $243,000.
H-P protested, saying it had made an error in its calculations and even refiled its proxy with the SEC. Magically, Hurd's "gross-ups" for his family meals shrunk to $3,285.
H-P's error and refiling could have simply been a decision on its part, based on the angry reaction of employees and shareholders, for Hurd and all executives to simply cover these meals and their taxes themselves. Let's face it: It wouldn't have been a hardship for any of them based on their compensation last year.
I don't mind pay for performance. I do mind pay for non-performance and I mind perks for breakfast, lunch, and dinner. And in a year of across the board pay cuts? Where is their shame?
The board is equally or more to blame of course. After all, they approved all this. I was particularly surprised to note that Ken Thompson has served on the HP board for three years now. Thompson is one of the most disgraced CEOs coming out of the financial crisis.
He ended up destroying the fifth largest bank in America, Wachovia, by pushing it heavily into the area of subprime mortgages. When you destroy a company with $8 billion in annual profits, you shouldn't have the right to continue serving as a director and get $300,000 a year for doing so.
It was announced last week that Web pioneer Marc Andreesen would join H-P's board. I hope he can help reform the company's governance, but I don't think it's likely. In 2006, Andreesen sold his company Opsware to H-P for $1.6 billion -- making him indirectly beholden to Hurd and the rest of the board for his payday. That means Andreesen will likely be another voice around the table tacitly approving whatever Hurd wants to do and pay himself.
-- Written by Eric Jackson in Naples, Fla.
At the time of publication, Jackson did not hold any positions in the companies mentioned.
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.
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For some reason, the New York Post continues to get juicy tidbits leaked to it about 3 times a year. People whispering in the ear of Kara Swisher and Kevin Delaney I understand, but the New York Post? Good for them, I guess.
Today's tidbit in the Post - if it is true, although it certainly seems plausible to me -- is that Roy Bostock and Ron Burkle are confused and put off by Jerry Yang's "emotional" rejection of Microsoft's offer for the company. Robert Kotick and Eric Hippeau are also supposed to be on Jerry Yang's side, according to the article.
It wouldn't suprise me if this was in fact Jerry Yang's reaction. Last month, 3 days before the surprise bid from Microsoft, I was asked by TheDeal.com's David Shabelman whether I thought Yahoo! would sell itself to the company from Redmond:"I honestly believe that Jerry Yang and David Filo have no interest in selling the company," he said. "Other people could decide differently, but they're pretty big shareholders and carry a lot of weight. It's not going to change shareholders calling for a sale, but I think people underestimate how the two co-founders are so against a sale."
Last year, leading up to Yahoo!'s annual meeting, I promoted the idea that other Yahoo! shareholders should consider voting "against" 7 of the 10 directors on the Board -- in order to force some much needed change in the company. The only directors who I didn't think should go were Jerry Yang, VJ Joshi, and Ed Kozel (primarily because Jerry was a co-founder and Joshi and Kozel had actually purchased shares in the company fairly recently, instead of just selling or vesting).
I wasn't the only shareholder who felt angry at the board, as this review shows. The Compensation Committee members (Bostock, Burkle, and Art Kern) each received at least 31% of shareholders voting "against" their re-election. However, all directors received an abnormally high percentage of shares cast "against" them.
It's because of this high protest vote by shareholders that I've said it's now ironic that we - the shareholders and owners of Yahoo! - must sit back and await the decision of the Yahoo! board on what will create the most shareholder value for us. I - and several supporters from last year's "Plan B" group - became very concerned when we heard it leaked to the Wall Street Journal last Saturday that Yahoo!'s board would reject Microsoft's offer. The decision seemed at odds with the board's fiduciary responsibility to us to create the highest possible value for our shares.
Therefore, we've relaunched our "Yahoo! Plan B" Group to unequivocally state that we want Yahoo! to sell out now (whether to Microsoft or someone else at the highest price possible) to maximize the value of our shares in the here and now. We absolutely want no part of an independent Yahoo! whether it's as a $17 a share company pre-bid or even if News Corp took a 20% stake.
I don't care if the best is yet to come for Yahoo! I don't care if Yahoo! truly reaches its ambition of getting on every advertiser's "must buy" list (which really means Yahoo! hopes to make advertiser's say, "well, we're done; we've just decided to do all our paid search stuff on Google.... Hey, maybe - to keep Google honest - we should throw a couple of bucks at Yahoo! too?") or becoming my "start page." I want to cash out, hopefully at $40, definitely at $36, and maybe even at $31. We don't want to crouch down in our airline seats, with our hands clamped behind our necks, preparing to drop back down to $18 and say, "alright guys, go to it, and get this puppy to $50 as quick as you can."
Creative deal-making which combined the assets of Yahoo! with MySpace, Facebook, eBay, etc. all would have been welcome -- and probably easily approved -- by shareholders prior to February 1st at 6am et (before the Microsoft offer arrived). Since that offer was put out on the table (clearly and cleanly dangled in front of us), we understandably want that or better -- not less and more complex. Yahoo! doesn't do complexity well.
It's nice to know that there are some Yahoo! directors who understand this line of reasoning. I applaud Bostock and Burkle if the Post story is true. They - and other Yahoo! directors - have the chance at a major do-over here in the eyes of us, the shareholders. They can and should do the right thing, by sticking to their guns and forging ahead in our interests.
Where will the other Yahoo! directors fall in this "divided" boardroom? Wilderotter -- the newest Yahoo! director -- clearly must see this offer with the freshest eyes. As an old-timer (14 years on the Yahoo! board, just like Hippeau), I would guess Kern is siding with Jerry. Ed Kozel - although friendly with Jerry - is one of the most level-headed members of this board, I have heard from someone who knows. Level-headed does not equate with "emotional." Joshi and Wilson are quieter but - I suspect - more open to a deal than not. [Kara Swisher disagrees with me on Kozel and Joshi. She puts them squarely "on the fence."]
So, if you do the numbers, this board should do a deal. That's what their shareholders want. Jerry Yang and David Filo are amazing people. Their "baby," that has grown into a 14,000 person company and one of the most trafficked sites on the Internet in 14 years, is a remarkable accomplishment with great assets. However, we - the shareholders - are now the owners of this company and we should decide how we want to see value created from our investment. We will see the most value from a deal now -- and that deal will most likely be with Microsoft.
