WSJ: Yahoo Shareholders Approve Board With Low Majority

From this afternoon's WSJ:

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

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

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

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

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

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

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

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

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

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

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

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Seeking Alpha: Eric Jackson Prepared to Shake Things Up at Yahoo's Shareholder Meeting

From today's Seeking Alpha:

David Neubert submits: Last night, I saw Eric Jackson talking to Maria Bartiromo on CNBC. He was getting press for his small shareholder campaign to shake up Yahoo (YHOO) management.

He said he represented over 100 investors with over 2 million Yahoo (YHOO - $27.35) shares. I am one of the investors he represents. I signed up at his website called Breakout Performance.
The Yahoo shareholder meeting is today.

Mr. Jackson has all sorts of press, and even the conservative proxy advisor used by most funds, ISS, mentions Mr. Jackson's Plan "B" in its recommendations for the Yahoo board vote.

And is Terry Semel's pay too high? Is he taking too much of a share of Yahoo's earnings as salary? It would seem Eric Jackson is not alone in thinking so.

Anyway, I wish I could be at today's Yahoo shareholder meeting, but Eric Jackson will be there speaking for me. Go kick some entrenched-overpaid-underperforming management butt for me, Eric!

Disclosure: I own Yahoo and plan to pledge my shares to the campaign. However, if the shares rise above $35, I'm likely to start selling. I'm short Jan 2008 35 strike calls against half my position of YHOO and am also short Jan 2008 30 strike puts. I like Yahoo!. I use their email and use MyYahoo as my homepage. I make extensive use of Yahoo Finance. I also like the newsreader in YahooMailBeta.

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CNBC: Activist Yahoo Investor Gunning for CEO Semel

From yesterday's CNBC Closing Bell:

Yahoo is a top Internet destination -- but that hasn't brought bliss to all of the Web portal's shareholders. One particularly disgruntled stockholder is Eric Jackson, president and CEO of Jackson Leadership Systems. He explained to "Closing Bell" viewers why he intends to hold Yahoo CEO Terry Semel's "feet to the fire" at the company's annual shareholder meeting on Tuesday.

Jackson cited Yahoo's "underperformance" compared with key rival Google: Over the past 12 months, Semel's firm lost 9.78% of its share value, while Google gained 33.19%. And the management consultant said the comparison looks even worse over a 3-year period during which Google has leaped some 300% since its IPO.

CNBC's Maria Bartiromo pressed Jackson to take a longer view: She noted that over five years, Yahoo showed a gain of 245%. But Jackson scoffed at the statistic, attributing it to the "general recovery" in the ad market that "lifted all boats." He believes that "anyone in the CEO's seat" would have enjoyed the ad rally in the months after the dot-com bubble popped.

Jackson said he's familiar with a "frustration that's palpable -- and institutional": He has spoken to "a bunch of the top ten ten holders" of Yahoo shares, including "some of the largest pension funds" in America. He said his fellow stockholders are aghast that Yahoo management "missed the boat" on acquisition targets like MySpace (bought by News Corp.), YouTube and DoubleClick (both snapped up by Google) -- and Google itself, for that matter.

The dissident investor said his coterie will urge all shareholders to vote against seven of the ten directors on the board slate Tuesday.

Click here to see the interview.

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NY Times: For Yahoo, an Ordeal of Dissent

From today's NY Times:

By MIGUEL HELFT
Published: June 12, 2007

SAN FRANCISCO, June 11 — When Terry S. Semel, Yahoo’s chief executive, faces shareholders at the company’s annual meeting on Tuesday, Eric Jackson will be there to pepper him with questions.

Mr. Jackson, who owns just a few Yahoo shares, is not happy with the company’s performance, so he has mounted a grass-roots campaign calling for changes including the removal of Mr. Semel and several company directors.

“The company has tremendous assets,” said Mr. Jackson, who began his campaign with a video on YouTube. “But there needs to be new blood and new direction.”

Mr. Jackson’s campaign has little chance of success for now, but plenty of other people have questions for Mr. Semel these days.

Three Wall Street advisory firms have criticized his pay package, which is among the largest in corporate America, saying it is undeserved given the company’s lackluster performance.

Investors remain concerned about the company’s inability to close the gap with Google in search, and about increased competition from sites like MySpace and Facebook. Then there are the members of Yahoo’s own management ranks — some of whom have not waited around for answers.

Since Mr. Semel reorganized the company into three units in December, it has experienced a steady stream of executive departures, some planned but some resulting from disagreements about how the company should be run.

Now two of those three operating units lack a permanent leader. The head of Yahoo’s technology group, Farzad Nazem, left late last month after 11 years with the company. And Yahoo has yet to name an executive to run the audience group, which was created in December and oversees many of the Yahoo’s most important Web offerings.

In addition, 17 executives at the vice president level or higher are known to have left Yahoo since the December shake-up. Some of them left after their responsibilities changed or their jobs were reduced or eliminated. Others, like Mr. Nazem, chose to move on after years at the company. But the defections include executives who were widely praised, ran important businesses within Yahoo and left for places that seemed to offer better opportunities.

Yahoo disputes the notion that it is losing people at an unusual rate, saying that it had named about 80 vice presidents worldwide this year, most of them promoted from inside. But some in Silicon Valley say that plenty of people are still looking to leave.

“It’s a buyer’s market in terms of hiring people out of Yahoo,” said a prominent Silicon Valley venture capitalist who asked to remain anonymous, in part because three of the companies he has backed are talking to different Yahoo vice presidents about possible jobs.

The departed executives include one of Mr. Nazem’s top deputies in engineering, the senior vice president in charge of HotJobs, two executives who ran Yahoo’s music business, the head of the health and food Web sites, the heads of international and European operations and an important search executive.

Jerry Yang, one of Yahoo’s founders, said that many of the departures involved people whose positions had been eliminated during the reorganization or who had planned to leave after a long career at Yahoo. He said the company has had no problem replacing those who have left with seasoned executives from inside and outside Yahoo.

“We are promoting and hiring new executives at a pretty fast pace,” said Mr. Yang, who holds the title of chief Yahoo. “People are joining us because they believe in the upside.”

The company recently named Blake Jorgensen, the co-founder of the investment bank Thomas Weisel Partners, to be its chief financial officer. The move freed Susan Decker, who had held that post, to take over Yahoo’s other operating unit, its advertiser and publisher group, which is largely responsible for the company’s advertising revenue.

The New York Times contacted a dozen executives who have left since December. Those who responded agreed to speak only if they could remain anonymous, citing confidentiality clauses in their separation agreements.

“In general, there is a pretty big morale problem internally,” said an executive who left the company earlier this year. “There are a lot of frustrated people who may not leave tomorrow, but if the right offer came along, they’d jump.”

This executive said that, among other complaints, some managers resented that over the last two years many of the company’s resources were devoted to a major overhaul of its search advertising system, an endeavor known as Project Panama — leaving their own projects starved for resources.

The dissatisfaction among some senior Yahoo managers was thrust into the spotlight last November when an internal memo written by Brad Garlinghouse, a senior vice president who oversees the company’s communications and social networking products, was leaked to The Wall Street Journal. In the memo, dubbed the Peanut Butter Manifesto, Mr. Garlinghouse complained that like peanut butter on toast, the company had spread itself too thin. It also said the company had become too bureaucratic and needed a drastic revamping.

Yahoo’s management has since said that it had long recognized that the company faced some structural problems and had begun planning a reorganization long before Mr. Garlinghouse’s memo came to light.

But some of those who have left recently said the reorganization did little to address Yahoo’s problems.

“The takeaway from a lot of the people was that this new strategy is not a new strategy,” said another recently departed executive.

Mr. Yang disputed that assertion, saying that the reorganization had focused Yahoo on its customers: its users, and the advertisers and publishers that help it generate the bulk of its revenue.

Analysts who follow the company say the executive departures are not surprising given the company’s continuing challenges and the many job opportunities in the Internet sector.

“A little turnover in the management team is probably a good thing,” said Mark Mahaney, an analyst at Citigroup. “It is not like execution has been flawless,” Mr. Mahaney said, noting, for instance, that Panama had been delayed by several months.

Others said Yahoo was simply going through changes that are common at large technology companies.

“All companies go through transitions,” said Jim Brock, a former Yahoo executive who left more than two years ago and is now chief executive of Attributor, a technology start-up. “Some people are charged up about the opportunity, and you have people who cycle in and out.”

But in light of Yahoo’s continuing difficulties and lagging performance Mr. Semel’s handsome compensation has become a focal point of dissatisfaction. Three advisory firms — Institutional Shareholder Services, Glass Lewis and Proxy Governance — have recommended that shareholders withhold votes from three directors on Yahoo’s compensation committee on Tuesday. Such votes are usually symbolic, but they are a way for shareholders to register discontent.

In its report to investors, Institutional Shareholder Services singled out grants of 6.8 million stock options given to Mr. Semel as retention and bonus pay in 2006. It estimated Mr. Semel’s total pay during the year at $107.5 million. The figure is larger than the $39.8 million that Yahoo reported, in part because the company amortizes the value of the options over some years and makes different assumptions about their terms.

“Given the size of these mega-awards they give to Terry Semel, we don’t see a link between pay and performance,” said Patrick McGurn, executive vice president of Institutional Shareholder Services.

For Yahoo shareholders, Mr. Semel’s tenure, which began in 2001, has been a mixed bag. Over the last five years, the company’s shares returned an average of 23.6 percent each year, far outpacing the Standard & Poor’s 500-stock index, according to the I.S.S. report. But in the last three years, its shares have lagged behind the S.& P. 500. And in 2006, the shares fell nearly 35 percent, as the S.& P. rose 13.7 percent.

Mr. Semel has realized gains of about $451 million from options and other pay since he joined Yahoo, according to a report by Equilar, an executive compensation firm.

In a statement, Yahoo said: “Mr. Semel’s compensation for 2006 was almost entirely equity based and is, therefore, closely aligned with the interests of Yahoo’s shareholders.”

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PaidContent: Yahoo CEO May Face Dissenting Shareholders At AGM On Tuesday

From today's PaidContent.org:

By Rafat Ali - Sun 10 Jun 2007 10:43 PM PST

Terry Semel will surely face some tough questions from investors at its annual general meeting this Tuesday. Not much will happen with these protest, but at least one activist investor believes it could add momentum to campaigns to overhaul its executives and replace Semel, reports WSJ.

Among the gripes: Semel’s annual salary, in face of continued stock and performance decline for the company. Semel’s total compensation last year of $71.7 million put him at the top of the list of highest-paid CEOs at Standard & Poor’s 500 companies that have filed with regulators this year, according to an AP analysis of the filings.

AP: “The company is drifting,” said Eric Jackson, who intends to confront Semel during the meeting on behalf of about 80 Yahoo stockholders who own a combined 2 million shares (about 0.2 percent of Yahoo’s outstanding stock) in the company. “And its problems ultimately lie at Terry’s feet.” Besides pushing for Semel’s ouster, Jackson’s group believes six other directors on Yahoo’s 10-member board should be bounced: Roy Bostock, Ron Burkle, Eric Hippeau, Arthur Kern, Robert Kotick, and Gary Wilson. Only Yahoo co-founder Jerry Yang, HP executive Vyomesh Joshi and Ed Kozel, CEO of Silicon Valley startup Skyrider Inc., have done enough to remain on the board, Jackson contends. Lots more details in the AP story.

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ISS Corporate Governance Blog: Online Communication Grows

From Friday's ISS Corporate Governance Blog:

Online Communications GrowsSubmitted by: L. Reed Walton, Staff Writer

Even before the Securities and Exchange Commission's new "e-proxy" rules take effect on July 1, shareholders and companies are increasingly using the Internet to communicate on governance matters.

Online sources like weblogs, video sites, and e-mail campaigns--not to mention company-sponsored Web sites--have emerged in recent years, sparking hope among investors for improved communication. In addition, these new forms of communication have gotten more attention since the SEC announced recently that it was studying the feasibility of "electronic shareholder forums."

Among the notable Internet efforts this season was the California Public Employees' Retirement System's (CalPERS) campaign for proxy access at UnitedHealth Group. The pension fund set up a Web site, www.healunitedhealthgroup.com, to accompany a letter sent to shareowners before the company's May 29 annual meeting.

CalPERS urged investors to vote for a proposal that calls on the company to amend its bylaws to permit investors who own at least a 3 percent stake for over two years to nominate up to two directors to appear on the management proxy statement. That proposal received 45.3 percent support, according to a company regulatory filing.

In addition, Yahoo! shareholder Eric Jackson is using a weblog (also known as a "blog") and streaming video to generate retail investor support for a "vote no" campaign against seven directors in advance of the company's June 12 meeting.

Earlier this season, ExxonMobil provided an online forum for shareholders to ask questions on proxy materials before the company's May 30 meeting. The company set a cut-off date of May 15 for all questions.

One of the primary goals of the new SEC rules is to reduce the cost to companies that mail thousands of hard-copy proxy statements--a package which, as SEC Chairman Christopher Cox has noted with chagrin, has gotten bigger with the advent of new compensation disclosure standards.

The new proxy rules stipulate that a company may--but is not required to--send proxy materials to investors via a "notice and access" model, meaning that the default method of proxy delivery will be an e-mailed notice of the annual meeting with Internet-based links to proxy materials.

The company can then send a paper proxy card 10 days or more after the release of the original notice, and shareholders are free to "opt out" of electronic delivery in favor of hard-copy materials.

In its announcement of the new rules in December, the SEC explicitly barred companies from transitioning to the predominantly electronic format until after the July 1 effective date.

Electronic Forums

The commission also has hired consulting firm Broadridge Financial Solutions to report on the feasibility of setting up secure "electronic shareholder forums" that would allow investors to discuss, debate, and potentially vote on issues.

The idea was discussed at SEC roundtables on the proxy process on May 7 and May 25. Both corporate and investor advocates raised some doubts, with some arguing that shareholders wouldn't take the idea seriously or trust such a forum if it is run by management and unregulated by the commission.

In a May 25 letter to the SEC, CalPERS General Counsel Peter Mixon praised the voluntary efforts by ExxonMobil and other firms to facilitate communications with shareholders. However, he urged the SEC not to replace non-binding shareholder proposals with "an unproven chat room concept that is riddled with concerns."

"It is doubtful that a chat room even with informal voting could adequately replace" non-binding proposals, which are taken seriously by companies and shareholders, Mixon wrote.
William J. Mostyn III, deputy general counsel at Bank of America, expressed concern about the staff resources that his company would have to devote to monitor an electronic forum if it was a supplement to non-binding proposals.

"I look at this as a parallel operation that would tie up my resources all year long," Mostyn told the commissioners at the May 25 roundtable. Evelyn Davis, a long-time shareholder activist, also spoke out against electronic forums. "You should not force the Internet on senior citizens and small shareholders," she said.

At the May 7 roundtable, Paul Neuhauser, a University of Iowa law professor, expressed skepticism that "serious" investors would use such a mechanism.

"To the extent it looks like an Internet chat room, it would be entirely useless," he said, citing examples of irrelevant postings that appeared on the Yahoo Finance chat room for General Electric.

Dissident Challenges

The new e-proxy rules are expected to reduce solicitation costs for dissidents as well. Dissatisfied shareholders have been using the Internet to win support for alternate proxy campaigns for at least seven years. In 2000, lawyer Les Greenberg used an online campaign to nominate himself and four other dissidents to the 12-member board at Luby's Cafeterias.

Greenberg attracted supporters through postings on a Yahoo online message board, including some former members of Luby's management, according to The Wall Street Journal. Greenberg said his nominees won 24 percent of the vote and received significant support for two of their proposals.

In 2005, Alaska Air dissidents tried to conduct an all-online proxy contest. They posted their alternate proxy card on the Internet and urged shareholders to scratch out the names of the incumbent directors and replace them with the dissidents'--a sort of "write-in" campaign. The bid was defeated when the New York Stock Exchange ruled that the dissidents had not physically mailed proxy cards to enough shareholders to make it a legitimately contested election. The new e-proxy rules will officially open the online avenue to dissidents.

This season, investor Eric Jackson is using several online methods to enlist support for his "vote no" campaign at Yahoo. Jackson, CEO of consulting firm Jackson Leadership, maintains a blog about Yahoo called Breakout Performance and has posted several video appeals to shareholders on streaming video site YouTube (now owned by Yahoo rival Google).

Jackson told Governance Weekly that he received several responses--many from current and former Yahoo employees--when he posted a blog entry in January speculating that Yahoo's financial recovery had more to do with market conditions than with CEO Terry Semel's leadership.

"It became clear to me that it was kind of an emotional topic," Jackson said.

Jackson, who says he has the support of investors who own about 0.2 percent of Yahoo's voting shares, said he expects significant withhold votes against seven of the company's 10 directors.

*This article appeared in the June 7 edition of Governance Weekly. Director of Publications Ted Allen contributed to this article.

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Yahoo CEO Faces Shareholder Backlash

From Today's SFGate and LA Times and others:

By MICHAEL LIEDTKE, AP Business Writer

Sunday, June 10, 2007

(06-10) 14:00 PDT SAN FRANCISCO, (AP) --

Just before Google Inc. went public nearly three years ago, Yahoo Inc. Chairman Terry Semel assured a roomful of securities analysts and money managers that his company would remain the Internet's brightest star. To punctuate his high hopes, Frank Sinatra's "The Best Is Yet to Come" played in the background.

Google has so thoroughly eclipsed its rival since then that a growing contingent of Yahoo shareholders believes the company would be better off without Semel, who could face a chorus of discontent when he takes the stage at Yahoo's annual shareholders meeting Tuesday.

Even as it has struggled, Yahoo has continued to pay Semel like a rock star — yet another sore point for frustrated shareholders.

"The company is drifting," said Eric Jackson, who intends to confront Semel during the meeting on behalf of about 80 Yahoo stockholders who own a combined 2 million shares in the Sunnyvale-based company. "And its problems ultimately lie at Terry's feet."

Although the stake held by Jackson's group represents less than 0.2 percent of Yahoo's outstanding stock, the shareholder misery is widespread, said Standard and Poor's equity analyst Scott Kessler.

"A lot of people are wondering what is going on and what management is doing to get the stock moving in the right direction again," he said. "I wouldn't want to be one of the presenters at that meeting."

Shareholders are exasperated largely because Yahoo has seemed to be meandering while online search leader Google has been stampeding farther ahead.

In the last year alone, Google has trumped Yahoo in the bidding for online video pioneer YouTube Inc. and Internet display ad service DoubleClick Inc. while widening its lead in the lucrative field of search. Google has established such a commanding advantage that the Mountain View company makes more money in a single quarter than Yahoo does in an entire year.

It's a humbling descent from the days when Semel was singing a happier tune.
After Google completed its August 2004 initial public offering, Yahoo was still the larger and more valuable company.

The IPO gave Google a market value of $23 billion compared with $39 billion for Yahoo at the time. Google's stock price has increased by more than sixfold since then, creating nearly $140 billion in additional shareholder wealth. Meanwhile, Yahoo's stock price has fallen by about 4 percent during the same period, leaving the company with a market value of $37 billion.

Semel, who ran a movie studio before becoming Yahoo's chief executive six years ago, isn't the only one on the hot seat.

Besides pushing for Semel's ouster, Jackson's group believes six other directors on Yahoo's 10-member board should be bounced: Roy Bostock, Ron Burkle, Eric Hippeau, Arthur Kern, Robert Kotick, Edward Kozel and Gary Wilson.

Only Yahoo co-founder Jerry Yang, Hewlett-Packard Co. printing executive Vyomesh Joshi and Ed Kozel, CEO of Silicon Valley startup Skyrider Inc., have done enough to remain on the board, Jackson contends.

Although still difficult to do, removing Yahoo's directors has become a more realistic option for shareholders because of a new policy adopted this year. The rules now require each Yahoo director to be approved by a majority of the votes cast. Previously, Yahoo directors only needed a single supporting vote to prevail in uncontested elections, no matter how many shareholders may have been opposed. This system — known as a "plurality" vote — still governs most publicly held companies.

Despite the change to majority vote, Yahoo's board still can refuse to accept the letters of resignation each director must submit under the new rules. The resignation letters are supposed to ensure the directors can be removed if they don't win majority support, but the guidelines give the board the discretion to overrule the shareholders.

Three shareholder advisory firms — Institutional Shareholder Services, Glass, Lewis & Co. and Proxy Governance — have all recommended opposing three directors who sit on Yahoo's compensation committee. They are: Roy Bostock, a veteran advertising executive; Burkle, a billionaire best know for his investments in the supermarket industry; and Kern, a former radio broadcast executive.

The firms concluded the trio should be punished for richly rewarding Semel despite Yahoo's recent struggles. In 2006, Semel received a compensation package valued at $71.7 million — more than any other CEO at the 386 publicly held companies covered in an Associated Press analysis of nation's top corporate paychecks.

Most of Semel's pay consisted of 6 million stock options given to him in exchange for agreeing to reduce his annual salary from $600,000 to $1. The committee awarded Semel another 800,000 stock options in February as his bonus for 2006 — a year in which Yahoo's stock price plummeted by 35 percent.

The latest awards will give Semel an opportunity to build upon the nearly $450 million in gains he has already realized by exercising stock options Yahoo gave him in previous years.
"Semel is rewarded when times are good ... and when times are bad," wrote ISS, the largest of the three advisory firms.

Yahoo believes Semel's pay package is in the company's best interest because it's structured to give him a strong incentive to boost the stock price.

That's because stock options only yield profits when their exercise price is below the underlying shares' market value. For now, at least, the options that Semel got last year are worthless because their exercise prices exceed the stock's market value, which was hovering around $27 last week.

In its analysis, Proxy Governance questioned whether Semel needed any more incentive to boost Yahoo's stock price. As of April 1, Semel held 17.7 million stock options eligible for exercise and 7.1 million stock options that hadn't fully vested.

"Based on his ownership in the company, Semel already should have the proper incentives ... to work toward building long-term shareholder value," Proxy Governance wrote.

Yahoo says its confidence in Semel hasn't wavered.

"Under Terry's leadership, the company has a clear strategy to create stockholder value, and the company is well-positioned to capitalize on the substantial growth opportunities ahead for the Internet," Yahoo spokeswoman Helena Maus said in a prepared statement.

But Semel, 64, may be on a short leash after Yahoo suffered an 11 percent drop in its first-quarter profit while Google's earnings soared by 69 percent. Many analysts believe Semel will face even greater pressure to surrender the reins unless Yahoo's profits accelerate during the second half of this year.

A pivotal upgrade to Yahoo's system for distributing text-based ads alongside search results and other Web content is supposed to start paying off by then. The improved formula — dubbed "Panama" because it's supposed to open new moneymaking corridors — adopted many of the measures Google has been using for years.

Semel also is counting on recent advertising partnerships with more than 260 newspapers and Viacom Inc. to revive earnings growth.

Jackson, a Naples, Fla. management consultant who owns about 100 Yahoo shares, doubts the company will regain its stride as long as Semel is calling the shots.

That's why he turned to the Internet earlier this year to recruit Yahoo shareholders to support a plan to shake up the company. Besides gaining the support of 80 shareholders, Jackson said about 25 current and former Yahoo employees disillusioned with the company's direction have contacted him to support his cause.

Besides finding a new CEO, Jackson wants Yahoo to close its entertainment and news division in Santa Monica, lay off employees with overlapping responsibilities and institute a cash dividend.
Jackson also thinks the board should be more open to takeover overtures, particularly since last month's media reports of a possible bid by Microsoft temporarily lifted Yahoo's sagging stock.

But first he would like to see what a new leader could do with the tarnished Internet icon.

"It's frustrating because you can see so much unlocked potential in the company," Jackson said. "If it were managed in the right way, this company could be worth $150 billion."
___
On The Net:
Eric Jackson's blog devoted to Yahoo issues:
http://breakoutperformance.blogspot.com

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A Yahoo Investor Hopes to Provide Impetus for Change

From today's WSJ:

By KEVIN J. DELANEY
June 9, 2007; Page A2

Yahoo Inc. shares have dropped about 10% from a year ago, and its revenue growth has fallen every quarter. That has disgruntled some investors, who plan to confront the Internet company's management at its annual meeting Tuesday.

That shareholder confab isn't expected to produce any immediate changes to the Sunnyvale, Calif., company's management or strategy. But at least one activist investor believes it could add momentum to campaigns to overhaul its top brass and shift tacks.

High on the list of shareholder complaints is the allegedly outsize compensation of Chief Executive Terry Semel, a former Hollywood executive who joined Yahoo in 2001. Mr. Semel's total compensation last year of $71.7 million put him at the top of the list of highest-paid CEOs at Standard & Poor's 500 companies that have filed with regulators this year, according to an Associated Press analysis of the filings.

Proxy-advisory services Institutional Shareholder Services Inc. and Proxy Governance Inc. are recommending that shareholders vote against re-electing members of Yahoo's compensation committee to its board because of concerns about what they see as excessive awards to Mr. Semel. "Semel is rewarded when times are good -- pay for performance -- and when times are bad -- retention," wrote ISS in its report. Mega options grants to the CEO are "particularly troubling in light of the company's recent poor stock performance and corporate performance," it added.

Speculation has swirled for years around the timing of the retirement of Mr. Semel, who is 64 years old, but Yahoo has always dismissed it. A Yahoo spokeswoman said the company's executive compensation is designed to "attract and retain key executive and employee talent and to link compensation to the company's performance and increases in long-term stockholder value." As part of a three-year arrangement, Mr. Semel's salary dropped to $1 in May 2006 from $600,000 previously. He was also awarded stock-option grants (priced at the market value of Yahoo shares when granted) on 6.8 million shares as part of his 2006 bonus and the three-year retention pact.

Shareholder activist Eric Jackson of Naples, Fla., says investors holding about two million Yahoo shares, or less than 1% of its capital, have agreed to back his "Plan B" for the company. That plan includes replacing Mr. Semel and the majority of the company's directors for missteps, including failing to gain on rival Google Inc. in search advertising. Mr. Jackson predicts heated questions from shareholders during Tuesday's meeting. But he says his main hope for change is for co-founders Jerry Yang and David Filo, who each hold smaller-than-10% stakes in Yahoo, to look at the shareholder-meeting votes and the company's performance and "come to the decision themselves that the company needs to move in a new direction."

The Yahoo spokeswoman said the company is always interested in its shareholders' views. But she said that Mr. Semel had outlined a clear strategy focused on three key priorities: "narrowing the gap in search monetization, extending our lead in display advertising and securing leading positions in the major emerging areas of social media, video and mobile access."

Yahoo investors Tuesday will also vote on two shareholder proposals that stem from Yahoo's disclosure of information to the Chinese government that helped lead to the imprisonment of at least one dissident. One proposal calls for the creation of a board committee on human rights and the other for new company policies related to censoring and disclosing information at a government's request. Yahoo's board has recommended that shareholders vote against the proposals, saying the company is already taking measures to address such issues.

Write to Kevin J. Delaney at kevin.delaney@wsj.com

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Struggling Yahoo's Leadership Challenged

From the AP:

Associated Press
Jun. 9, 2007 12:00 AM

SAN FRANCISCO - Just before Google Inc. went public nearly three years ago, Yahoo Inc. Chairman Terry Semel assured a roomful of analysts and money managers that his company would remain the Internet's brightest star. To punctuate his high hopes, Frank Sinatra's The Best Is Yet to Come played in the background.

Google has so thoroughly eclipsed its rival since then that a growing contingent of Yahoo shareholders believes the company would be better off without Semel, who could face a chorus of discontent when he takes the stage at Yahoo's annual shareholders meeting Tuesday.

Even as it has struggled, Yahoo has continued to pay Semel like a rock star, yet another sore point for frustrated shareholders.
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"The company is drifting," said Eric Jackson, who intends to confront Semel during the meeting on behalf of about 80 Yahoo stockholders who own 2 million shares in the Sunnyvale-based company. "And its problems ultimately lie at Terry's feet."

Although the stake held by Jackson's group represents less than 0.2 percent of Yahoo's stock, the shareholder misery is widespread, said Standard and Poor's equity analyst Scott Kessler.

Shareholders are exasperated largely because Yahoo has seemed to be meandering while online search leader Google has been stampeding farther ahead. "It's frustrating because you can see so much unlocked potential in the company," Jackson said. "If it were managed in the right way, this company could be worth $150 billion."

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ISS Says Vote AGAINST Key Yahoo! Director, Mentions "Plan B"

This past week, influential proxy advisor ISS came out and advised institutional shareholders to vote AGAINST 3 Yahoo! directors: Roy Bostock, Art Kern, and Ron Burkle. They comprise Yahoo!'s Compensation Committee.

The suggested action reflects ISS's disapproval in CEO, Terry Semel's, compensation package for 2006, after previous years of generous pay. More on that follows in the article below.

The report also prominently mentions the "Plan B" campaign begun in January on this blog and still going strong against Yahoo! A whole page in the report covers the details of the nine-point plan submitted to Yahoo! last February and still -- to our knowledge -- not implemented by the company.

In addition to Bostock, Kern, and Burkle, "Plan B" calls on Yahoo! shareholder to vote AGAINST Eric Hippeau, Terry Semel, Robert Kotick, and Gary Wilson. The votes will be cast and counted in Santa Clara on Tuesday (June 12th) at Yahoo!'s Annual Meeting. I will be there to represent the other 100 shareholders who have joined our campaign to urge Yahoo! to take immediate steps to unlock value buried within this great company. I'm looking forward to have the chance to address Terry Semel.

Far away from Sunnyvale, something interesting happened yesterday. ECS -- a little-known investment fund -- announced that it had purchased $650,000 of shares in Vodafone and were going to be agitating for changes at the telecom. That stake represents 0.0004% of Vodafone - a $168 billion company. To put that in perspective, our "Plan B" group owns $56 million of Yahoo! shares, close to 0.2% of the company - with a market cap of $37 billion. The profile of an activist investor just got smaller -- something which will aid our campaign as we continue it in the months to come, no matter the result on Tuesday.

We have a view of Yahoo! as a $160 billion company, which it could easily achieve in the next two years if managed properly. That's much more attractive than a $40 billion or $60 billion MSFT-YHOO or EBAY-YHOO. We need to hear how Yahoo! will build a bridge to that $160 billion vision so that it can control its own destiny. "Plan B" is a good first step.

Here is a link to the article on ISS:

Yahoo CEO's Pay Too High, Groups Say

SAN FRANCISCO (Dow Jones) -- Yahoo Inc. Chief Executive Terry Semel has not earned his considerable pay, and shareholders should therefore withhold support for the company's compensation committee members at its annual meeting next week, two proxy adviser firms said recently.

The firms, Proxy Governance Inc. and Institutional Shareholder Services, said in reports that Semel's compensation, particularly a grant of 6 million stock options awarded in 2006, is bloated relative to that of CEOs at companies such as Microsoft Corp. and Google Inc.

"Mr. Semel's stock options grant is particularly troubling in light of the company's recent poor stock performance and corporate performance," ISS said in a report issued May 30.
Proxy Governance, in a report issued Wednesday, said that "the average three- year compensation paid to [Semel] is 926% above the median paid to CEOs at peer companies."

Yahoo (YHOO) shares have fallen more than 10% in the past year, while those of competitor Google (GOOG) have risen over 30%, and those of Microsoft (MSFT) have also risen more than 30%.

To protest Semel's pay, both ISS and Proxy Governance recommended that shareholders withhold support for Yahoo compensation committee members Ron Burkle, Roy Bostock, and Arthur Kern, "as a way of signaling concern about the company's compensation practices," Proxy Governance said.

Yahoo is hosting its shareholder meeting Tuesday in Santa Clara, Calif.

Yahoo spokeswoman Helena Maus said in an e-mail that Semel's 2006 direct compensation was reduced to $1, with the rest coming in the form of performance- based stock option grants.
"Under Terry's leadership, the company has a clear strategy to create stockholder value," Maus said.

In its report, ISS took particular interest in Semel's three-year retention agreement signed in May, which included the sizable grant of 6 million stock options.

That "mega" grant has a present value of $92 million, ISS said. Including Semel's bonus from 2005, his pay package in 2006 was therefore worth an estimated $107.5 million, ISS said.

Maus said that the options grant was made with the expectation that no other long-term grants will be made to Semel "for the next three years, with the exception of the annual bonus grants."

Maus added that the options have exercise prices equal to the market value of Yahoo's stock at the time of the grant, "so Terry will only financially benefit from these options if all Yahoo! stockholders also benefit from improvements in our stock price."

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What Would You Ask Yahoo! CEO Terry Semel If You Could?

I'll be attending the Yahoo! annual meeting in Santa Clara on June 12th.

Every shareholder there will be given the opportunity to ask some questions to Terry Semel.

This morning, I asked users on LinkedIn and Yahoo! Answers: "What would you ask him as a shareholder if you were there?"

The responses have been great. Here are a few. Keep them coming - and, if you're going to the meeting, feel free to use any of these.

1. What are Yahoo's most valuable strategic assets and how do you plan to leverage them to strengthen your strategic position?
2. If there were one asset or competency (that you don't have) that you wish Yahoo had, what would it be?
3. What do consider Google's weakness (Achilles' heel)?
4. What are the 3 reasons I should be a shareholder of Yahoo rather than Google ?
5. Why is Yahoo perpetually afraid to innovate and would rather follow then lead?
6. Why is Zod leaving?
7. Why did you not buy Google all those years ago when you had the chance?
8. What is the plan to beat Google? Is there even a plan?
9. When are you going to return the $50,000,000 million you owe the company as a result of the March 10, 2004 backdated spring loaded grant of 2,900,000 options?
10. If you could put one corporation, anywhere in the world, out of business, effective today, which would it be, and why?
11. How Dow, Braun now?
12. What capacity and resource planning is underway to move Yahoo! from a reactive, outmaneuvered position to a strategic, flexible advantage?
13. Where does Yahoo plan to claim its own space online for its groundbreaking developments once again, amid constant speculation of its eventual acquisition (or demise) and scrutiny of the "catch up" it must do on search, ads, and content?
14. Why don't you step down already?
15. How are you concretely engaging your management team around defining an inspiring vision and strategy that will not only stop the brain drain out of Yahoo but also attract key talent away from Google and other competitors?

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Zod's Departure is an Opportunity

Zod Nazem announced this afternoon that he'll be leaving his post as head of one of Yahoo!'s three pillars (Technology Group) on June 8th - just prior to Yahoo!'s annual meeting.

Zod is a longtime Yahoo! Over the years, he's had his share of Valleywag critics, but insiders I've spoken to talk about the many strengths he brought to the organization. I wish him well in his new endeavors.

For Yahoo!, this creates some more management uncertainty -- which had started to be resolved with Blake Jorgensen's hiring a couple of weeks ago as CFO. Today, two of the 3 main groups for the company are without a leader. (We're still waiting on a head of the Audience Group, even though Jeff Weiner's been doing his best not to leave that group rudderless.)

Yet, every crisis brings opportunity. In our view, the Technology group at Yahoo! has been underfunded and overlooked over the past 6 years. The neglect of Overture leading to the current "catch-up" frenzy with Panama is one example. The group deserves a strong new leader and some more resources to get the job done. Let's hope it takes less than 6 months to find that person. More drift is not what Yahoo! needs now.

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Don't Give Yahoo! Another Blank Check

June 12th is fast approaching. That's the date for the Yahoo! Annual Meeting in Santa Clara.

If you're a Yahoo! Shareholder, you've likely already received your company proxy. You're also likely disappointed by Yahoo!'s performance relative to Google over the last 3 years. Google's shareholders have seen their holdings rise 333%. Yahoo!'s shareholders have seen their holdings drop 8%.

If you support a "Plan B" for Yahoo! and simply are not willing to sign a blank check to the current board and management for the coming year, we recommend you use your shareholder rights at the Annual Meeting and vote "AGAINST:"

• Terry Semel
• Robert Kotick
• Roy Bostock
• Ron Burkle
• Eric Hippeau
• Arthur Kern
• Gary Wilson

If any of these men receives less than a majority vote, he will need to immediately leave the board.

It's time for a change. It's time for a "Plan B" for Yahoo!

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Is Your Business Sustainable?

Several weeks ago, I had the good fortune of being able to begin consulting with The David Suzuki Foundation of Vancouver, BC. I've had the opportunity to better get to know their leaders at the Board and Management levels, as well as its charming and inspiring founder.

The Foundation has several noble goals which guide it. However, perhaps its most dominant mission statement is "sustainability within a generation."

"Sustainability" is a term now heavily used by Arnold, Leo, and corporate leaders (such as Yahoo!'s David Filo). However, beyond these glitzy references, what does it mean for you and me?

I recently found a link to the following YouTube video from one of my Facebook contacts. It is a 9 minute video (from TV Ontario) of David Suzuki Foundation Board Member Ray Anderson. He is the Founder and Chair of Interface, Inc., the leading carpet manufacturer in the world - based in Atlanta. Until 1994, he never gave "sustainability" a thought.

Watch this video, and reflect on if your business is a sustainable one:

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The Economist Asks: Is Terry Semel the right man to lead Yahoo! against its nimbler rival?

As reported in today's Economist.

JERRY YANG, who co-founded Yahoo! and remains on its board, says that the internet company is in the middle of a “transformation” and that its board members are “all in lockstep” behind Terry Semel, the chairman and chief executive. Meg Whitman, the boss of eBay, a Silicon Valley neighbour as well as an advertising partner to Yahoo!, says that Mr Semel has done “a spectacular job” and is “well loved at Yahoo!”. Clearly, Mr Semel has a lot of impressive supporters.

He may need them now. Mr Semel became Yahoo!'s boss six years ago this month, after a long and distinguished career in Hollywood, where he ably led Warner Brothers, a film studio. He had a good start at Yahoo!, turning losses into profits, although some of the credit for this was down to timing: he arrived during the trough of the dotcom bust, when the online advertising market was just about to recover. Of late, however, Mr Semel has been taken aback by the astonishing rise of Google, which today dominates the market for web-search and keyword-related advertising, having left Yahoo! far behind. His fate at Yahoo! now depends on whether it can catch up with its more agile rival.

Increasingly the view on Wall Street is that Yahoo! by itself cannot catch Google, so it must either merge with a compatible partner—eBay has been mentioned—or, more likely, sell itself for the highest possible price to Microsoft, a software giant that has fallen even further behind Google in its web business. Yahoo! and Microsoft have been talking, off and on, since last year.
This union of two also-rans against the winner has a clear logic. Microsoft once licensed Yahoo!'s search and advertising technologies (Inktomi and Overture, respectively) before building its own, so the technical integration ought to be feasible. Both Microsoft and Yahoo! have far more users than Google does in services such as web-mail and instant-messaging, and together would be formidable. However, melding the two firms and their cultures would distract the new company for at least a year, during which Google might speed ahead even further.

For Mr Semel, who is 64, a sale might also hold the appeal of a graceful exit. It would be a rueful one, however. Back in 2002 Mr Semel considered buying Google, which was just then rising out of obscurity, but balked at a price in the single billions (Google's stockmarket value today is $145 billion, about 3.5 times that of Yahoo!'s). Having belatedly grasped the money-making potential of web-search, Mr Semel then bought Inktomi, another search engine, and in 2003 he bought Overture, the pioneer of paid-search advertising.

But Inktomi and Overture languished ignominiously inside Yahoo!, which Mr Semel was simultaneously trying to turn into a new sort of media company. With much fanfare, Mr Semel even opened a Hollywood branch—in Los Angeles under Lloyd Braun, an old-media star—to produce content. This turned out to be a misreading of industry trends, so Mr Semel soon switched the emphasis towards “user-generated content” and, during a corporate reshuffle this winter, closed his Hollywood branch and bade farewell to the hapless Mr Braun.

During all this, Google was outmanoeuvring him not just technologically but also strategically. Mr Semel was at one point talking to his old-media friends at Time Warner about buying AOL, its web portal and a natural fit. But Google swooped in and took a defensive equity stake. Mr Semel was interested in YouTube, a video site built on user-generated content, but Google bought it instead. He wanted a social-networking site, but couldn't capture Facebook and lost an advertising deal with MySpace to Google. He wanted to buy DoubleClick, a firm that specialises in online display advertising, where Yahoo! is the leader, but Google again pre-empted him. So Mr Semel has had to content himself with consolation prizes. Last month he bought Right Media, a display-advertising firm far smaller than DoubleClick. In search advertising, Yahoo!'s weakest area, he has launched Panama, a new system for placing text advertisements that appears to be as good as Google's in drawing mouse clicks and thus money, and which is Yahoo!'s greatest hope.

The odd man out?

The question for Yahoo!'s shareholders, and thus its board, must be: is that enough? “First you have to get to parity before you leapfrog,” says Ms Whitman, in defence of Panama as well as Mr Semel. (A leapfrog may seem unlikely, given Google's reputation as an innovator, but its diversification into so many fields beyond web-searching might yet cause it to stumble.)

The view among the engineers of Silicon Valley is different from Ms Whitman's. They see Mr Semel as the odd man out in their industry. Google is led by esteemed computer scientists: its founders, Sergey Brin and Larry Page, and chief executive, Eric Schmidt. Microsoft has Bill Gates as chairman and Ray Ozzie, a titan of engineering, as software architect. Mr Semel, by contrast, was a Hollywood dealmaker who did not use e-mail before his arrival at Yahoo! in 2001. He has learnt a great deal about technology since then, of course, but an online-advertising entrepreneur, who deals with all three firms, says that Mr Semel still does not know enough “to go deep with the innovators”.

Instead Mr Semel, charming and funny in private, increasingly resorts in public to pre-cooked, vague grandiloquence laden with the jargon of “Web 2.0”. The founder of another online-advertising company, who counts Yahoo! as his biggest customer, even compares him to Chance, the character played by Peter Sellers in the 1979 film “Being There”. Chance is a gentle gardener whom fate thrusts into the high society of Washington, DC, where he is mistaken for a profound genius as he regurgitates gardening phrases that he has heard on television (“In the garden, growth has its seasons”). In Chance's case, however, the doubters kept quiet. Mr Semel's critics are getting noisier.

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An Open Letter to SEC Chairman Christopher Cox on the Importance of Proxy Access

Via Email

May 5, 2007

The Honorable Christopher Cox
Chairman
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C.
20549

Dear Chairman Cox:

I have been following, with great interest, the discussion and debate inside and beyond the Commission on the subject of whether shareholders should be granted more access to company proxies to, for example, run for election to the board of directors.

I know that you and the other Commissioners will be discussing this issue intensely over the coming months.

I wanted to provide you with my story of how I've tried as a 34-year old individual investor (holding only 45 shares) in Yahoo!, for the last 5 months, to band together support of like-minded individuals (and institutions) via the Internet, my blog, a wiki, online polling, and YouTube videos, who wish to effect change at the company.

As of today, I have the support of approximately 75 other individuals who collectively own 2 million Yahoo! shares, worth $64 million (or about 0.2% of the total shares outstanding).

As you will see below from a recent article I published in Seeking Alpha, I nominated myself to the Yahoo! board last February. Despite many people telling me to give up on the idea of running for the board, as it would cost about $200,000 to run my own proxy contest, I had an individual who was part of my group willing to pay this cost. Recently, I was instructed that I couldn't run for the board leading up to Yahoo!'s annual meeting in June, because, although I was a shareholder on the date I nominated myself (well in advance of their requirements, according to their current corporate by-laws), I wasn't a "shareholder of record." Apparently, because my online broker had not at the time of my self-nomination yet informed the company's transfer agent that Eric Jackson owned 45 shares, I couldn't run for their board.

Life is full of technicalities. Of course, I'm disappointed. However, we need to focus on the bigger picture and I believe this story demonstrates the importance of the work you and the other Commissioners are doing in seeking to find a way to allow forthright and well-meaning shareholders to have a more meaningful voice to all shareholders through the company proxy.

The "Plan B" for Yahoo! that my group submitted to the company for consideration (which was essentially the platform I was running on for election to Yahoo!'s board) was not devised purely by me. It was edited greatly through the use of a wiki and online polling. Only after it was improved, by the democratic input of other shareholders, did we see the tremendous support from others. If our ideas didn't have credibility, no one would have supported us and "pledged" their shares.

The critics of open proxy access say that special interest groups will high-jack the agendas of corporate management. We say: let the best ideas circulate and rise to the top. There will be no support for ideas that have no merit. Knowing that shareholders can raise their voice when necessary will be a great motivator for management to do a better job before the fact, rather than afterwards.

I hope you find this "case study" of interest.

Please let me know if I can be of any further assistance to the Commission as you deliberate on this very important topic. I also hope that I'll be able to follow your rules in the 2008 proxy season.

Sincerely,

Eric Jackson, Ph.D.
President & CEO
Jackson Leadership Systems, Inc.

With a link to: http://internet.seekingalpha.com/article/34496#comments

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Out-Law.com News and Interview: Blogger activist will run for Yahoo! board

This article came out last week in Out-Law.com. Unfortunately, I won't be running for a seat on Yahoo!'s board this year, but the "withhold" campaign as a lever for change is still alive and well.

The interview that supplements the article is available here for download; the interview starts at the 2:00 minute mark.

OUT-LAW News, 03/05/2007

The activist shareholder spearheading an online campaign against Yahoo!'s management will seek a seat on its board in June. Eric Jackson says wealthy supporters will cover the $200,000 cost of the campaign.

"I have nominated myself for a spot on the board and the annual meeting is on June 12th," said Jackson, who is behind a shoestring campaign which uses blogs and YouTube videos to attempt to unseat chief executive Terry Semel. "Between now and then to get elected I need to run a proxy contest, and that costs a lot of money."

Jackson owns just 45 Yahoo! shares, currently around $1,200-worth, but is running an online campaign to motivate other disaffected shareholders to back his 'plan B' for Yahoo!, which involves firing Semel and finding a way to claw back market share from Google.

Jackson said that he has requested meetings with management, and that he will run for a seat on the board of the company in June, which he says will be a costly exercise.

"The estimates are usually in the area of $200,000," he told OUT-LAW Radio, the weekly technology law podcast. "It's pricey, but in our shareholder group we're fortunate that some of the members are well heeled and are interested in pursuing that."

Jackson's is the kind of plan usually put in place by more traditional activist shareholders, who target a company and buy stock, and therefore control. But Jackson is trying to do it without spending billions of dollars on shares.

"I don't have a $6 billion hedge fund so I thought how can I get the same impact as that?" he said. "I thought, well I have my blog, I sat down in January and recorded a YouTube video of myself making a call to action for Yahoo! shareholders."

Jackson uses the currently fashionable tools associated with the so-called web 2.0 phenomenon to exert an influence out of proportion to his shareholding, gathering supporters to his cause at almost no cost.

"It was a combination of my own blog, where people could leave comments and make suggestions, the use of YouTube videos, where I would give periodic updates and the third major web tool that was used was a wiki for the actual plan B itself," said Jackson.

His efforts have met with surprising success. He now has almost 200 million shares pledged to his cause by proxy, which is $55 million-worth of stock accounting for 0.2% of the company. Traditional activist shareholders often change the direction of a company with as little as 0.5% of a firm.

Jackson, a business advisor in his day job, said that his new plan for Yahoo! centres on replacing Semel as chief executive. "We're advocating nine steps. We think the company could benefit from a new leader," he said. "We think the company should look to replace seven of the 10 directors. There appears to be a certain amount of drift at Yahoo! and a lack of coherent explanation as to what's next for this company."

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Check out my Slide Show!

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Foreshadowing Microsoft and Yahoo! Deal

This morning, the news is all about Microsoft and Yahoo! merging their operations. Is it a good thing for Yahoo! shareholders that the stock got a 18% bump on the news? Of course. This more than makes up for the shrinkage in value which happened following the disappointing Q1 numbers.

Will it happen? I think it's more than likely. It's almost out of a Hollywood script, riding off into the sunset in Redmond. Fin.


Will it make Yahoo! or MSN any more competitive with Google? Not clear.

Henry Blodget is correct that an immediate spin-off of the MSN-Yahoo! would be critical to employee retention. Otherwise, it could be quite a poor deal for Microsoft.

I can't help but wonder if Yahoo!'s path could have been a different one than this ending. Yet, it seems that this fate has been in the cards for some time. See below for a blast from the past.

The following is an excerpt from a February 7th post called "What's the Strategy Inside Yahoo!?":

Time Magazine's Jeremy Caplan (and Jeff Ressner) recently profiled the latest news on Yahoo! with the full article here.

For it, Yahoo! was complicit in allowing Timothy Archibald access for some artistic signs within the Yahoo! campus (of the basketball court and sign directing the Yahooligans to the cafeteria). It's clear that there are other points Yahoo! wanted to get across in the article.

What I find discouraging as a Yahoo! shareholder are intimations in the article that Yahoo! could join forces/be bought later this year with Microsoft, AOL, or Bertelsmann. This possibility is attributed to "analysts," including blogger and commentator Paul Kedrosky and is reiterated later in the full article, and not directly to Yahoo! management. Yet, it doesn't seem to be an accident that it's there.

Of course, there's nothing wrong with increased shareholder value and one way for this to happen would be for one of these companies (or any other) to come in and pay a 40% premium to take over the company. Since proposing a "Plan B" for Yahoo! a month ago, my primary goal was to raise shareholder value for all Yahoo! shareholders.

...

I do have a big problem with the fact that Yahoo! ... has failed to articulate a clear strategy about how the company will be dominant for years to come independently. Better monetizing search is not a company strategy, it's a tactic. Improving a lead in graphical ads is not a strategy, it's a tactic. Doing lots of ankle-biter acquisitions is not a strategy.... Getting snapped up by Microsoft and assimilated into MSN is not a strategy.

I would like to hear one. Jeff Weiner has proudly stated that Yahoo! now has a mission: "Connecting people with their passions, communities and the world's knowledge." Stewart Butterfield has given this his seal of approval, because "A year and a half ago there wasn't a satisfying articulation of what the mission of the company was." I'm still waiting for the articulation for the strategy. The company, investors, and employees need one and deserve one.

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Why I Can't Run for Election to Yahoo!'s Board of Directors

Since January of this year, I've been formally advocating for changes at Yahoo! - the Internet titan, which has gone through a difficult last 2.5 years when comparing its performance to Google, its closest and most direct competitor.

Since August 6th, 2004, through today, Google's stock has increased 333%, while Yahoo!'s has decreased by 8.4% and the NASDAQ has climbed 35%. In other words, $10,000 invested in Google's aftermarket IPO price would be worth $33,300 today. That same $10,000 invested in Yahoo! at that time would be worth $9,160 today. That's a 3.6x differential.

I became a shareholder of Yahoo! at the beginning of this year -- purchasing 45 shares, which I still own. On January 7th, I began to advocate for change at Yahoo!, issuing a "draft" Plan B via a YouTube video and a blog posting and asking for others who shared my sentiments to help refine and improve the alternative plan, in order to take it to the company.

The response was immediate and strong. Several current and former Yahoo! employees, long-standing shareholders (including an actual widow - no orphans, though, to my knowledge), and even a former castmate of the Apprentice LA joined the campaign. Press coverage was strong too. There was an novelty aspect to it. "Web Warrior Takes on Yahoo" was one headline.

Pledges of Yahoo! shares immediately started to pour in via the blog (in the comments section) as well as suggestions for improving the plan. To help keep this collective shareholder action better organized, the folks from YouChoose.Net helped create a form to track the various pledges of shares and Wikia helped create a Yahoo! wiki, where our supporters could actually go and directly edit the "Plan B."

I had no idea this would happen when I sat down in my guest-room on a Sunday morning in January to record my first video. However, it did strike me that, with the power of blogs and social networking (the tools that Yahoo! itself promotes to draw groups of users together for their collective benefit and Yahoo!'s), which had worked it the political realm, perhaps now was the time for shareholders to be able to band together and help influence the direction of a public company for the betterment of all its shareholders.

Within a few weeks, we were up to a total number of pledged Yahoo! shares of 1 million. Today, we are just shy of 2 million Yahoo! shares - worth approximately $55 million.

On February 22nd, we finalized our "Plan B" and formally submitted it to Yahoo!'s Corporate Secretary. We asked to bring forward the nine points of our "Plan B" as business at the 2007 Yahoo! annual meeting. All nine points, we believe, if implemented, will create significant additional value for Yahoo! shareholders.

We couldn't include it as a formal stockholder proposal, as the submission date (set by Yahoo!) was back in December 2006. We also put forward my name as a nominee for the Yahoo! board -- also to be voted on at the 2007 annual meeting. There were certain requirements, as set forth in Yahoo!'s corporate by-laws, that anyone must meet, in order to be nominated to the board. We believed we fulfilled all of them, including (of course) being a stockholder at the time of nomination.

I regret to say that I have been informed that our reading of the requirements to stand for election as a director for Yahoo! was apparently not accurate. It isn't sufficient to be a stockholder in the company to run for election to the board, you need to be a stockholder of record. That is to say, that Yahoo!'s master list of stockholders needs to have a record of you as a stockholder before you nominate yourself to its board. Not enough time had passed for E*Trade to inform Yahoo!'s transfer agent that Eric Jackson now possessed 45 Yahoo! shares.

To say I'm disappointed is an understatement. I believe that Yahoo!, despite its problems over the past years, has an incredible collection of assets and a bright future -- if it acts swiftly and wisely in the coming 6 - 12 months. If it drifts, acting swiftly and wisely 18 months from now will be too late. A fresh perspective to the Yahoo! board of only one person, but someone representing a sizable group of shareholders, would signal to all Yahoo! shareholders that their voices are being heard around the board table.

However, for those of you who support a "Plan B" for Yahoo! and would like your voices to be heard by Yahoo!'s board and management, your support now is more important than ever. On June 12th, Yahoo! will hold its annual meeting in Santa Clara. The company proxy was released earlier this week. There are 2 ways you can make your voice known - in support of "Plan B" - at that meeting.

(1) Our group is entitled -- just as any other shareholder is -- to speak up at the Q&A session preceding the formal meeting. Continuing to pledge your shares to our plan will give us a greater collective stake when we stand up to make our points.

(2) Every Yahoo! shareholder can vote "for" the 10 directors on the company's slate of directors or they can "withhold" votes for any or all directors. Because Yahoo! has moved from plurality to majority vote counting this year (for which they deserve kudos), any Yahoo! director receiving less than 50% of shareholder votes will be required to immediately leave the board. In recent years, there have been a number of high-profile companies receiving high "withhold" votes. In all these cases, the results were symbolic -- not requiring the company to take action. This could be one of the first examples in a post-Enron world where a company actually sees one or more of its directors voted down by majority vote.

Therefore, my fellow Yahoo! shareholders, I ask you to continue to support a "Plan B" for Yahoo! and read your Yahoo! proxy wisely. We live in a shareholder democracy, after all. Every vote counts. If you don't believe in Yahoo!, please sell your shares. Many did over the past two weeks following the Q1 earnings call. Those of you who didn't sell obviously still believe in the company.

If you want to help influence Yahoo!, for the benefit of all shareholders, but don't just want to sign a blank check for the Yahoo!'s current board and management based on the last 2.5 years, support "Plan B" and withhold your votes for some of Yahoo!'s directors.

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