Shareholders Back Yahoo Board

SAN JOSE, Calif.—What could have been a nasty Yahoo shareholder uprising if activist billionaire shareholder Carl Icahn had been present actually turned out to be a rather docile gathering of business folks Aug. 1 at the company's annual conference at the Fairmont Hotel.

At least that's the way I judged it from the press section. (See my Storage Station blog for details of the meeting.)

Icahn, who owns about $1 billion worth of Yahoo stock—almost 5 percent of the company—and who tried to orchestrate a Microsoft takeover over a six-month period, met with key executives two weeks ago, agreed on a temporary settlement and decided not to attend the meeting, to the disappointment of many shareholders who see him as their de facto leader.

In a vote that was publicized via a press release on the Yahoo Web site after the meeting, embattled Yahoo CEO and co-founder Jerry Yang and board chairman Roy Bostock both retained their positions in the Yahoo hierarchy—and, surprisingly, by much larger mandates than in the 2007 vote, which also was contentious. 

CEO-at-the-time Terry Semel was under so much pressure last year that he resigned less than a week after that meeting.

After enduring a 34 percent "no" vote last year, Bostock received only a 20.5 "withholding support" vote this time, while only 14.6 percent of shareholders withheld their support for Yang, who scored about 30 percent "against" in 2007. Longtime board member Arthur Kern had the harshest vote on Friday with 22 percent against him.

More than 75 percent of the company's 1,381,008,701 outstanding shares were represented at the meeting, either in person or online.

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Yahoo leaders had their statements ready to go following the vote.

"Last year, Yahoo's board of directors and management took steps to thoroughly re-examine the company's direction and to improve the company's performance," Bostock said in the news release. "Since then, Yahoo has made significant strides in executing on its strategy, performing particularly well in light of the challenging circumstances of the past six months."

Yang said Yahoo is "at a unique point in our history, where we have the eyes of the world focused on our company and tracking our performance. We are redoubling our commitment to driving sustained, profitable growth for our stockholders. The value inherent in Yahoo's unique collection of assets is truly extraordinary."

Contentious Moments Were Few

Although it was a genteel event overall, there were some contentious moments, including a piercing comment by shareholder John Harrington, who runs a human rights-aware investment fund in Napa, Calif. Harrington called for a company committee to be formed on human rights.

Harrington cited Yahoo's complicity with the Republic of China in helping identify users in mainland China who are dissidents of that nation's Communist government. A number of people were found and tortured, Harrington said, and a number of lawsuits hit the company that were settled out of court.

"Tom Lantos [the late congressman from Silicon Valley] said in session that 'Yahoo's leadership are the equivalent of moral pygmies.' I would agree to that, although that would be denigrating to the pygmies," Harrington said. There was some scattered applause when he finished and sat down.

Activist shareholder Eric Jackson called upon the board to stop "overpaying" themselves and for President Sue Decker to resign from "two of her three other corporate board positions" at Intel, Costco and Berkshire Hathaway.

"You have 22 board meetings other than Yahoo's to attend each year," Jackson said. "We would prefer that you spend less time doing other companies' business and focus more on the job at hand here."

Bostock defended Decker as being "probably the hardest worker at Yahoo and one of the smartest people we know. She's tireless—we get 3 a.m. e-mails from her. She's very capable, and capable people can do more than others."

Yang chimed in with a similar comment. "Her connections with other companies like Intel and Costco are very important for our company. Her work on those boards does not affect her work as president at all."

Company Needs to 'Reduce Head Count'

Jackson, president of Ironfire Capital, an investment fund that owns 3.2 million Yahoo shares, was candid in his criticism of the current board in comments he gave to eWEEK following the 2-hour meeting.

"The company is too bloated right now; they need to reduce head count and divest some of their holdings that aren't making any money," Jackson said. "They've been slow in letting people go, always have been.

"The board has people that have been on too long; when you've been on for 10 years or more you can't be objective anymore," he said, citing the fact that board member Eric Hippeau has been on the board for 12 years and that Yang has been on since 1995.

Jackson was all for the takeover attempt by Microsoft.

"We overplayed our hand with Microsoft. Yes, it would have been a great deal for the shareholders and for the company," Jackson said. "We should have taken the deal. But I don't think it's completely dead. I believe … [Microsoft] will come back around next year and try again."

Nobody else at the meeting went so far as to say that. But with Icahn in a new power position, and possibly two of his hand-picked friends backing him up, there's undoubtedly going to be a lot more noise coming from Yahoo headquarters in Sunnyvale, Calif., during the next year.

Especially if the stock continues to be mired in the teens after being as high as $108 in 2000 and $40 in 2006. Shareholders have a thing about slumping share prices.