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Yahoo Board Expected To Face Criticism At Annual Meeting

Posted on: Friday, 1 August 2008, 09:30 CDT

Yahoo Inc. shareholders remain angry about a recent truce with investor Carl Icahn heading into the company's annual meeting on Friday.

A number of votes opposing the re-election of the Yahoo board, and a fair share of criticism is expected.

Jerry Yang, Yahoo's Chief Executive, will face the brunt of the opposition after rejecting a $47.5 billion takeover proposal from Microsoft in May.

Now Microsoft has withdrawn their offer, and Yahoo's stock has taken a 30 percent nose-dive, bringing the company's market value nearly $20 billion below what shareholders would been paid if the Yahoo board had accepted the bid.

"The Microsoft negotiations were just the latest example of the negligence by this board," said Eric Jackson, an angry Yahoo shareholder. "There is still a lot of anger and frustration among shareholders right now."

Jackson currently represents a stockholders group that holds nearly 3.2 million Yahoo shares.  Last year, Jackson made a scene at the annual meeting by criticizing the performance of then-CEO, Terry Semel.  Semel resigned just six days later.

The failed Microsoft takeover is not the only thing agitating shareholders.  Despite an Internet advertising boom, the company has seen its stocks and profits fall for the past few years. Since 2005, main competitor Google has climbed 15 percent, while Yahoo has lost almost half its market value.

On Thursday Yahoo shares fell another 14 cents to $19.89, landing just above their price when Microsoft made its first move to buyout the company six months ago.

Shareholder Mark Nelson believes Yang may step down as Chief Executive if the outcry is loud enough.

"I haven't spoken to anyone who thinks, 'Hey, this is the right team to lead Yahoo,'" said Nelson, who represents Mithras Capital, which owns 1.7 million Yahoo shares. "I hope there will be enough shareholder pressure at this meeting for the board to realize they need to bring in someone else to run the company."

Icahn will join Yahoo's board next week and has already stated that he believes Yang should be replaced with a more experienced executive.  Two Icahn supporters will be joining the board by Aug. 15th, and change seems eminent.

Previously Icahn had been asking to replace all of the company's directors with his own, but dropped the idea in July when he didn't receive enough shareholder support.

Icahn doesn't plan to be at the annual meeting even though he owns a 5 percent stake in the company.  His recent agreement with the company prevents him from criticizing Yang or other directors publicly.

"While we still disagree on many points, I have great hope 'this will be the beginning of a beautiful friendship,'" Icahn recently posted on his blog.

Now Yahoo must select two Icahn-approved candidates from a group of nine to join its board.  Two of the men, AOL CEO Jonathan Miller and former Viacom Inc. CEO Frank Biondi Jr., are expected to contend for Yang's job.

Yang still believes he is the best choice to run the company.

"I am as excited as I have ever been to lead this company," Yang said on July 22.

On Friday Yang plans to emphasize a partnership with Google that's expected to increase the company's annual revenue by $800 million, though antitrust officials could stop the agreement.

Yang believes Yahoo's revenue will grow from $5.6 billion this year to over $9 billion in 2010, though industry analysts are skeptical. Many project the company reaching only $7 billion by 2010.

Roy Bostock is also expected to face harsh criticism in the annual meeting.  Bostock, who oversaw the failed Microsoft takeover, also approved an employee severance plan that will greatly increase the costs of a buyout.

RiskMetrics ISS, the most influential shareholder firm supports re-electing Yahoo's entire board, but Glass, Lewis & Co. and Proxy Governance have expressed their distaste for the current directors including Bostock.

If the majority of shareholders oppose a director, the director is required to submit a letter of resignation to Yahoo, although the company does not have to accept the resignation. 

It is rumored that Yahoo might announce an extraordinary measure, such as a special dividend or spin-off of its Asian assets, both of which Microsoft proposed in July when they teamed with Icahn to buy the company's search engine.

Source: redorbit Staff & Wire Reports

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