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Revised Count of Yahoo Shareholder Vote Reveals More Disdain for Yang, Chairman

August 6, 2008

By Elise Ackerman, San Jose Mercury News, Calif.

Aug. 6–More than a third of Yahoo’s shareholders signaled their opposition to Jerry Yang’s re-election to the board of directors, the company said Tuesday, far higher than originally reported and a stinging rebuke to his leadership of the Internet giant.

After questions about the election of board members were raised by its largest shareholder, the company said a vote-counting error significantly underreported the opposition to Yang and Chairman Roy Bostock, both of whom received about twice as many negative votes as had been announced Friday following the annual meeting.

The new totals, while not changing the outcome of the election, spotlight continuing shareholder unhappiness over the company’s failed takeover talks with Microsoft. On Tuesday, Yahoo closed at $19.82, far below the $33 a share Microsoft had offered.

Corporate governance experts said such strong opposition was a clear vote of no confidence, although one unlikely to lead to immediate changes. Yahoo’s corporate bylaws stipulate that directors shall be elected “by a majority of votes cast.”

“I don’t think anyone will do anything differently as a result of these numbers,” said Michael Klausner, a Stanford law professor. “The dissatisfaction was apparent already.”

Thanks to the last-minute resolution of a proxy fight led by dissident investor Carl Icahn, Yahoo shareholders had a choice only of voting for the existing board or withholding their votes.

According to the

latest tally, 40 percent of Yahoo shareholders withheld their support from Bostock and 34 percent withheld their support from Yang. Yahoo originally reported that 21 percent of shareholders had withheld support from Bostock and 15 percent had withheld support from Yang.

Robert Howell, a visiting professor at Dartmouth’s Tuck School of Business, said it was “very unusual” for directors to have more than 10 percent of shareholders vote against their nomination, and he described the 40 percent against Bostock as “very significant” and criticized his role in handling the board’s dealings with Microsoft.

Bostock and Yang both played key roles in the failed negotiations with Microsoft. After Microsoft upped its original bid to $33 per share, Yang asked for $37 during a meeting at a Seattle airport.

At that point, Microsoft Chief Executive Steve Ballmer called off the entire deal. Later Bostock tried to persuade Ballmer to put Microsoft’s offer back on the table, but Ballmer said he was only interested in buying Yahoo’s search business.

The discrepancy in the vote tally was caused when an intermediary failed to accurately transmit the votes of Yahoo’s two largest shareholders: Capital World Investors and Capital Research Global Investors. On Friday, Capital Research & Management, the parent firm, requested an investigation into the voting.

The review showed that shareholders also registered unusually high levels of unhappiness with three other directors: Ron Burkle received a withhold vote of 38 percent, Arthur Kern received a withhold vote of 32 percent and Gary Wilson received a withhold vote of 28 percent.

Meanwhile, at least one individual investor contacted the Mercury News to question the accuracy of the revised tally. Robin Hubbard said he received six proxy solicitations in the mail from Yahoo. After he voted to withhold support from all nominees, he said a representative of Yahoo called and said his vote hadn’t been received.

“I didn’t believe him,” Hubbard wrote in an e-mail. “There is no integrity in the process.”

Yahoo revealed Tuesday that 24 percent of outstanding shares were not voted in the election at all, compared with about 10 percent last year. A Yahoo spokesman said it is not uncommon for shareholders to decide not to vote at all in a proxy contest.

Contact Elise Ackerman at eackerman@mercurynews.com or (408) 271-3774.

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Copyright (c) 2008, San Jose Mercury News, Calif.

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