Activist Investor: Yahoo!'s Board Irrelevant

What Yahoo! Lacks and Icahn Needs to Correct

In my view, Yahoo!'s board has been asleep at the switch for several years now, while continuing to shell out lavish pay for under-sized performance. Icahn and Microsoft are right to make the case against them directly to shareholders, and they will likely succeed in the final vote. If this is a trend we are watching start here -- where activists go around intransigent boards and take their case directly to shareholders -- I say, May the best arguments win.

In the short term, more aggressive shareholders will make boards more hesitant, reluctant to fight activists, more difficult to recruit for, and, according to Lipton, more short-term thinkers. In the long term, however, this discipline will cure a lot of lax and cozy boards.

Details and plans matter more than sound bites. Frankly, both Yahoo! and Icahn have been weak on these since this proxy battle began. Yahoo! incessantly mouths PR-created sound bites about aspiring to be a "must buy" and "start page" with no credible plan for getting there. Then, they turn around and criticize Icahn for not having a plan.

Icahn has left himself open to such attacks. He has a two-part plan: (1) sell to Microsoft and (2) replace Jerry Yang as CEO with an "operator."

The Yahoo! proxy vote on Aug. 1 will hinge on the largest Yahoo! holders. Up until now, although they've been dismayed at the incumbent Yahoo! board, they've worried about Icahn's ability to actually bring Microsoft back to the table and his ability to actually run the company for a period of months/quarters assuming he sacks Yang and President Sue Decker, and as other senior managers continue their exodus from Yahoo!'s Sunnyvale headquarters.