A "Third Option"Here is a "Third Option" for how institutions can vote at Yahoo!'s annual meeting, if you cannot fully support the Icahn slate: Vote in a minority of Icahn's representatives to Yahoo!'s board. There are 9 spots up for election on this year's Yahoo! board. My "Third Option" would be to vote in 5 from the existing board and 4 nominees from Icahn's slate. Whichever 9 individuals gets the most number of votes will serve on the new board. In doing so, you will ensure the following:
- Change: After the company's last four years of poor performance and the great disappointment with the outcome of the Microsoft talks, shareholders clearly want change. This "Third Option" will create a new board. The old directors who remain will be more responsive and shareholder-friendly, as a result of a clear message being sent from this election.
- Heightened Accountability to the Will of Shareholders: There will be full accountability within board meetings by ensuring that shareholders select four powerful new voices to sit around the table representing their interests.
- Removal of Impediments to a Future Acquisition: The costly $2.6 billion severance/poison-pill plan will not be triggered through a "change of control" provision and could be immediately rescinded by the new board after the election, so as not to deter future potential acquirers of Yahoo!.
- Operational Continuity: The operational continuity of the company will be assured. You will continue to have the existing management team in place (until the new board makes changes in the future as needed), as well as a majority of the current board to ensure a continuity of the issues that have been discussed and grappled with at the board level over the last year.
Which Yahoo! Directors Should Be Re-elected?I endorse these five Yahoo! directors to remain on the board under this "Third Option" scenario, for reasons explained below:
Robert Kotick, Chair & CEO of Activision
Maggie Wilderotter, Chair & CEO of Citizens Communications
Gary Wilson, Private Investor
Jerry Yang, Co-Founder of Yahoo! In my opinion, the current members of Yahoo!'s Compensation Committee (Chairman Bostock, Ron Burkle and Art Kern) should not be re-elected as they were each the subject of the highest "against" votes at last year's annual meeting. They are also responsible for ladling out excessive stock options to their fellow directors and senior executives over the last four years. I also believe that Eric Hippeau should not be re-elected because he, like Art Kern, has been on the board for over 12 years. That's simply too long, given the relatively poor performance of the company in these past four years. It is time for new blood. Although I have been disappointed with the results of Jerry Yang's tenure as CEO and hold him accountable for the poor outcome with Microsoft, I believe that -- as a co-founder -- he should remain on this board. Whether or not he remains as CEO is something for the new board to determine. I frankly hold Mr. Bostock more responsible for the break-down in talks with Microsoft. He supposedly has much more experience in such deal-making matters than Yang, and I find it puzzling that he would choose not to attend that fateful May 3 meeting in Seattle, which led to Microsoft finally pulling the plug on its offer.
Which Icahn Nominees Should be Elected?From Icahn's slate, there are many worthy candidates. However, I believe the best four candidates to serve on the new Yahoo! board are:
Lucian Bebchuk: The Harvard professor is director of Harvard Law School's program on corporate governance. He is also an esteemed researcher and outspoken critic on excessive executive compensation. He would be the perfect antidote for what ails Yahoo! on that particular issue.
John Chapple: He is the former CEO of Nextel Partners, which he sold to Sprint ( S). If nothing else, he understands the virtues (for his shareholders at least) of selling high rather than selling low. We would welcome such perspectives on Yahoo!'s board. He also brings Fortune 500 CEO experience to the board table.
Edward Meyer: He is the former CEO of large advertising agency Grey Global Group. Yahoo! needs to sell to advertisers like Grey if it is to have a future. Therefore, Meyer will ensure that perspective is represented on the new board. Why shouldn't Icahn or his deputy Keith Meister be elected? I want Icahn to win outright, but I am putting forward this "Third Option" because I fear several large shareholders will worry about the operational abilities of Icahn and his team. As I said earlier, I support them and believe they are more than fit to serve on this board. Icahn has done a great service to Yahoo! shareholders by running this proxy contest. If he wasn't, we would only be able to vote for the existing board members. But the "Third Option" is about electing a "short slate" of directors with highly relevant professional, industry and research experience to make Yahoo!'s board better. These four nominees meet that criteria and will be, I believe, appealing to a majority of investors. To move forward as Yahoo! shareholders, we need to turn the page with this "Third Option" and not remain stuck in the past with the existing failed board. Most Yahoo! shareholders I've communicated with since the breakdown in discussions between Microsoft and Yahoo! last week are still numb and angry. From Feb. 1 to May 3, Yahoo! shares were valued at $31 (and briefly verbally valued at $33), before the bottom fell out of the talks. Today, those shares are at $23, with no prospect of increased value in the foreseeable future. Yahoo! appears comfortable with its new deal to partially use the market monopolistic leader for paid search ads. Microsoft, and its 61% premium offer, appears to be gone, for now. Hence the need for this "Third Option."