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The Yahoo Annual Meeting Circus Rolls Back Into Town Next Week: Send in the Clowns?

Kara Swisher — Thu, 18 Jun 2009 11:45:17 +0000

In exactly one week at 10 am PDT, Yahoo will hold its annual meeting in Silicon Valley, the first time when new CEO Carol Bartz will greet its shareholders in person.

She should prep carefully, as the event has been quite a drama over the last two years.

In 2007, former Yahoo CEO Terry Semel left the company just days after a fractious annual meeting and was replaced by co-founder Jerry Yang.

And last August, the meeting was held in the midst of even more trouble.

The walk-up to that gathering included a failed takeover attempt by Microsoft (MSFT), extensive Yahoo (YHOO) management turmoil and a high-profile proxy fight waged by billionaire investor Carl Icahn.

And the meeting itself was also a mess, after shareholder voting was miscounted and it turned out that discontent about leadership was double what Yahoo first reported it was.

Broadridge Financial Solutions’ corrected tabulation of the vote on Aug. 1, without the “truncation errors,” showed Yang’s disapproval more than double what was previously reported, rising from 14.6 percent votes withheld to 33.7 percent. Yahoo Chairman Roy Bostock saw his shares withheld rise from 20.5 percent to 39.6 percent.

Yang later stepped down, as did President Sue Decker, both of whom presided over the meeting. Yang was replaced by Bartz early this year.

But most of the Yahoo board remains in place, with the addition of Icahn, including Bostock.

And today, just as it was then, Yahoo and Microsoft remain engaged in an ongoing push-me-pull-you relationship about whether to partner in search and online advertising or not.

Talks have been on-again-off-again for months now, including a meeting between Bartz and Microsoft CEO Steve Ballmer at the D: All Things Digital conference in late May.

Those talks have now appeared to reach yet another impasse, but that could change again quickly.

Sources at Microsoft said the software giant has remained interested in such a deal, although not at any price, a stance that has recently been made firmer by the apparent early success of its rehaul of its search offering, now called Bing.

Some inside the company think this puts added pressure on Yahoo to do a deal, before Microsoft actually logs in consistent gains in search share.

Microsoft has long been mired in third place at around eight percent, behind Yahoo by a dozen points and well behind Google (GOOG), which consistently tracks above 60 and 70 percent.

“Bing’s success only increases the odds [of a Yahoo deal] and decreases the price,” said one observer.

But a big price is exactly what Yahoo wants, with Bartz stating in an onstage interview with me at D7 that she was willing to do a deal for “boatloads of money,” as well as the right technology and data.

(You can see a video of Bartz’s full session here, talking about that and more.)

And she is backed, at this point, by the board, except for Icahn, who has been aggressively agitating for a Microsoft deal, in hopes it will return his huge investment in Yahoo into the black.

“He has been kind of driving Carol crazy about it,” said one source close to the situation.

For her part, Bartz has told many at the company and outside it that she was hired to make such key decisions and if the board–especially Icahn–did not like it they could find another CEO.

Yahoo has been upgraded recently by some analysts, based on confidence in Bartz’s ability to turn around and reinvigorate the company. The stock has seen a small bump up too.

But Bartz, although successfully projecting command of Yahoo and stabilizing the management over the last six months, has yet to put forth a detailed strategy for the company to stanch declines in profits and revenues and increase innovation.

And, although annual meetings are usually painfully scripted affairs, the event might be her chance to perhaps articulate that plan and more.

BoomTown will, of course, be front and center at the ongoing show to see what happens next.

Until then, here are two videos I did at the 2007 and 2008 annual meetings.

And below it, the great Barbra Streisand in a video, singing the classic, “Send in the Clowns”–which is pretty much the perfect theme song for the star-crossed Microsoft and Yahoo relationship.

2007:

[ See post to watch video ]

2008:

[ See post to watch video ]

After Vote-Gate, Heads Must Roll on Yahoo's Board

Eric Jackson — Thu, 07 Aug 2008 00:00:50 +0000

To anyone who says that it’s inconsequential that Yahoo understated the level of shareholder dissatisfaction by more than half thanks to a “tabulation error” by its proxy counter, Broadridge Financial Solutions, I say: You couldn’t be more wrong.

This incident will have ramifications in the coming weeks for the composition of Yahoo’s board. But here’s the shocking thing: This latest batch of numbers might still underrepresent the level of disdain shareholders have for this board.

Any corporate election that doesn’t receive 95 to 98 percent support from shareholders for the incumbent management and board is an anomaly. Yahoo’s first press release from last Friday suggested that, despite all the hubbub of the failed merger talks with Microsoft and public criticism from Carl Icahn and others, Yahoo (YHOO) shareholders had let the incumbents off the hook.

Chairman Roy Bostock and CEO Jerry Yang were re-elected with 79.5 percent and 84 percent support respectively. These relatively benign results (compared to last year’s), combined with the fact that there were not more pointed questions at the meeting last week, led some observers to conclude that this board had “faced down” its critics.

Not quite. Gordon Crawford of Capital Research Global Investors did all Yahoo shareholders a favor by demanding a recount. Yahoo and Broadridge complied.

And results of that recount were alarmingly different from the first set of numbers. We’ve all heard of +/- 4 percent in polling, but when was the last time you heard of +/- 50 percent?

The recount might set a modern-day record among S&P 500 companies for the most “withhold” votes for a board in a corporate election. Only Vyomesh Joshi, head of Hewlett-Packard’s (HPQ) printer group, got off without a serious warning from shareholders (a 7.1 percent “withhold” vote).

The “withhold” vote for Bostock was 39.6 percent, not 20.5 percent as originally reported. And 33.7 percent of Yahoo shareholders withheld their support from Yang, not 14.6 percent.

Other Yahoo directors who fared poorly in the election were Gary Wilson (27.7 percent of votes withheld) and Compensation committee members Ronald Burkle (37.9 percent withheld) and Arthur Kern (31.7 percent withheld).

What would we all be doing today if Crawford had never called for a recount? If a “tabulation error” happens and no one is there to hear it, did it happen at all? We will never know.

And there will likely be more shoes to drop in this tragedy of errors. This “tabulation error” was only one of two major question marks surrounding last Friday’s initial voting results. Yahoo easily made Broadridge the fall guy for this first error.

The second error–how few eligible shares were counted in the final tally–isn’t so easily eluded. And for that, Yahoo will be the fall guy.

Only 75.8 percent of the eligible shares as of the June 3 record date were voted in this election. After such intense media scrutiny in the past few months, it seems odd that so few investors participated.

Last weekend, I dove into the numbers in detail and reviewed them against numbers from the last two Yahoo elections. On Sunday night I wrote about the most recent Yahoo shareholder vote and verified that there were 200 million fewer votes cast this year compared to the average over the last two years. I called on Yahoo to appoint an independent third party to review and certify the voting process.

Yesterday, as news of the voting irregularities circulated, I received a number of complaints from frustrated shareholders.

Some claimed they had received multiple proxies from Yahoo over the last month, with several arriving Aug. 4–the Monday after the election. Some said they had had trouble voting by phone. Others, who had initially voted for Icahn’s slate, said when they tried to re-vote against the Yahoo board, they weren’t able to do so.

How many other shareholders encountered similar difficulties? Without a full inquiry, we’ll never know.

These missing votes could have had an even more significant impact on the overall results. For example, Bostock received “for” votes from fewer than half of the total shares eligible to vote (only 45.8 percent of the 1.4 billion shares eligible to vote). He truly lacks the approval of the majority of the shareholders he is supposed to represent. With a 47 percent vote, Burkle also lacks majority support. And while Yang won majority support, he did so by the skin of his teeth, with just a 50.2 percent vote.

Governance Matters

At Friday’s meeting, I asked Yang, Yahoo President Sue Decker and Bostock about three issues that suggest to me that Yahoo’s governance oversight has been lax.

(1)

(2) Decker serves on three Fortune 500 boards: Intel (INTC), Costco (COST), and Berkshire Hathaway (BRK). Her duties to those companies required her to attend at least 22 meetings last year, according to proxy filings. And each meeting required significant preparation. As a Yahoo shareholder, I fail to see how outside commitments like these benefit Yahoo. Are they really necessary? Shouldn’t Decker drop a few of them until Yahoo finds solid footing again?

(3) About a third–31 to 36 percent–of Yahoo shareholders voted against the re-election of Roy Bostock and fellow Compensation Committee members Burkle and Kern last year. Yet all three continue to sit on this committee (or the board). Why? And why did they agree to pay outside directors average total compensation of $500,000 last year? Google’s (GOOG) outside directors were paid $250,000, on average, for their services last year. Decker received $2,700 for sitting on the Berkshire Hathaway board (and $110,000 per year for serving on the Intel and Costco boards). Why is Yahoo paying its directors so much?

I found the trio’s answers to these questions unconvincing. Particularly surprising were Bostock’s comments on Compensation Committee member tenure and compensation.

In the first place, Bostock said while 32 percent of shareholders voted against his reelection last year, 68 percent voted for him. And that’s not bad, he said. This glass-half-full logic explains why he has never bothered to explain to shareholders why he, Burkle and Kern have remained on the Compensation Committee and the Yahoo board.

Second, Bostock disputed my assertion that Yahoo’s outside directors were paid an average of $500,000 last year. When I asked him if he was definitively stating that he did not receive compensation of about $500,000 last year, he said “yes.” Yet, according to Yahoo’s own proxy statement, Bostock earned total compensation of $499,264 last year. 2007 compensation for Yahoo’s other board members was as follows:

Ronald Burkle: $482,046
Eric Hippeau: $496,674
Vyomesh Joshi: $519,520
Arthur Kern: $496,990
Robert Kotick: $492,774
Edward Kozel: $516,202
Mary Agnes Wilderotter: $205,832 (for five months of service; annualized $493,997)
Gary Wilson: $482,046

The average compensation for each Yahoo outside director in 2007: $497,531.

Third, Bostock also claimed that this year’s vote would be a far better indication of shareholder support for Yahoo’s Compensation Committee than last year. With 39.6 percent of shareholders withholding support from Bostock and 37.9 percent withholding it from Burkle, isn’t it time for them to step aside?

Fool Me Once, Shame on You; Fool Me Twice, Shame on Me

Given all this, I am deeply concerned that my interests and those of all Yahoo shareholders are not being protected by the company’s board.

We need to know why 200 million shares were missing from this year’s vote as compared to the last two years’.

We need to know why so many proxies were mailed late to shareholders (on our dime).

We need to know why so many shareholders are questioning whether their votes were counted.

Yahoo will try to sweep all these concerns under the rug, but we shouldn’t allow it. The company should immediately appoint an independent third party to address these questions and assure shareholders that their votes were properly counted.

Immediate Changes to the Board

Also, Yahoo needs to immediately make some changes to the composition of its board. Bostock and Burkle should do the honorable thing and step down from this board.

In truth, this should have happened a year ago. One wonders what might have happened in the last 12 months with Microsoft negotiations had Yahoo acted swiftly, following the 2007 annual meeting, to remove them.

New Yahoo Shareholder Vote: Yang Disapproval More Than Doubles

Kara Swisher — Tue, 05 Aug 2008 21:06:24 +0000

The vote is now in and it’s not so pretty for Yahoo, as it turns out.

Broadridge Financial Solutions’ corrected tabulation of the vote at the Yahoo annual meeting on Aug. 1, without the “truncation errors,” came out and, it seems, shareholders are actually mighty irked at Yahoo leadership.

Most glaringly, the new result shows Yahoo CEO Jerry Yang’s disapproval more than double what was previously reported, rising from 14.6 percent votes withheld to 33.7 percent. Yahoo Chairman Roy Bostock saw his shares withheld rise from 20.5 percent to 39.6 percent.

Yang (pictured here), who has been under fire for his management of Yahoo (YHOO), is likely to now endure yet another round of questioning about whether he should stay in his job in the wake of this massive show of disapproval by investors.

Here is part of Yahoo’s press release, with the correct and incorrect tables below:

Yahoo! Acknowledges Tabulation Error by Broadridge

SUNNYVALE, Calif., August 5, 2008 – Yahoo! Inc. (Nasdaq: YHOO) was informed today by Corporate Election Services, the inspector of elections for the Yahoo! annual meeting of shareholders on August 1, 2008, that Corporate Election Services was notified this morning by Broadridge Financial Solutions, Inc., an independent voting intermediary that processes proxies on behalf of banks, brokers and institutions, of errors made by Broadridge in reporting votes at the meeting. Specifically, as Broadridge publicly disclosed earlier today, when Broadridge reported voting results for “withholds,” a truncation error occurred in reporting share numbers that exceeded eight digits.

The following table reflects the corrected Broadridge numbers:

Roy Bostock (Shares For: 632,023,657/60.4%; Shares withheld 414,071,927/39.6%)

Ronald W. Burkle (649,373,291/62.1%; 396,722,293/37.9%)

Eric Hippeau (948,862,579/90.7%; 97,233,005/9.3%)

Vyomesh Joshi (971,594,650/92.9%; 74,500,934/7.1%)

Arthur H. Kern (714,871,925/68.3%; 331,223,659/31.7%)

Robert A. Kotick (967,044,818/92.4%; 79,050,766/7.6%)

Mary Agnes Wilderotter 964,939,727/92.2%: 81,155,857/7.8%)

Gary L. Wilson (756,006,576/72.3%; 290,089,008/27.7%)

Jerry Yang (693,055,602/66.3%;353,039,982/33.7%)

The following table shows the original voting results certified by the inspector of elections, as previously reported:

Roy J. Bostock (Shares for: 832,023,657/79.5%; Shares Withheld: 214,071,927/20.5%)

Ronald W. Burkle (849,373,291/81.2%; 196,722,293/18.8%)

Eric Hippeau (948,862,579/90.7%; 97,233,005/9.3%)

Vyomesh Joshi (971,594,650/92.9%; 74,500,934/7.1%)

Arthur H. Kern (814,871,925/77.9%; 231,223,659 /22.1%)

Robert A. Kotick (967,044,818; 92.4%; 79,050,766/7.6%)

Mary Agnes Wilderotter (964,939,727/92.2%; 81,155,857/7.8%)

Gary L. Wilson (856,006,576/81.8%; 190,089,008/18.2%)

Jerry Yang (893,055,602/85.4%; 153,039,982/14.6%)

Broadridge to Yahoo: Oops, We Added Wrong (and Shareholders Like You Lots Less)!

Kara Swisher — Tue, 05 Aug 2008 17:07:09 +0000

Here’s the full statement (below) from the outside firm, Broadridge Financial Solutions, that tabulated Yahoo’s recent shareholder vote.

Bottom line: An underreporting of shares withheld for certain directors, which the Lake Success, N.Y., shareholder services firm is calling an “isolated incident” and also a “truncation error.”

That sounds painful.

And it is likely Yahoo CEO Jerry Yang will feel much of that pain, as sources said the shares are largely those that were withheld from him by disgruntled shareholders.

While the mistake will not change the vote’s overall outcome, in which all current Yahoo (YHOO) directors were re-elected, it will surely make the no-vote tally worse than first reported for many directors, and underline more clearly the increased investor disappointment directed at Yahoo leadership.

As reported Friday, for example, Yang only had 14.6 percent withheld, with 85.4 percent voting for him, which was better than the year before.

A Yahoo spokesman said the company was redoing its results, based on the new information, and would release the new numbers soon. The Internet company did not do the vote tabulation.

The examination of the results was prompted by an unusually positive Yahoo shareholder vote, when it did not seem to include the withheld votes of one major Yahoo shareholder.

Thus, Capital Research & Management asked Broadridge for a recount of its votes.

The problem centered on how shares were tallied in the Yahoo annual meeting, specifically related to a group of votes withheld by Capital Research Global Investors.

That fund owns almost seven percent of Yahoo, and its head, Gordon Crawford, had recommended withholding votes from Yahoo.

Here is the statement from Chuck Callan, Senior Vice President Regulatory Affairs at Broadridge:

On August 4, Broadridge was notified by an investor of a potential discrepancy in a reported vote at the Yahoo Annual Meeting on August 1.

Upon review, it was determined that there was a truncation error in the final printout sent to the tabulator. This resulted in the underreporting of shares withheld for certain directors.

This error did not change the outcome of the election of directors, and was determined to be an isolated incident.

Broadridge has determined that the situation was unique–a truncation error occurred when shares withheld for a specific director in a specific nominee exceeded 8 digits and were reported to the tabulator in paper format. Broadridge has fixed the problem. Further, Broadridge has verified that over the past 18 months there were no other meetings with reports that included this unique combination of factors. The review is ongoing for meetings occurring before then.

On August 4th Broadridge notified Yahoo’s Inspector of Elections and Tabulator of the problem, and a revised report was issued on August 5th.

The Yahoo Shareholder Vote: Like Florida, Except More Confusing!

Kara Swisher — Tue, 05 Aug 2008 13:50:33 +0000

All Yahoo needs now is for former Florida Secretary of State Katherine Harris to show up and start recounting votes.

It could happen, given all the crazy characters who have been drawn to the much-beleaguered Internet company like a magnet, in 2008.

It’s almost as if there is a voodoo curse on Yahoo (YHOO).

So, you didn’t think the digital gods would let it have more than one weekend of good news, did you?

No, they will not, it seems.

After the annual meeting last Friday, which went off without a hitch and, more importantly, without an expected major shareholder vote against the company’s management and board, you could feel a palpable easing of tension among Yahoo leadership and its exhausted PR team.

By Monday, the Yahoo shareholder kerfuffle–in essence, one major shareholder of Yahoo has asked for its outside tabulator of investor votes at the annual meeting for a recount–had landed with a thud.

The problem is how shares were tallied in the Yahoo annual meeting, specifically around whether a group of votes withheld by Capital Research Global Investors was not counted, counted incorrectly or even voted incorrectly by the investor.

Parent company Capital Research & Management confirmed that it had asked Broadridge Financial Solutions, a Lake Success, N.Y.-based financial services company that does securities clearing and processing, to investigate whether those votes were correctly counted on behalf of its Capital Research Global Investors fund.

Capital Research Global Investors–one of two funds separately managed at Capital Research & Management–owns 6.5 percent of Yahoo, according to recent filings, and Capital World Investors owns 9.8 percent.

Capital Research Global Investors is run by legendary media investor Gordon Crawford (pictured here), who has become disenchanted with Yahoo over the last year.

Because of that, sources close to the fund’s thinking said Crawford had recommended that the fund withhold votes from CEO Jerry Yang and some other board members.

It’s not clear whether that actually happened or, if it did, whether the votes were tallied properly.

That’s because Yang, for example, only had 14.6 percent withheld, with 85.4 percent voting for him.

The votes withheld seemed low to Capital, considering Crawford’s large stake and how many shareholders have been deeply unhappy with Yahoo management this year.

Instead, overall results for Yang and the Yahoo board were mostly better than last year.

Everyone is investigating, of course–from Capital Research to Broadridge to Yahoo, which does not do its own tabulation, although it has hired an outside proxy solicitor to manage the process–to try to find out what’s what.

It is likely there’s a nonsinister reason for the voting results.

And there might be a lot of possible explanations, but I am partial to blaming the confusion that followed after activist investor Carl Icahn pulled his proxy fight a week before the meeting and made nice with Yahoo.

Unfortunately, Icahn’s golden proxy ballot was already in the hands of investors, many of whom might have voted for it and then had that vote essentially voided.

Wrote one BoomTown reader and Yahoo shareholder:

“I hold 23,000 shares of YHOO. I had 17,000 on the date of record. I voted to ‘withhold all’ … I think twice. Then I voted for all of Carl’s team. Now I have learned that the Carl votes did not count and a day AFTER the annual meeting I received my new ballot. I wonder how many other people were disenfranchised??? Who can I complain to?? Is this how Jerry got his support??”

Another commenter on the site also wrote:

“As a stockholder, I was curious *which* of my proxy letters actually was counted–I received four. One was from Icahn, the other three were from Yahoo. The last of which arrived today, August 4th. Does this strike anyone as odd?”

Actually, Yahoo’s twisting journey passed odd a long time ago and is now headed toward “The X-Files” territory.

(So let’s all triple-hope Yang’s upcoming trip to China for the Olympics goes smoothly. Have a good time, Jerry, we’ll be back here counting!)

Yahoo Shareholder Vote Number-Crunching–Whither Cap Re's No Vote?

Kara Swisher — Mon, 04 Aug 2008 21:39:26 +0000

There is a mini-tempest brewing over how shares were tallied in the Yahoo annual meeting last Friday, specifically around whether a group of votes withheld by one of Yahoo’s major shareholders was not counted, counted incorrectly or even voted incorrectly by the investor.

According to sources close to the thinking at Capital Research & Management, the proxy committees for its two large funds that hold a significant stake in Yahoo (YHOO) recommended last week that they withhold votes specifically from CEO Jerry Yang and from various board members, such as Chairman Roy Bostock, to register disappointment with their performance.

Thus, the investment fund confirmed it had approached outside vote tabulator Broadridge Financial Solutions, a Lake Success, N.Y.-based financial services company that does securities clearing and processing, to investigate whether those votes were correctly counted on behalf of its Capital Research Global Investors fund.

Capital Research Global Investors’ investor Gordon Crawford has been vocal about his disappointment with Yang and the board at Yahoo.

And sources close to the fund’s thinking said Crawford recommended that it withhold votes from Yang and some other board members.

Capital World Investors has been less critical of Yahoo, but sources said it was also leaning toward voting at least some of its stake against the company’s leadership.

But Yang, for example, only had 14.6 percent withheld, with 85.4 percent voting for him. Bostock fared worse, grabbing only 79.5 percent of the yes vote, with 20.5 percent withheld.

That would mean, assuming a large part of Capital Research’s votes to withhold were counted, that only a few other investors voted against Yahoo.

This is highly unusual in a year when many shareholders have been deeply unhappy with its management.

But, in fact, overall results for both Yang and Bostock were actually better than last year.

I called Broadridge for comment and am awaiting a response.

Yahoo does not do its own tabulation, which must be done by a third party, although it has hired MacKenzie Partners as a proxy solicitor to manage the process.

Said a spokesman in response to my inquiry about the situation:

“The independent inspector of elections certified the results of the election and Yahoo! accurately announced those results. Yahoo! did not participate in the execution of the votes and was not a party to any errors which may have been made either by a voting institution or a proxy processing intermediary acting on behalf of banks, brokers and institutions.”

While the recommendations of the proxy committees at Capital Research are apparently not binding on some individual directors of smaller funds that make up the larger ones, they typically follow along with the overall decision from the top.

They might not have in this case, of course, or they might not have voted the shares at all, although it is also possible they could have voted incorrectly or that the votes were not tallied properly.

This is better than a hanging chad!

Another unusual issue around the voting: The amazing drop in the number of shares that were voted at all.

In 2008′s shareholder tally (see below for individual director numbers), only 75.8 percent, or 1,046,095,584 out of 1,381,008,701 possible share votes, were cast.

There were 1,205,435,371 votes cast in 2007 and 1,276,175,601 in 2006, a much higher percentage of overall votes.

Sources at Yahoo speculated that this could be due to the fact that most investors vote automatically in an uncontested election and were waiting for an outcome in the proxy fight between activist investor Carl Icahn and Yahoo.

After that issue was settled right before the annual meeting, though, some investors might not have even bothered to vote.

More to come, but here are the pertinent stats on the Yahoo vote as of Friday:

Roy J. Bostock (Shares for: 832,023,657/79.5 %; Shares Withheld: 214,071,927/20.5%)

Ronald W. Burkle (849,373,291/81.2%; 196,722,293/18.8%)

Eric Hippeau (948,862,579/90.7%; 97,233,005/9.3%)

Vyomesh Joshi (971,594,650/92.9%; 74,500,934/7.1%)

Arthur H. Kern (814,871,925/77.9%; 231,223,659 /22.1%)

Robert A. Kotick (967,044,818; 92.4%; 79,050,766/7.6%)

Mary Agnes Wilderotter (964,939,727/92.2%; 81,155,857/7.8%)

Gary L. Wilson (856,006,576/81.8%; 190,089,008/18.2%)

Jerry Yang (893,055,602/85.4%; 153,039,982/14.6%)