On the surface, Glass Lewis & Co’s latest advice to its clientele of institutional investors that own shares in Yahoo seems designed to press Yahoo’s board of directors to remove compensatory considerations that might dissuade another takeover bid from Microsoft — or from anybody else, for that matter.
Earlier today, Glass Lewis recommend that its clients vote against the re-election of three Yahoo directors — Yahoo Chairman Roy Bostock, and directors Ron Burkle and Arthur Kern — all of whom wield gavels on Yahoo’s compensation committee. Among the alleged crimes and misdemeanors that Glass Lewis imputes to the compensation committee are excessive compensation awarded to Yahoo executives during the fiscal year 2007 and the passage of an employee-severance program discourages an acquisition of Yahoo.
In the words of Glass Lewis:
Nominees BOSTOCK, BURKLE and KERN all served as members of the compensation committee in fiscal year 2007, during which time the Company paid more compensation to its top executives but performed worse than its peers. The members of the compensation committee have the responsibility of reviewing all aspects of the compensation program for the Company’s executive officers. It appears to us that members of this committee have not effectively served shareholders in this regard. Further, we are concerned that the committee approved the adoption of the Change in Control Severance Plans with potential brobdingnagian payouts, potentially discouraging a takeover.
Plaudits should go to the advisory firm for the use of the seldom-used word “brobdingnagian,” but otherwise one is inclined to think it is up to some mischief. In trying to oust the three board members, Glass Lewis effectively is attempting to stage a coup, making it possible for Yahoo to be sold to Microsoft, which patiently waits in the wings for impatient Yahoo investors to bash away at the company’s executives, board, and market value.
Microsoft’s divide-and-conquer tactics might have worked, too, except for the fact that Yahoo’s corporate-governance bylaws will not compel the company to accept the resignations of the three board members, even in the event that a majority of shareholders vote for their removal.
Expect more noise and more distraction when Yahoo’s shareholder meeting occurs on August 1. However, it’s in the best interests of Yahoo and its shareholders to move past the Microsoft affair and into a more constructive mode of long-term strategic planning and operational efficiency.