Yahoo Shareholder Vote Challenges Board

A strong minority of Yahoo shareholders challenged the Web company's direction on Tuesday by voting against board-nominated directors at the annual meeting, and investors confronted Chief Executive Terry Semel.

Nearly a third of votes for at least one board member were cast against his election, an unusually high protest, even though all 10 candidates were elected. Proposals opposed by the board that aimed to tie executive pay to competitive performance and challenge the company's human rights policies in China were defeated.

Eric Jackson, who said he represented a group of current and former Yahoo employees that own 2.1 million shares, said presentations by senior company officials failed to give specifics on how Yahoo can jump-start growth.

"I am surprised that you didn't apologize for the last three years of performance," Jackson said during a question-and-answer session that followed the formal meeting, directing his comments at Yahoo Chairman and Chief Executive Terry Semel.

Yahoo's share price is flat versus three years ago.

Amid economic weakness in some advertising markets and delays in upgrading its Web search ad system to better compete with rival Google , Yahoo shares last year tumbled roughly 38%. After a false start this year, they are trading back at $27.05, up just 6% from the end of 2006.

Yahoo did not disclose the actual votes for specific board members. But a company spokeswoman said that the lowest vote in favor of reelecting a board member was 66.6%, with 32.6% against, with abstainers accounting for the balance.

Yahoo management reiterated that it expects to see a pick-up in its business in the second half of the year as its recently upgraded Web search advertising system, known as Panama, kicks into high gear in competition with Google.

"You are seeing real progress," Semel told a few dozen shareholders attending the annual meeting, held in a Silicon Valley convention center just down the road from the company's Sunnyvale headquarters.

In February, Jackson published a "Plan B" for Yahoo on the Web at http://breakoutperformance.blogspot.com/2007_02_01_archive.html. He called for Semel and Yahoo's board to be fired and for strategic changes to be made to compete with Web leader Google.

"I expected a sort of personal apology from you as well as the members of the Yahoo board of directors," Naples, Florida-based Jackson told Semel.

Afterward, speaking to a group of reporters, Jackson said he planned to continue to push to unlock better performance at the company. "They (management) wave their hands away at the poor performance of the past and say 'Think about the future.'"
    
Signs Of Dissatisfaction

The three independent proposals voted down had been opposed by management. Detailed vote counts will be disclosed in the company's quarterly filing in July, the Yahoo spokeswoman said.

The closest vote at the shareholder meeting called for executive compensation to be based on superior performance versus peers in the Internet industry.

"Pay for performance is not enough," David Collins, a representative of the United Brotherhood of Carpenters Pension Fund, told the shareholder meeting. The fund, which put forward the proposal, holds 4 million shares of Yahoo stock, he said.

The proposal received 34.6% in favor and 62.3% against, according to voting overseer Josh McGinn, of the independent transfer agent ComputerShare Trust.

Instead of demanding pay for performance, the company's compensation focuses on time-based service that is not conditioned on actual company performance, critics complain.

A report released in May by shareholder advisory group Proxy Governance found Yahoo has performed in line with peer companies but that Semel's three-year compensation is 926% above the median pay to CEOs in Yahoo's peer group.

The proxy advisory estimated that Semel stands to make as much as $170 million from long-term options he received in 2006 alone, although the company values those options at a lower amount, based on a different calculation method.

"Even using the company's valuation, Semel's overall compensation would remain far above that of peers, or for that matter, far above almost any executive at any publicly owned company," Proxy Governance said in an analysis issued in May.

Proposals for Yahoo to adopt an anti-censorship policy on the Internet and for its board to establish a human rights committee to review the implications of its policies in the world, specifically China, were overwhelmingly defeated.

Yahoo has been heavily criticized by human rights groups since 2005 for its role in turning over some political dissidents' e-mails to police in China that were used to prosecute and imprison them.

The company maintains it must comply with the local laws of any country it operates in and that it was unaware how the information it provided to Chinese authorities would be used.

In preliminary tallies, the censorship proposal received 15.2% of the votes in favor and 71.4% against. The human rights committee had only 4.1% in favor and 81.1% against, the vote overseer said.

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