Mayer’s First Smart Decision at Yahoo: Greenberg
Marissa Mayer is off to an excellent start at Yahoo, at least based on what I believe is her first big smart move: Yanking Yahoo’s stock price off the front of the company’s internal home page.
The move was just a nugget in a Wall Street Journal piecetoday about how she is starting Yahoo’s makeover.
But it may prove to be the most important first step, and certainly sends an important message to employees as she starts to put her stamp on the struggling company.
It also harkens back to something Starbucks CEO Howard Schultz said in his book, “Pour Your Heart Into It” about Starbucks’ early days as a public company: When he started focusing on the business instead of the stock price, everything else fell into place.
CEOs of public companies work for the shareholder, and their goal should always be to improve shareholder return. All too often that appears to get confused with pumping up the stock.
Never mind that short of manipulation a stock price cannot be controlled: Once upon a time, in a galaxy far, far away when stocks weren’t moving routinely in 10 percent swings, there was a belief that if a business grew and was run well the stock price would follow.
Now, in a market where headlines seem to trump the details, it sometimes appears to be just the opposite.
Still, there’s a reason short-sellers drool if they walk into the lobby of a company and see the stock price front-and-center: CEO obsession with the stock price can have unintended consequences of the worst kind.
The most obvious is poorly timed stock buybacks for the sole purposes of jacking up a stock price rather than as an investment. As I recently pointed out, more often than not buybacks prove to be waste of shareholder money. Over the past year pre-Mayer, Yahoo has been an ambitious purchaser of its own shares at prices generally in the $15 to $16 range, or roughly its current stock price.
Then there are acquisitions for the sake of creating instant growth. (Hewlett Packard is the poster child of this.)
Less obvious is fraud, which can occur when stock-centric executives get hooked on unsustainably aggressive behavior.
It’s too soon to say, of course, whether Mayer’s strategy and stewardship at Yahoo (a CNBC content partner) will be a success.
By taking the focus off the stock price she is getting rid of an important distraction while she focuses on the turnaround.
Now, if she’s really smart she’ll also get rid of another big distraction: Earnings guidance. I’m not a fan of guidance in general, but it’s just plain silly in fluid turnaround situations, which never go quite as planned and often come back to smack you in the face.
Just ask Ron Johnson of J.C. Penney . He learned that one the hard way.
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