Big Yahoo Shareholders Demands Inquest Over Voting For Yahoo! Board
San Francisco – Jerry Yang, the co-founder and chief executive of Yahoo! may be contemplating that he has put to rest the search engine’s controversial annual meeting behind him during the fag-end of last week.
But, last night it all shattered into pieces when one of Yahoo Inc.’s biggest and most important shareholders, Capital Research Global Investors, has asked independent vote counter Broadridge Financial Solutions for a probe into the results of the closely watched Friday’s shareholder vote, suggesting that more opposition to Chief Executive Jerry Yang should have been recorded.
It is also believed that apart from a number of powerful shareholders, including the rabble rousing billionaire Carl Icahn, who this week takes a seat on the board; believes Yang is the wrong man for the job.
Somewhat in excess of one out of every seven shares — about 15% — was withheld in a vote confirming Yang’s re-election to the board of directors on Friday. That’s more than double the withhold votes Yang received last year.
Capital Research Global Investors, which owns a 6.2 percent stake in Yahoo, called for the review Monday, Capital spokesman Chuck Freadhoff said. Capital World Investors, a related fund that owns nearly 10 percent of Yahoo’s stock, did not make the same request.
The unusual inquisition was first reported on the technology blog, “All Things Digital.”
Yang received 85.4 percent backing in the results announced on Friday, with the remaining votes withheld in protest.
“I guess Jerry Yang did not come out of the meeting as unscathed as it seemed,” Canaccord Adams analyst Colin Gillis said of the uncertainty raised by calls for a recount.
Capital Research merely wants independent vote counter Broadridge Financial Solutions to certify the fund’s votes on the Yahoo directors were accurately transmitted, Freadhoff said. He declined to discuss how Capital Research intended to vote or what prompted the request for a review.
Lake Success, N.Y.-based Broadridge did not immediately return calls left late Monday.
Yang has been under extreme pressure for months over failed negotiations to sell the company to Microsoft Corp. and regarding questions about his leadership, but Friday’s shareholder vote suggested the tide was turning in his favor.
Capital Research Global Investors, the fund group led by portfolio manager Gordon Crawford, has publicly scolded Yahoo’s leadership for its response to a $47.5 billion takeover bid from Microsoft Corp., which withdrew the offer three months ago after Yahoo Chief Executive Jerry Yang demanded more money.
Crawford had suggested that he might vote against some Yahoo directors — particularly Yang and Chairman Roy Bostock — to punctuate his displeasure with the failed Microsoft negotiations.
Yahoo prevented the election results in a statement and expressed that the error may have been made by Broadridge Financial Solutions, a vote-tabulating company based in Lake Success, N.Y., that was used by the investors.
“The independent overseer of elections certified the results of the election and Yahoo accurately announced those results,” Yahoo’s statement said. “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.”
Investors controlling just about 76 percent of Yahoo’s 1.38 billion shares showed strong support for all nine board directors, with the lowest level of support for long-time member Arthur Kern, who drew 77.9 percent.
In any case, such demands by shareholders are rare. “It will not change any substantive outcome that I can foresee,” said Michael Klausner, a Stanford Law School professor who specializes in corporate law and governance.
Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware, said when an election is contested, the parties generally try to work it before going to court. “Obviously if they disagree, it is susceptible to judicial challenge,” he said.
Gillis at Canaccord Adams said a somewhat lower vote was unlikely to materially weaken Yang’s position, which looks secure unless Yahoo’s third-quarter results fall short amid a worsening economy or if the stock remains stuck around $20 in the months to come.
“I think Jerry (Yang) is still firmly in place until some deviation happens from the plan Yahoo has set forth,” he said.
Since Microsoft walked away, Yahoo shares have plunged 32 percent, closing Monday at $19.38, down 42 cents.