New Yahoo election tally reveals big protest vote
SAN FRANCISCO (Reuters) - Yahoo Inc on Tuesday released a recount of the vote for its board that revealed a strong protest vote against five of nine directors, including Chief Executive Jerry Yang.
The Internet company said revised vote tallies showed 33.7 percent of votes withheld for Yang, the company's co-founder, or more than twice the opposition to his reappointment to the board as in the first count.
Yang has been under pressure for months over failed attempts by Microsoft Corp to buy Yahoo and over questions about his leadership, but early results from Friday's shareholder vote suggested the tide was turning in his favor. The initial tally showed 85 percent of votes going to Yang.
The stunning new twist in the Yahoo saga came after one of its largest and most critical shareholders, Capital Research Global Investors, called for a probe of the shareholder vote after finding discrepancies in the results.
Analysts were split over whether the recount, while potentially emboldening for critics, was a symbolic embarrassment to the leadership or a new threat to its power.
"That's a big negative vote against the Yahoo board, but it doesn't change anything," RBC Capital Markets analyst Ross Sandler said. "It is a statement that they shouldn't be under any illusion that their support is broad.
"The recount somewhat lowers the credibility of the management team," Sanford C. Bernstein analyst Jeffrey Lindsay said. "Assuming this was all a mistake, it is particularly unfortunate: Management doesn't have the mandate they appeared to have had" coming out of the annual meeting, he said.
Yahoo said it had been informed by Corporate Election Services, the company's inspector of elections, that Broadridge Financial Solutions, a proxy voting intermediary for major investors, had made significant errors in reporting votes at its annual shareholder meeting.
Three other directors, including Chairman Roy Bostock, also had strong protest votes, with nearly 40 percent of votes withheld for Bostock, 38 percent withheld for director Ron Burkle and 32 percent withheld for Arthur Kern.
The three are members of Yahoo's compensation committee and have borne the brunt of criticism for the company refusing to do more to link executive pay to performance as corporate governance critics have demanded.
A fifth board member, Gary Wilson, the former chairman of Northwest Airlines, had 28 percent of votes on his reelection withheld.
The remaining four board members -- Vyomesh Joshi, Eric Hippeau, Robert Kotick and Mary Wilderotter -- all received strong endorsements, with each winning more than 90 percent of votes in favor of their reelection.
Ahead of the August 1 meeting, Kotick said he planned to resign shortly after the meeting as part of a settlement deal with proxy challenger Carl Icahn in which Icahn and two members of a slate proposed by the billionaire investor would join an expanded board of 11 members instead of the previous nine.
Gordon Crawford, whose Capital Research Global Investors owned 6.2 percent of Yahoo as of early June, said in May he was "extremely angry" at Yang over the breakdown of talks with Microsoft.
His fund asked for a shareholder vote recount on Monday.
Critics of corporate voting technology have called for a system overhaul to prevent such disputed ballots, saying the counting process is complicated and lacking in transparency.
In a statement, Broadridge acknowledged the error, but said it was an isolated incident and that it did not change the outcome of the election of the company's directors.
"Upon review, it was determined that there was a truncation error in the final printout sent to the tabulator," said Chuck Callan, Broadridge's senior vice president of regulatory affairs. "This resulted in the under-reporting of shares withheld for certain directors."
Shares of Yahoo had gained 2.3 percent to $19.82 in regular trading on Nasdaq amid gains in the broader market but edged down 3 cents to $19.79 in extended trade after the announcement of the revised vote totals.
RBC's Sandler said the investor saga was likely to drag on for the next several quarters until the company concludes its previously announced partnership with Google Inc, reaches a deal with Microsoft, or sells one of its Asian properties to help the company remain independent.
"For the next several quarters there is going to be more noise, especially with the stock below $20," Sandler said.
Microsoft backed out of an unsolicited takeover offer in May that valued Yahoo at about $33 a share in stock after Yahoo management rebuffed the offer. Microsoft later pursued a partial break-up of Yahoo, but those talks have also cooled.
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