Proxy firms split in support of Yahoo's board

SAN FRANCISCO (Reuters) - Investor advisory firms are split on whether to fully support the re-election of Yahoo Inc's (YHOO.O) board of directors ahead of its annual meeting, but their reviews have less weight since Yahoo struck a deal to avert a proxy battle.

Proxy adviser Glass Lewis & Co has recommended that Yahoo shareholders vote against Chairman Roy Bostock and two other directors in protest over the company's track record on executive pay, and the firm expressed concern over a deal to place activist investor Carl Icahn on its board.

Glass Lewis noted that Bostock, Ron Burkle and Arthur Kern were on Yahoo's compensation committee in 2007, when the company increased pay for executives even as it performed worse than rivals, according to a July 23 report obtained by Reuters on Thursday.

Separately, ISS Governance Services, a unit of RiskMetrics (RMG.N), recommended in its own report this week that investors vote to re-elect all existing Yahoo board members, including one, Robert Kotick, who asked to step down on Sunday from the board.

ISS differed with Yahoo management on a non-binding proposal to be put forward at the August 1 annual meeting, recommending its base of institutional investors vote in favor of a "pay for performance" proposal that Yahoo management has opposed.

"We believe that Yahoo's compensation practices, in particular the newly-adopted severance plans, as well as the way the board handled negotiations with Microsoft at the initial stage, are concerning," the ISS report concludes.

Yahoo reached a deal with Icahn earlier this week to expand its board to 11 members, agreeing to let him and two of his nominees join to avert a proxy battle at the annual meeting. The pact takes effect after the meeting.

ISS recommends that Yahoo investors abstain from voting for Icahn's alternative slate of nominees, but struck a positive note about the impact Icahn and his outside nominees can have on the board in the wake of the proxy settlement with Yahoo.

"We believe the settlement appointing Mr. Icahn as a significant shareholder representative as well as two of his selected nominees with relevant industry experience have achieved what most shareholders called for," ISS said.

But Glass Lewis said the fact that Icahn already serves on seven public company boards was a cause for concern.

"We believe shareholders should monitor Mr. Icahn's ability to devote sufficient time and attention to the company," the report advised Yahoo investors.

Icahn launched a proxy battle against Yahoo in May to bring it back to the negotiating table with Microsoft Corp (MSFT.O).

At least one major Yahoo shareholder, Legg Mason fund manager Bill Miller, declined to back Icahn.

While many Yahoo shareholders sought a deal, Microsoft has abandoned interest in buying all of Yahoo since talks over a $47.5 billion bid collapsed in May.

"It (a merger deal) didn't work out," Microsoft Chief Executive Steve Ballmer said at the company's annual briefing for Wall Street analysts on Thursday. "Fine, we're done. We can move on," he said. But he also said talks could resume later.

(Additional reporting by Michele Gershberg; Editing by Lisa Von Ahn and Braden Reddall)