Internet giant Yahoo, Inc. (YHOO) said Sunday it has appointed three new independent directors after failing to reach a compromise with its largest shareholder, hedge fund Third Point LLC, which owns about 5.15% of Yahoo shares. Following the appointment, Third Point said in a statement the it "intends to move forward with a proxy contest."
"The Board's decision today demonstrates once again that one of Yahoo!'s paramount principles of corporate governance is "Shareholders not welcome". In the absence of independent shareholder oversight, the Yahoo! Boards of the past five years have given shareholders five CEOs and strategic plans in as many years and seriously damaged the value of the core business, a fact masked only by the increasing value of Yahoo's Asian assets," Third point noted.
Third Point's founder and activist investor Daniel Loeb has been pushing for sweeping changes in Yahoo's board of directors and its leadership since September 2011, and also nominated himself and three others to join the Yahoo board. He has been extremely critical of the board's mishandling of the Microsoft negotiations in 2008.
Loeb had in September alleged that Yahoo Chairman Roy Bostock has been a destroyer of company value and indicated that he should have voluntarily followed the terminated hand-picked executive, Carol Bartz, who was fired as CEO by Yahoo board in early September.
Third Point said it offered several significant compromises to strike a deal in order to avoid a proxy contest and the related costs and distraction accompanying a proxy fight.
Yahoo said in mid-February that it is disappointed with the "potentially disruptive path" taken by Loeb as its nominating and corporate governance committee reviewed all candidates, including Third Point's nominees.
Yahoo noted that it "thoroughly reviewed a broad range of highly qualified candidates and sought input from a number of major shareholders, the Committee enthusiastically recommended to the full Board the appointment of these three excellent directors."
Yahoo appointed John Hayes, executive vice president and chief marketing officer of American Express Co. (AXP); Peter Liguori, former COO of Discovery Communications, Inc. (DISCA) and former chairman and president of Entertainment of Fox Broadcasting Network; and Thomas McInerney, the outgoing CFO of IAC/InterActiveCorp. (IACI), as the three new independent directors, effective April 5.
As part of its ongoing strategic review process, Yahoo named PayPal's President Scott Thompson to take over as the new CEO in early January, elected two new directors in early February as well as said Bostock and three others will not stand for re-election to the board.
Meanwhile, Yahoo co-founder and former CEO Jerry Yang also resigned from its board and all other positions in mid-January.
The Internet giant, which offers most of its products free, requires more of ad revenues to boost its performance. Even though display advertising is a bright spot, the company is facing tough competition in search business from Google, Inc. (GOOG) and also from increasing popularity for social networking sites such as Facebook.
Yahoo continues to lose search market share to Google, and hasn't been able to increase revenues even as the Internet ad market expands by more than 20 percent annually.
YHOO closed Friday's regular trading session at $15.39, down $0.10 or 0.65% on a volume of 8.50 million shares.
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