Voices » Carl Icahn

Why This Famous Raider Is Scooping Up Debt

Lawrence C. Strauss — Mon, 01 Dec 2008 08:02:31 +0000

By Lawrence C. Strauss, Contributing Writer, Barron’s

What a difference two decades makes. In the 1980s, Carl Icahn loomed large as a corporate raider, in the mold of the Gordon Gekko character in the movie “Wall Street.” Icahn made a lot of money, but was vilified for what some considered a slash-and-burn approach to taking over companies. Twenty years later, Icahn has morphed into a shareholder activist and rails against what he considers to be incompetence among senior executives and on boards. “They call me raider. They call me an activist,” says Icahn, who, at 72, shows no sign of slowing down. “I don’t know what those labels mean. All I know is that something should be done to improve corporate governance and management. If we don’t, managements will remain unaccountable and our economy will suffer.”

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After Vote-Gate, Heads Must Roll on Yahoo's Board

Eric Jackson — Thu, 07 Aug 2008 00:00:50 +0000

By Eric Jackson, Managing Member, Ironfire Capital LLC

To anyone who says that it’s inconsequential that Yahoo understated the level of shareholder dissatisfaction by more than half thanks to a “tabulation error” by its proxy counter, Broadridge Financial Solutions, I say: You couldn’t be more wrong.

This incident will have ramifications in the coming weeks for the composition of Yahoo’s board. But here’s the shocking thing: This latest batch of numbers might still underrepresent the level of disdain shareholders have for this board.

Any corporate election that doesn’t receive 95 to 98 percent support from shareholders for the incumbent management and board is an anomaly. Yahoo’s first press release from last Friday suggested that, despite all the hubbub of the failed merger talks with Microsoft and public criticism from Carl Icahn and others, Yahoo (YHOO) shareholders had let the incumbents off the hook.

Chairman Roy Bostock and CEO Jerry Yang were re-elected with 79.5 percent and 84 percent support respectively. These relatively benign results (compared to last year’s), combined with the fact that there were not more pointed questions at the meeting last week, led some observers to conclude that this board had “faced down” its critics.

Not quite. Gordon Crawford of Capital Research Global Investors did all Yahoo shareholders a favor by demanding a recount. Yahoo and Broadridge complied.

And results of that recount were alarmingly different from the first set of numbers. We’ve all heard of +/- 4 percent in polling, but when was the last time you heard of +/- 50 percent?

The recount might set a modern-day record among S&P 500 companies for the most “withhold” votes for a board in a corporate election. Only Vyomesh Joshi, head of Hewlett-Packard’s (HPQ) printer group, got off without a serious warning from shareholders (a 7.1 percent “withhold” vote).

The “withhold” vote for Bostock was 39.6 percent, not 20.5 percent as originally reported. And 33.7 percent of Yahoo shareholders withheld their support from Yang, not 14.6 percent.

Other Yahoo directors who fared poorly in the election were Gary Wilson (27.7 percent of votes withheld) and Compensation committee members Ronald Burkle (37.9 percent withheld) and Arthur Kern (31.7 percent withheld).

What would we all be doing today if Crawford had never called for a recount? If a “tabulation error” happens and no one is there to hear it, did it happen at all? We will never know.

And there will likely be more shoes to drop in this tragedy of errors. This “tabulation error” was only one of two major question marks surrounding last Friday’s initial voting results. Yahoo easily made Broadridge the fall guy for this first error.

The second error–how few eligible shares were counted in the final tally–isn’t so easily eluded. And for that, Yahoo will be the fall guy.

Only 75.8 percent of the eligible shares as of the June 3 record date were voted in this election. After such intense media scrutiny in the past few months, it seems odd that so few investors participated.

Last weekend, I dove into the numbers in detail and reviewed them against numbers from the last two Yahoo elections. On Sunday night I wrote about the most recent Yahoo shareholder vote and verified that there were 200 million fewer votes cast this year compared to the average over the last two years. I called on Yahoo to appoint an independent third party to review and certify the voting process.

Yesterday, as news of the voting irregularities circulated, I received a number of complaints from frustrated shareholders.

Some claimed they had received multiple proxies from Yahoo over the last month, with several arriving Aug. 4–the Monday after the election. Some said they had had trouble voting by phone. Others, who had initially voted for Icahn’s slate, said when they tried to re-vote against the Yahoo board, they weren’t able to do so.

How many other shareholders encountered similar difficulties? Without a full inquiry, we’ll never know.

These missing votes could have had an even more significant impact on the overall results. For example, Bostock received “for” votes from fewer than half of the total shares eligible to vote (only 45.8 percent of the 1.4 billion shares eligible to vote). He truly lacks the approval of the majority of the shareholders he is supposed to represent. With a 47 percent vote, Burkle also lacks majority support. And while Yang won majority support, he did so by the skin of his teeth, with just a 50.2 percent vote.

Governance Matters

At Friday’s meeting, I asked Yang, Yahoo President Sue Decker and Bostock about three issues that suggest to me that Yahoo’s governance oversight has been lax.

(1)

(2) Decker serves on three Fortune 500 boards: Intel (INTC), Costco (COST), and Berkshire Hathaway (BRK). Her duties to those companies required her to attend at least 22 meetings last year, according to proxy filings. And each meeting required significant preparation. As a Yahoo shareholder, I fail to see how outside commitments like these benefit Yahoo. Are they really necessary? Shouldn’t Decker drop a few of them until Yahoo finds solid footing again?

(3) About a third–31 to 36 percent–of Yahoo shareholders voted against the re-election of Roy Bostock and fellow Compensation Committee members Burkle and Kern last year. Yet all three continue to sit on this committee (or the board). Why? And why did they agree to pay outside directors average total compensation of $500,000 last year? Google’s (GOOG) outside directors were paid $250,000, on average, for their services last year. Decker received $2,700 for sitting on the Berkshire Hathaway board (and $110,000 per year for serving on the Intel and Costco boards). Why is Yahoo paying its directors so much?

I found the trio’s answers to these questions unconvincing. Particularly surprising were Bostock’s comments on Compensation Committee member tenure and compensation.

In the first place, Bostock said while 32 percent of shareholders voted against his reelection last year, 68 percent voted for him. And that’s not bad, he said. This glass-half-full logic explains why he has never bothered to explain to shareholders why he, Burkle and Kern have remained on the Compensation Committee and the Yahoo board.

Second, Bostock disputed my assertion that Yahoo’s outside directors were paid an average of $500,000 last year. When I asked him if he was definitively stating that he did not receive compensation of about $500,000 last year, he said “yes.” Yet, according to Yahoo’s own proxy statement, Bostock earned total compensation of $499,264 last year. 2007 compensation for Yahoo’s other board members was as follows:

Ronald Burkle: $482,046
Eric Hippeau: $496,674
Vyomesh Joshi: $519,520
Arthur Kern: $496,990
Robert Kotick: $492,774
Edward Kozel: $516,202
Mary Agnes Wilderotter: $205,832 (for five months of service; annualized $493,997)
Gary Wilson: $482,046

The average compensation for each Yahoo outside director in 2007: $497,531.

Third, Bostock also claimed that this year’s vote would be a far better indication of shareholder support for Yahoo’s Compensation Committee than last year. With 39.6 percent of shareholders withholding support from Bostock and 37.9 percent withholding it from Burkle, isn’t it time for them to step aside?

Fool Me Once, Shame on You; Fool Me Twice, Shame on Me

Given all this, I am deeply concerned that my interests and those of all Yahoo shareholders are not being protected by the company’s board.

We need to know why 200 million shares were missing from this year’s vote as compared to the last two years’.

We need to know why so many proxies were mailed late to shareholders (on our dime).

We need to know why so many shareholders are questioning whether their votes were counted.

Yahoo will try to sweep all these concerns under the rug, but we shouldn’t allow it. The company should immediately appoint an independent third party to address these questions and assure shareholders that their votes were properly counted.

Immediate Changes to the Board

Also, Yahoo needs to immediately make some changes to the composition of its board. Bostock and Burkle should do the honorable thing and step down from this board.

In truth, this should have happened a year ago. One wonders what might have happened in the last 12 months with Microsoft negotiations had Yahoo acted swiftly, following the 2007 annual meeting, to remove them.

Eric Jackson is the Founder and Managing Member of Ironfire Capital LLC, an activist hedge fund. In 2007, he founded the “Yahoo! Plan B” group, a Web-based group of 150 Yahoo shareholders who own more than 3.2 million shares, in a campaign to change the company’s direction.

Icahn Hires Reporter to Write for His Blog

Andrew Ross Sorkin — Wed, 06 Aug 2008 07:00:45 +0000

By Andrew Ross Sorkin, Blogger, DealBook

Carl C. Icahn took his first steps into the Internet earlier this year by beginning a blog. Now he’s about to get some help. The activist shareholder has hired Dane Hamilton, a hedge fund reporter at Thomson Reuters, to work on his Web site, The Icahn Report, according to people briefed on the matter. Mr. Hamilton is expected to contribute original reporting and analysis to the site, augmenting Mr. Icahn’s own voluble opinions on the state of corporate America.

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How I Spent My Weekend

Carl Icahn — Wed, 23 Jul 2008 07:00:12 +0000

By Carl Icahn, Chairman, Icahn Enterprises

Proxy fights are very expensive and time-consuming. Unlike political elections, where change is often seen, it is unfortunately extremely difficult to take control of a company. By the end of last week, I realized that although many large shareholders supported me and my slate for Yahoo’s board, they were nervous about having a complete change of control. From prior proxy contest experience, I have discovered that a minority position on the board can be also quite effective.

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Yahoo Holder Mithras Capital to Back Icahn Slate

Eric Savitz — Mon, 16 Jun 2008 12:00:29 +0000

By Eric Savitz, Blogger and Columnist, Barron’s

Mithras Capital, an investment firm which holds 1.7 million Yahoo (YHOO) shares, said in a letter to Yahoo Chairman Roy Bostock, CEO Jerry Yang and President Susan Decker on Friday that Mithras plans to vote for Carl Icahn’s slate of directors at the company’s upcoming August 1 annual meeting.

What makes this especially interesting is that Mithras was founded by Mark Nelson, who in 1998 sold a search technology company he founded and took public called Ovid Technologies to Wolters Kluwer for $200 million.

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Idiot's Guide to Fixing Yahoo

R. Scott Raynovich — Thu, 12 Jun 2008 07:00:10 +0000

By R. Scott Raynovich, Publisher, Contentinople

The great CEOs are always focused on products and product marketing. Three that come to mind: Steve Jobs, Bill Gates and Eric Schmidt. The products are: Mac & iPod, Windows and Google Search. What’s Yahoo’s great product? What’s its marketing focus? … If I were one of the shareholders voting on the proxy, here’s a question I would ask: If Yahoo is going to remain independent, what kind of company is it going to be?

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A Gamble, But What if He Wins?

Andrew Ross Sorkin — Wed, 21 May 2008 07:02:07 +0000

By Andrew Ross Sorkin, Staff Writer, New York Times

About a month and a half ago, Carl Icahn and I went to dinner at Tse Yang, an upscale Chinese restaurant in Midtown Manhattan. Mr. Icahn, the corporate raider turned activist investor, came blustering through the dimly lit restaurant about 20 minutes late, grabbed one of the waiters–they all know him–and ordered a martini.

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Microsoft, Yahoo Back On — or Not

Om Malik — Tue, 20 May 2008 07:00:01 +0000

By Om Malik, Founder and Senior Writer, GigaOM

It is a sad commentary on the state of affairs in Silicon Valley when Carl Icahn, a known corporate raider from the go-go ’80s, is used as a lightning rod to bring two of technology’s major players, Yahoo and Microsoft, to the table to strike some sort of a deal. And there seems to be some sort of a transaction in the works. And that’s not necessarily a good idea.

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Adios, Amateur Hour. The Big Dog Marks His Turf

Charles Cooper — Thu, 15 May 2008 07:02:56 +0000

By Charles Cooper, Executive Editor of Commentary, CNET News.com

Jerry Yang was able to rope-a-dope Steve Ballmer. But he’s never had to square off against a royal pain in the ass like Carl Icahn. Wednesday afternoon, Icahn, a billionaire with a God complex — or is that repetitive? — wrote a new chapter in this deliciously goofy Microhoo saga when he launched plans for a proxy contest to challenge Yahoo’s famously feckless board of directors with his own handpicked nominees.

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Yahoo: Can Icahn Get MSFT Back to the Table?

Eric Savitz — Wed, 14 May 2008 15:04:47 +0000

By Eric Savitz, Blogger and Columnist, Barron’s

So here’s the basic conundrum in this whole concept of Carl Icahn launching a proxy contest for Yahoo (YHOO): What’s the point unless he can get Microsoft (MSFT) to launch a new bid?

It is certainly possible that institutional investors are sufficiently irritated at Yahoo CEO Jerry Yang and the company’s board that they might want to oust some or all of the directors. But to what end?

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Blitzkrieg

Jeff Segal — Wed, 14 May 2008 07:00:47 +0000

By Jeff Segal, Reporter, breakingviews.com

Carl Icahn just stepped into the Yahoo fray–he’s reportedly accumulated 3.5% of the Internet company’s stock. If he can nominate a few directors in the two remaining days before Yahoo’s deadline for filing nominees to its board, the road ahead may not be all that difficult.

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