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Yahoo Board Faces Down Critics

Yahoo
UPDATED: SAN JOSE, Calif. -- TV cameras and other media massed outside the Fairmont hotel before the start of Yahoo's shareholder meeting here today. But they weren't huddled around embattled CEO Jerry Yang or other Yahoo officials.

Rather, it was maverick shareholder Eric Jackson who was holding court, detailing his displeasure with current management and why he still is in favor of the Internet giant doing a deal with Microsoft.

Jackson leads a group of 146 investors who jointly hold 3.2 million Yahoo (NASDAQ: YHOO) shares, he said, seizing the opportunity to reiterate his displeasure over Chief Executive Jerry Yang and the current board of directors.

"I'm frustrated and it's not just about Microsoft," he said. "We've been asking for a plan for the past four years, but there's no indication the company can execute. I don't think [Yang] is the right CEO. They need an outsider and new people around the table."

During the question-and-answer portion of the shareholder meeting, Jackson continued criticizing Yahoo management, at one point telling Chairman Roy Bostock he should "do the honorable thing" and step down.

Jackson's position didn't appear to ruffle too many feathers on Yahoo's board: Yang elicited a few laughs by greeting the tough-talking investor with, "Good to see you again, Eric."

Jackson also said that during the last board election, 34 percent of shareholders declined to vote in favor of Bostock's reinstatement, Yahoo's chairman responded that he looked more positively on the fact that 66 percent did vote in his favor.

Later in the afternoon, after the meeting, Yahoo reported its board received a strong vote of confidence from investors. CEO Yang was re-elected with an 85.4 percent vote tally. Chairman Bostock was re-elected with 79.5 percent of the votes. The lowest vote total came in for board member Arthur Kern, who was still easily reelected, garnering 77.9 percent of the votes for reelection.

Shedding some light on talks with Microsoft

Considering the hoopla surrounding Yahoo's recent history -- Microsoft's (NASDAQ: MSFT) abortive acquisition and activist investor Carl Icahn's attempts to launch a proxy war to oust Yahoo's leadership -- vocal shareholders like Jackson were few in number at the meeting, however.

In fact, with the most recent drama over Icahn's threatened proxy war now over, it seemed that the meeting had attracted relatively few of Yahoo's shareholders, filling only a small portion much of the cavernous hall here at the Fairmont.

After being spurned by Yahoo, Microsoft tried to rekindle a deal with the help of dissident shareholder Ichan, in a plan to either buy Yahoo in full or its search business. Finally, the software giant all but gave up when Microsoft CEO Steve Ballmer admitted that his company was no longer actively pursuing a deal.

[cob:Pull_Quote]Shortly afterward, Yahoo cut a deal with Icahn to invite him and two of his hand-picked choices to join its board of directors, staving off the threat of a proxy battle.

With the dust now seemingly settled, Bostock made a point today of saying he didn't know why Microsoft walked away from negotiations and that the Yahoo board, including CEO Jerry Yang, was committed to pursue any deal that would enhance shareholder value.

"I want to be clear that the board controlled the process of dealing with Microsoft," Bostock said. "We called the shots and were deeply involved."

As part of the negotiation process, Bostock said Yahoo asked Microsoft for details regarding how the companies might deal with what was likely to be complex regulatory approval in the U.S., Europe and Asia.

"They never really engaged with us on that," he said. "To this day, I cannot tell you why they withdrew their offer to acquire us."

Contrary to reports Microsoft upped its initial offer from $31 per share to $33 for Yahoo, Bostock said $31 was the only written proposal.

[cob:Special_Report]However, he added that at one point, a Microsoft official said to one of Yahoo's management, "There may be a few more dollars on the table."

"There was never anything given to the board in writing," Bostock said. He also noted Microsoft's stock value dropped subsequent to the initial offer, reducing the proposed deal to $28 per share.

Microsoft, which has to date discussed little of the negotiations with Yahoo, later fired back at Bostock's comments.

"Yahoo! is attempting to rewrite history yet again with statements that are not supported by the facts," the company said in a statement.

In any event, Yahoo's board ultimately provided little in the way of further hints on where things stood with Microsoft -- potentially leaving investors like Patrick Sheridan disappointed.

Before the meeting, Sheridan said he had traveled to the board meeting to check in on his investment.

"I'm hoping for closure on the Microsoft transaction," he told InternetNews.com. "I still believe there's something there to be gained. I want them to buy Yahoo."

Yang condemns Chinese government actions

Yang and board also faced heat over the company's human rights record, including cooperation with the Chinese government that led to the jailing of a dissident who had been critical of the authoritarian regime online.

Yahoo later reached a settlement with the jailed citizen's family, and Yang today insisted the company has gone to great lengths to improve its human rights policies and promote a more enlightened code of conduct for the industry.

"I think Yahoo is a leader in Internet human rights efforts," he said. "We've done right with the families and I've been personally involved. We have a lot more work to do. We've condemned the Chinese government for blocking people's use of the Net and set up a fund for Internet and any human rights abuses around China."

Yahoo shares fell less than half a percent on Friday, finishing down 9 cents at $19.80.

Update includes new information on Yahoo's board being reelected.