What Yahoo's board did wrong

Why did Yahoo's board replace Terry Semel with executives who had no experience running a company or turning one around? Good question.

Fearis a human emotion. It's part of our survival mechanism--the adrenaline fight or flight response. In ancient times when a caveman felt fear, he ran and hid or readied himself for battle. Those who paid attention to their fear survived; those who didn't, well, let's just say their descendants probably aren't around to read this.

Having courage does not mean ignoring fear. It means facing fear head-on and doing the right thing anyway. At least that's my definition. If you fail to face fear and act appropriately you're not necessarily a coward, but you're not the best you can be either.

The most successful people on the planet are the ones who face the cold, hard truth of reality and act accordingly. They don't surround themselves with "yes men" and they don't view the world through rose-colored glasses.

They feel fear just like you and me. But they understand that it's not the "be all" and "end all" of their existence. They understand that they need to face that fear and make hard decisions anyway. They're brave.

When executives and directors act courageously, the results are evident. And when they don't, the results are also evident.

In the Microsoft-Yahoo saga, I believe Steve Ballmer was brave. He faced the truth and saw that, while Microsoft had spared no expense and made a valiant effort to compete in the Internet space, those efforts would not be enough to ensure the continued growth of the company. That's why its stock has languished in recent years. Analysts and smart investors know this.

So Ballmer took a bold step in moving to acquire Yahoo. He didn't choose the easy path, since battling with Yahoo's board and potentially its shareholders is a difficult and arduous task. Still harder will be the integration of the two companies. That's where most mergers fail.

Win or lose, it's a gutsy move and Ballmer was brave in making it.

Yahoo's board of directors, on the other hand, has not acted so courageously. In June of last year, just one week after a contentious shareholder meeting, it bowed to shareholder pressure in accepting the resignation of CEO Terry Semel.

While that wasn't necessarily the best move, it wasn't a disaster, either. Sure, not everybody can run a company and even fewer can turn one around, but Semel wasn't the only one, to be sure. What the board did the same day, however, was a disaster and it really surprised me. It installed the combination of Jerry Yang and Susan Decker as CEO and president respectively of the beleaguered company.

As I said at the time , Yang and Decker were poor choices. Neither had ever run a company or turned one around before. I couldn't imagine a board being comfortable with on-the-job training of skills few possess with so much at stake.

Looking back on that decision now, I have no better inkling of what the board was thinking than I did then. In addition to being surprisingly reactive and poorly thought out, it now seems like an almost frivolous decision.

We all know what happened next. Yang did little to get the company on the right track, Ballmer made the offer, and here we are, just a few days away from Microsoft's "take it or we'll take it to the shareholders" deadline.

Just to reiterate what I've said before, Yahoo's board is made up of smart people. That said, they're too smart to let this turn into a proxy fight that will ultimately harm the company. In the end, the deal will get done. But smart as they are, the big mistake they made was to turn a once great company in trouble over to novices.

But remember, as I said, these are highly accomplished people. They're no dummies. So how do you explain their actions?

In my opinion, at a crucial moment in the company's history, Yahoo's board stuck its head in the sand and made believe things weren't as problematic as they were. If the members felt any concern or fear at all, they ignored it. Not only isn't that what boards are supposed to do, it isn't the brave thing to do, either.

I'm neither a Yahoo fan nor a Microsoft foe. But I still mourn the loss of a unique business entity that, but for the lack of a few brave people, might have survived this ordeal. After all, survival is what life is all about, isn't it?

 

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