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Icahn in dilemma over Yahoo severance plans

Billionaire investor Carl Icahn faces limited options in removing Yahoo's employee severance plans, as he gears up for a proxy fight.

Billionaire investor Carl Icahn is in a bit of a conundrum.

On Wednesday, in a letter sent to Yahoo's chairman, Icahn called on Yahoo's board of directors to rescind the company's controversial employee severance plans, fearing it was an impediment to a Microsoft buyout deal.

But as reported Tuesday, Icahn's proxy fight is what's keeping the controversial severance plans in play.

Icahn's proxy fight is considered a "potential change in control," which means Yahoo's board can't voluntarily remove the severance plans, attorneys say.

So, what are his options?

A. Give up the proxy fight, wait for 30 days to pass, then Yahoo's board can withdraw the severance plan. Whether this would all be done before the August 1 shareholders' meeting, when Icahn was going to run his dissident slate against Yahoo's current board, is another matter. Obviously, this scenario is highly unlikely.

B. Get a hearing before the Delaware Chancery Court and ask the judge to invalidate Yahoo's employee severance plan. Icahn, should he go this route, may want to act long before the August 1 meeting, because if his proxy slate is successful in winning a majority of the board seats, it would trigger the severance plans for the next two years.

C. Aim for something less than majority control over Yahoo's board, which means the employee severance plan could be pulled 30 days after the shareholders' meeting. Icahn, who is currently running a proxy slate to fill all positions on Yahoo's board, would be leaving that outcome up to Yahoo shareholders, who will be electing the company's next board at the August 1 meeting.

Which option do you think Icahn will take?