Services & Software

Yahoo shareholders meeting a case of deja vu?

Yahoo investors are likely to get a taste of deja vu when they attend the company's annual shareholders meeting on Friday. Shareholder revolt Take II?

Update 7:59 a.m. PDT: Added link to Carl Icahn's blog about his thoughts on the Yahoo shareholder meeting.

Believe in deja vu? Yahoo shareholders may when they file into the company's annual shareholders meeting on Friday.

Last year, an angry mob of investors took Yahoo CEO Terry Semel to task at the annual shareholders meeting, citing the company's lackluster performance and lucrative compensation awards. A week later, Semel resigned from his executive post, passing the baton to company co-founder Jerry Yang.

Fast-forward a year later and the situation is expected to be markedly similar. When Yang takes the stage at the annual shareholders meeting, he'll likely face not only a sea of angry investors but one that will include some shareholders who are making a repeat appearance at the microphone to voice dismay.

But the tenor of this upcoming meeting is expected to be even more pitched, given that Yang and Yahoo's board rejected a $33 a share buyout bid from Microsoft in May and the stock has now roughly come full circle to where it was trading before Microsoft's initial bid of $31 a share in February.

Yahoo closed at $20.03 a share on Wednesday.

But besides the fury that is expected at the meeting, what else might investors, employees, and Yahoo customers look forward to at this significant event for the Internet's search pioneer?

For starters, Yang will not be alone to fend off a potentially hostile crowd. Some, but not all, of Yahoo's current board members are expected to be in attendance, such as longtime director Eric Hippeau and newcomer Maggie Wilderotter.

Carl Icahn, the activist investor who launched a proxy fight to push Yahoo and Microsoft back to the table, will not make an appearance at the meeting, after having reached a settlement with Yahoo last week, as Icahn notes in his blog Thursday morning.

Under that arrangement, Yahoo's current board of nine directors will be up for re-election to another one-year term. Based on the settlement agreement, it is anticipated that sometime between the shareholders meeting on Friday and the end of business Monday, Yahoo's director Robert Kotick will resign from the board and Icahn will be appointed to his seat. The board will also vote to expand its size to 11 members from nine.

While the settlement agreement also calls for the Yahoo board, which would then include Icahn, to fill the two newly added seats with two folks from Icahn's pool of candidates, don't expect those two new faces to be named at the shareholders meeting, said a source familiar with the company. Yahoo has until August 15 to fill those two positions.

During the meeting, Yang & Co. are expected to provide a presentation on the state of the company, in which a question-and-answer session will follow from the floor.

Investor activist Eric Jackson said he plans to make a return visit to the meeting and will once again make a case for his recommendation that investors withhold votes to re-elect certain Yahoo directors. Jackson is asking investors this year to withhold votes for compensation committee members Roy Bostock, Yahoo chairman, Arthur Kern and Ron Burkle, as well as Hippeau, because of the length of time he has served on the board.

And while Jackson, along with advisory service to institutional investors Glass Lewis & Co. and Proxy Governance, have come out with recommendations to withhold votes or vote against several Yahoo directors, the effect will basically serve as a symbolic gesture to Yahoo's board on the level of investor dissatisfaction.

That's because the top vote-getters are the ones who will be elected to the available board seats, which means everyone will be re-elected in an uncontested race.

Nonetheless, the higher the percentage of votes cast that are marked with either "against" or "withhold," serves as barometer of investor discontent. Last year, Yahoo's board was re-elected with only 66 percent approval, whereas boards typically receive 80 percent to 90 percent of the votes cast.

And should any one director receive less than a simple majority of the votes cast, under Yahoo's bylaws they are required to automatically tender their resignation. But that too will unlikely lead to any director's ouster, given the board can vote to reject the resignation.

Yahoo, at the shareholders meeting, is expected to provide a 10,000-foot view on whether the directors received enough votes to be re-elected as a group, with the per director vote results to be released later, said one person familiar with the plans.

While the shareholders meeting is expected to bring a lot of one-day drama, keep an eye out for the ensuing two weeks as Yahoo's board undergoes a likely change in voice as Icahn and two members picked from his pool of candidates are added to Yahoo's board.

Click here for full coverage of Yahoo's shareholders meeting.