The Icahn Report

Concerning the Annual Yahoo! Meeting

I will not be attending. The proxy fight is over and it will not do shareholders or Yahoo! any good to have the annual meeting turn into a media event for no purpose. Last week, I realized it was impossible to gain enough support from the large institutions to win a majority of the Yahoo! directorships. In today’s corporate governance system where large mutual funds control so much of the stock, it is extremely difficult to oust an entire board, no matter how strongly a large number of shareholders feel about the board’s previous actions. Realizing I could not gain control, I saw no point in spending the final two weeks in a debilitating fight, where little would be accomplished except to build animosity between both camps and the end result would be no better than the compromise that was reached. In fact, in winning a minority position on a board by a fight to the end, you always have to be concerned that you may be "boxed" out by the majority that remains on the board. Committees can be formed that you are excluded from and you are given information only on a need to know basis. An important part of my compromise with Yahoo is that the board in the settlement agreement has agreed "that any meaningful transaction, including the strategy in dealing with that transaction, will be fully discussed with the entire board before any final decision is made."  Additionally, if any committee is formed to negotiate a meaningful transaction, Carl Icahn will be a member of that committee.

A few days ago, I met with both Jerry Yang and Roy Bostock and I believe both gentlemen genuinely wish that we will be able to work together to enhance value.  While we still disagree on many points, I have great hope "this will be the beginning of a beautiful friendship." Minorities on boards can accomplish a great deal (see following articles on Blockbuster).  I look forward to working harmoniously with the new board of Yahoo! 

Response to Wall Street Journal article of July 22, "Icahn Ends Feud with Yahoo, Setting up an Uneasy Truce."

Historians will marvel at why the press won’t write more about the egregious abuses and mismanagement at corporate boards in America and the Wall Street Journal article of July 22 is a good example of this abdication.

The article states that I often exert an "outsized influence" as a board member, implying that this is somehow reckless and counter to the best interests of stockholders.

In fact, just the opposite is true. Major shareholders, particularly those who serve on boards, should actively question decisions a company makes and not simply be a rubber stamp for corporate managements, as all too many are.

Many business journalists don’t seem to get this important point and I have never understood why, particularly in this post-Enron-Adelphia-WorldCom era. In my view, much of the nation’s business press fails in this important role. Disturbingly, many in the press don’t seem to care. 

Are they intimidated by legions of public relations executives who spend shareholder money to defend bad managers and bad management decisions? Are they worried their access to management will dry up if they give too much ink to corporate critics? Are they beholden to the corporate interests of their parent companies, the media conglomerates? Or is it just easier to toe the company line?

How I Spent My Weekend

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 the 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. Therefore, I determined to attempt to reach an agreement with Yahoo! which had reached out to me several times during the past week to reach a compromise. Many hours were spent over the weekend and I am very encouraged by the conversations I had with Roy Bostock and Jerry Yang. At 5 a.m. on Monday morning an agreement was finally reached. An important provision in the agreement which should not be overlooked is that it provided that I will be offered the chance to serve on any committee established to consider material transactions out of the ordinary course of business. I believe another important aspect of the agreement that should not be overlooked is that:

Absurdity of the Golden Parachute

A golden parachute is a binding agreement between a company and an employee (most often a CEO but in some cases all the employees) detailing considerable benefits for the employee if the employee is terminated or retires. When executives retire, parachutes are sometimes known as "golden handshakes." "Golden parachute" payments may also benefit employees should there be a change in ownership or control.

The overwhelming flaw with this system is that they may secure an egregious level of compensation regardless of performance. This is absurd.

Proponents of this inane policy believe that golden parachutes make it easier to hire and retain executives, dissuade takeover attempts by increasing the price of the offer, or keep an executive objective when he or she is considering a proposal on the sale of their company. This does not make sense. First there are plenty of executives all over the world who would earn reasonable compensation, have been hired, retained and continue to do a great job. To address the second point: Surely, if you were about to receive a $400 million parachute by allowing the sale of the company you manage, you would sell to whomever at any price just to receive your flagrant benefits!  This is clearly not in the interest of shareholders.

It's Not That Simple Eric

When I launched the Icahn Report, The Chicago Tribune published an article by Eric Benderoff 'Memo to blogger Icahn: Give power to the people, not your lawyers,' on June 19, 2008. The article attacked the Icahn Report for its format and legalities, but completely missed the point of what the blog is diligently working toward; exposing the adverse effects of flawed corporate governance as experienced by me first-hand.

Legal restrictions aside, I am one of the first activist investors to honestly engage in discussion with the public concerning the atrocities experienced in America’s boardrooms. To Benderoff's point, that should be enough to be taken seriously.

Benderoff notes that "well into Thursday evening there were no comments approved for any of the seven posts his blog launched." Please note I have posted many of the comments and have responded to some of them. As I have explained previously, posting every comment would raise various legal issues that solely affect my blog because of my activist shareholder activities, such as conducting proxy contests. (I noticed comments on Benderoff's articles are moderated as well.) Linking also creates potential legal issues. I know that these limitations are not commonplace in the blogging community, but not many bloggers are activist shareholders.

Icahn Issues Press Release Containing Open Letter to Yahoo! Shareholders

The following press release (PDF) regarding Yahoo! was issued on July 14, 2008.

Definitive Proxy Statement on Yahoo!

Attached for your information (PDF) is a definitive proxy statement we filed on Yahoo! on July 14, 2008.