Ya-hoyvey
Some thoughts about Yahoo… Maybe they should rename the company “Ya-hoyvey.” After all, not vetting the resumes of CEO candidates – one of the board’s basic and most important functions – suggests a corporate parallel to the Keystone Cops. It’s not just a blunder involving failed paperwork. The board hired someone who lied; not a particularly good sign of an engaged board.
The Yahoo drama also involved settlement with the Third Point hedge fund. Terms of settlement include electing three Third Point nominees, including Third Point’s CEO, to the Yahoo board. But, really, is this deal in the best interests of all shareholders? Hedge funds owe loyalty to the folks whose money they invest. As a Yahoo director, Daniel Loeb, Third Point’s CEO, now owes a primary fiduciary duty of loyalty to Yahoo and all its shareholders. See the potential conflict? Will Loeb and his compatriots steer Yahoo toward a strategy that coincides with Third Point’s investment objectives, or will they bring an objective viewpoint focusing on Yahoo’s long-term interests?
Our bet is that the Ya-drama will continue. Stay tuned.
The Chesapeake Board – case study of an ineffectual board
As corporate governance consultants, providing counsel to boards on how to be more effective, we are fascinated by what is going on at Chesapeake Energy.
The current saga has all the elements that suggest an ineffectual board:
- Dominant CEO/Chairman
- Independence compromised by extraordinary high pay and perks. Approved pay packages for the CEO criticized by shareholders
- Company fought “pay for performance” until shareholder revolt
- Situations where the CEO’s personal interest could conflict with the company’s interests
- Asleep at the switch. Having set up the conflicts, they failed to monitor them
- None of the current board members are thought to be capable of taking over as chairman
This is all very reminiscent of Enron’s board waiving the code of ethics and not monitoring the situation. They are taking action, but shareholders and the public will not let them off the hook no matter what they do now.
The Wall Street Journal’s Joann Lublin asked us what we thought in an interview. Here is a bit from the April 26 article:
Some governance experts remain critical of Chesapeake board members for not acting sooner. “They went to sleep,” asserted Jon J. Masters, founding principal of Masters-Rudnick & Associates LLC, a governance consultancy in New York. Acting now, he added, “doesn’t get them off the hook.”
As this story unfolds, we’ll see what happens.
Too little too late for the Chesapeake board?
Too little too late for the Chesapeake board? WSJ asks Masters-Rudnick http://on.wsj.com/ICSanD
