Starboard Value LP wants to replace Yahoo’s board of directors with a crew of new directors analysts say would likely steer the ailing company away from growth and into a more austere realm.
“If you want the company to just downsize, set itself up for a sale, figure out all the inefficiencies in the business, sell off assets — this board that’s being proposed is very good for that,” RBC Capital Markets tech analyst Mark Mahaney told CNBC Thursday.
The hedge fund published an open letter Thursday morning to Yahoo shareholders that nominated nine candidates — a mix of tech and media executives — to Yahoo’s board. The letter slammed the current board as having failed both shareholders and the company.
“We have been extremely disappointed with Yahoo’s dismal financial performance, poor management execution, egregious compensation and hiring practices, and general lack of accountability and oversight by the board,” Starboard said in its letter. Starboard, based in New York, is one of the largest shareholders of Yahoo! Inc., owning approximately 1.7 percent of shares worth $570 million.
“We believe the board clearly lacks the leadership, objectivity, and perspective needed to make decisions that are in the best interests of shareholders,” the letter added, citing “abysmal pay-for-performance, significant conflicts of interest, and egregious hiring and governance practices.”
Starboard’s list of nominees for election at Yahoo’s 2016 annual meeting in late June includes:
- Former NBCUniversal executive Bridget Baker
- Tor Braham, ex-Deutsche Bank Securities technology M&A global head
- Brad Buss, former CFO of SolarCity and a director of Tesla Motors
- W. Lance Conn, an executive and investor in the media and technology sectors
- Dale Fuller, currently on the board of AVG Technologies
- Eddy Hartenstein, a media executive who has previously served as chief executive of the Tribune Co., DIRECTV and the Los Angeles Times Media Group
- Rick Hill, a tech executive currently the director of Arrow Electronics, Cabot Microelectronics Corp. and Autodesk
- Debra Janssen, chief operating officer of Bankers Trust
- Jeffrey Smith, co-founder and CEO of Starboard
Starboard hinted in its letter its proposed board would focus on value, not growth, for the company. It excoriated Yahoo’s “billions of dollars spent in recent years on what has proven to be wasteful acquisitions and research and development expenditures.”
If its proposed board is voted in, the odds of Yahoo’s sale and dismantling would increase, The Wall Street Journal noted. Already bankers for the company have been reaching out to potential buyers, including Verizon, Time Inc. and private equity firms.
Hoping for a turnaround, Yahoo brought in CEO Marissa Mayer in 2012, but the company has nevertheless struggled to gain the traction to revive growth and compete with giants like Google and Facebook. Its global net digital ad revenues are projected to decline 14 percent in 2016. That decrease would mean Yahoo’s share of the digital ad market would drop to 1.5 percent from 2.1 percent in 2015.