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Tuesday, September 13, 2011

Yahoo's Chairman Must Go

Posted By on Tue, Sep 13, 2011 at 2:05 PM

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Much of the coverage of Yahoo CEO Carol Bartz's firing last week assumed that the company will now try to make a fresh start with a new leader. The fact that Yahoo's stock price has risen about 10 percent is an indication that some shareholders have made the same assumption.

But Bartz was only a symptom of the problem, not the problem itself. Yahoo can't truly make a fresh start until it makes changes to its board. Specifically, Chairman Roy Bostock's gotta go.

Bostock and the rest of the board have made bad decision after bad decision, culminating in the hiring of Bartz in 2009. As the CEO of Autodesk, the San Rafael-based maker of design software, Bartz had no experience in the Internet business or in advertising. As was widely noted at the time, it seemed an odd choice given that Yahoo (unlike, for example, Google) insists (correctly) that it's not a technology company, but a media company. Lots of CEOs do well running businesses where they have little experience, but there was little to recommend Bartz, and Yahoo was a company in dire need of a turnaround led by a CEO who knew how to do it.

It became clear rather quickly that Bartz didn't fit the bill, but she was allowed to stay in the job for more than two and a half years. In June, Bostock told shareholders -- some of whom had been advocating fro her ouster, that "this board is very supportive of Carol and the management team ... and I want to be very clear about that support."

Just weeks later, when Bostock decided it was time to fire the woman he was so supportive of, he bungled that, too. He did it over the phone, which was both classless and clueless.

Classless because, well, you don't fire people over the phone. Clueless because it gave Bartz ammo to rip on Bostock and the board. She did so, via e-mail to the whole staff -- because Bostock didn't think to yank her account. Then she called Bostock and the rest of the board "doofuses" in an interview with Fortune.

Bostock also didn't think to have a succession plan in place. Tim Morse was named as "interim CEO," and probably won't hold the post permanently. The uncertainty that surrounds the company (Will it be sold? Will it make acquisitions?) is only heightened by this incredible clumsiness.

But the Yahoo board had stumbled many times before hiring Bartz. The company has gone through three (perhaps four) CEOs in four years, even as revenue has continued to decline.

But the biggest mistake was Yahoo's rejection of Microsoft's $45 billion ($31 per share) offer for the company in 2008. That's when shareholders began to seriously question Bostock's leadership -- at one point, 40 percent of shareholders voted for him to go -- an incredibly high number.

But he's still there, the leader of what Forbes' Eric Jackson calls "the most hated board in America."

"How," Jackson wonders, "can you be the chairman of the most hated board in America and not accept the shame and embarrassment that comes with that enough to step down?"

Good question, and one that can be answered by Bostock himself. The only acceptable response would be: "I'm sorry. I'm leaving."

Dan Mitchell has written for Fortune, The New York Times, Slate, Wired, National Public Radio, The Chicago Tribune, and many others.

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Dan Mitchell


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