Strong Yahoo protest revealed as vote recounted

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Yahoo has released the details of a recount of the re-election vote for its board, revealing a strong protest vote against five of the nine directors, including chief executive Jerry Yang.

The internet company said revised vote tallies showed 33.7 per cent of votes withheld for Yang, the company's co-founder, or more than twice the level of opposition to his reappointment than was reported in the first count.

Yang has been under pressure for months over failed attempts by Microsoft to buy Yahoo and over questions about his leadership, but early results from Friday's shareholder vote suggested the tide was turning in his favor. The initial tally showed 85 per cent of votes going to Yang.

The stunning new twist in the Yahoo saga came after one of its largest and most critical shareholders, Capital Research Global Investors, called for a probe of the shareholder vote after highlighting discrepancies in the results.

Analysts were split over whether the recount was a symbolic embarrassment to the leadership or a new threat to its power.

"That's a big negative vote against the Yahoo board, but it doesn't change anything," RBC Capital Markets analyst Ross Sandler said. "It is a statement that they shouldn't be under any illusion that their support is broad.

"The recount somewhat lowers the credibility of the management team," Sanford C Bernstein analyst Jeffrey Lindsay said. "Assuming this was all a mistake, it is particularly unfortunate: Management doesn't have the mandate they appeared to have had" coming out of the annual meeting, he said.

Yahoo said it had been informed by Corporate Election Services, the company's inspector of elections, that Broadridge Financial Solutions, a proxy voting intermediary for major investors, had made significant errors in reporting votes at its annual shareholder meeting.

Three other directors, including chairman Roy Bostock, also had strong protest votes, with nearly 40 per cent of votes withheld for Bostock, 38 per cent withheld for director Ron Burkle and 32 per cent withheld for Arthur Kern.

The three are members of Yahoo's compensation committee and have borne the brunt of criticism for the company refusing to do more to link executive pay to performance as corporate governance critics have demanded.

A fifth board member, Gary Wilson, the former chairman of Northwest Airlines, had 28 per cent of votes on his reelection withheld.

The remaining four board members - Vyomesh Joshi, Eric Hippeau, Robert Kotick and Mary Wilderotter - all received strong endorsements, with each winning more than 90 per cent of votes in favour of their reelection.

Ahead of the 1 August meeting, Kotick said he planned to resign shortly after the meeting as part of a settlement deal with proxy challenger Carl Icahn in which Icahn and two members of a slate proposed by the billionaire investor would join an expanded board of 11 members instead of the previous nine.

Gordon Crawford, whose Capital Research Global Investors owned 6.2 per cent of Yahoo as of early June, said in May he was "extremely angry" at Yang over the breakdown of talks with Microsoft.

His fund asked for a shareholder vote recount on Monday.

In a statement, Broadridge acknowledged the error, but said it was an isolated incident and that it did not change the outcome of the election of the company's directors.

RBC's Sandler said the investor saga was likely to drag on for the next several quarters until the company concludes its previously announced partnership with Google, reaches a deal with Microsoft, or sells one of its Asian properties to help the company remain independent.

Microsoft backed out of an unsolicited takeover offer in May that valued Yahoo at about $33 a share in stock after Yahoo management rebuffed the offer. Microsoft later pursued a partial break-up of Yahoo, but those talks have also cooled.

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