Isn't Yahoo! Management Supposed To Work For Its Shareholders?
from the that's-what-I-thought dept
I've been puzzled by a lot of the coverage of the Microsoft-Yahoo merger talks. Take yesterday's write-up of the story in the New York Times, for example. The article starts off talking about Yahoo!'s efforts to "avoid defeat in its battle with Microsoft." If I were a Yahoo! shareholder, I'd be pretty unhappy that things are being framed that way. Yahoo! management has a fiduciary responsibility to me, the shareholder, to maximize the value of my investment. Yahoo! management ought to be excited by the idea of a deal where shareholders get paid a big premium for their shares. Of course, if Yahoo! can get an even better offer from another company, or use the threat of going elsewhere to get a bigger offer from Microsoft, that would be great. But the types of machinations described in this article sound more like Yahoo! management trying to hold onto their jobs than anything else. It's hard to see how shareholders benefit from delaying the shareholders meeting in order to prevent Microsoft from starting a proxy fight. If shareholders don't think Microsoft's offer is fair, they're free to vote it down. Likewise, a deal with News Corp or AOL might make business sense, but unless it causes the price of Yahoo! shares to rise higher than Microsoft's current offer, it's not clear why those deals would cause shareholders to reject the Microsoft deal. More generally, I think it's misguided to describe this type of negotiation as a battle to be won or lost by Yahoo! "Losing" in this case means Yahoo! shareholders get paid a big premium for their stock shares, while "winning" would, I guess, mean the deal falls through and Yahoo! shareholders don't get a big payday. That seems backwards to me.
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Filed Under: fiduciary responsibility, mergers
Companies: microsoft, yahoo
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I seem to remember a case from law school where a stock holder sued management for not bringing an alleged problem directly to their attention when it was pretty clear the board was not looking out for the stock holders' best interests.
The court held that the management had no duty to inform the stock holders of anything and that the management's notice to the board, no matter how corrupt the board was, ended the management's duty.
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Investment or arbitrage?
Fuck you. You may be a stockholder but you are clearly not an investor. Yahoo seems to be about the only company interested in the long-term health of the company and its employees. Since the 1980s stockholders ceased to be "investors" and became nothing more than arbitragers willing to sacrifice the health of the company, the community (rarely their own) and in the long term, the country, all just to net an additional 1/10 cent per share.
I'm a capitalist not an anarcho-socialist anti-globalisation weenie. I've studied economics and thanks to a bad marriage know exactly how stocks and funds work. Hell, I wrote some of the doublespeak speeches my ex- used to give at investor meetings. The reason there are so many peope who now hate companies is that the companies truly don't give a damn about them anymore. They only listen to the arbitragers who bought a 1.5% bloc of stock yesterday in the hope of selling it to someone else next week for an extra penny a share, netting them a cool ten mill for doing absolutely nothing. That's arbitrage, not investment, and if more companies took Yahoo's lead they'd see (the intangible, non-accountable, non-purchasable but extremely valuable) worker loyalty skyrocket.
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"a deal with News Corp or AOL might make business
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Microsoft architecture chief 'clarifies' online fo
http://www.regdeveloper.co.uk/2008/03/05/ozzie_microsoft_services/
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reading your comment I think I know why your wife is your exwife.
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for once, I disagree
They are 2 diametrically separate companies that would not merge smoothly. Their software and platform is not well integrated (competing,similar, and unrelated services in one bunch) and MS would have to take out a loan just to purchase them. From a financial perspective, that is commonly a bad decision to go that far over your assets (percentage wise).
The only other gamble is if Microsoft allows Yahoo to maintain control and is in essence just refreshing their budget on a gamble...but seeing as yahoo is going down (and further down) they are not going to leapfrog back on search dominance anytime soon, if ever.
Just because someone wants to give you money to buy your company out (and proceed to destroy it afterwards) does not mean that it is a good business decision on any level whatsoever. I seem to recall someone who just got bought out by MS (so of course biased) going "I see no problem with this situation whatsoever"...well gee, you got handed a wad of money, you think you'd have any objection? Of course not.
What people need to be paying more attention to is who submitted the proposal to wipe the board of directors out, because Microsft is probably the one doing so themselves (if they have stock they can submit a proposal and whatnot - this is not something I have factual proof but I have a hunch).
See, a board may be a board full of old people who hate change, but that doesn't mean the next in line is a great contender either.
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Stakeholders not shareholders
Either direction you choose, you upset someone.
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Re: for once, I disagree
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Need help business model!!!
My name is Abdul Clamwacker and I have a question. I am starting a business called "Beastly Gorilla Girlfriend Import Traders" and I don't want unhappy investors!!! Can you tell me how you would run the company? I love your delicious Copypasta.
Peace Love and Hairgrease,
Abdul
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Re: Re: for once, I disagree
Hey Tim, I might disagree with you a bit on this too... If there's a better long term option that will make my shares more valuable over the long term than selling out to Microsoft now, isn't that a reasonable stance?
i.e., if Yahoo really thinks that either going it alone or doing a deal with one of these other providers means that the value of your shares will be worth much more a year, or five years down the road... is that not a reasonable strategy?
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Saying Yahoo's management is breaching that duty by failing to entertain Microsoft's bid, while probably true, is extremely difficult to prove.
Token argument: I, as part of Yahoo's management, think that Microsoft's bid for $10 is nice, but I believe that X, Y, and Z forthcoming developments will increase our share's value by 500%. Thus, I am acting in the shareholder's best interest by preventing a hostile takeover, etc.
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Management might owe a duty to the stakeholders (employees, etc), but they owe a fiduciary duty to the shareholders, which is the greatest duty they can have.
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Re: Investment or arbitrage?
Sounds like a fast-track to an oligopoly, and I don't think we need any help in that department.
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If Yahoo is acquired by Microsoft, a significant percentage of Yahoo's employees WILL quit.
So the responsibility to the shareholders includes - dont put the company into a situation that will cause so much turmoil.
Want two more examples? MS buying Sun, or Apple. Same thing would apply. (not that they would.. but am talking about the staffing angle)
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Re: Re: for once, I disagree
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Touchingly naive
What planet do you live on, where executives of large companies give each other high-fives when--and only when--they maximize shareholder value? You're either the most naive "analyst" in the country, or you're being deliberately obtuse.
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#1 Don't try to double-guess Yahoo. A lack of profit now can mean a bigger profit later. In the current economy, the US dollar is falling.
#2 Remember that man is NOT rational. Ethics play roles, as do several other non-rational parts of the human decision making process.
#3 Rationality is overrated, or underrated. Humankind's irrationality has rational roots that allow us to be super-rational. Super-rationality wins.
#4 Remember that there are thing with value and worth that are not money, and that without them money has no worth or value.
#5 Publicity and worker loyalty have worth but are hard to give a solid value, making them priceless.
#6 Value and profit have many meanings. Do not be limited to money.
#7 What goes around comes around, therefore by helping the stakeholders you help everyone: and help make a stronger economy for tomorrow.
To sum it up: Go back to college, and change your major, because all economics is wrong, if it leads to the conclusion you believe it does. Either action by yahoo is correct for different reasons. Yahoo believed that this action was the more correct.
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Re: Investment or arbitrage?
Be that as it may, Yahoo is a publicly traded company. The benefit of running a publicly traded company is that you can sell small pieces of ownership to the general public and raise ridiculous amounts of cash. The detriment of running a publicly traded company is that you now have potentially millions of shareholders who may have a different opinion of your company and it's future than you do. And since they're shareholders, they get a say in how things are done.
You may not like it, but that's the rules of the game. And the Yahoos knew it when they filed their IPO. It's time to pay the piper.
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Re: Re: Re: for once, I disagree
It is a very reasonable stance. But it's up to the ownership (shareholders) to decide just how reasonable the stance is, and whether they want to roll the dice on a future plan or take the offer that is a known quantity today with a significant upside.
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Re: Re: Investment or arbitrage?
Which takes precedence, long-term or short-term? Well, I guess that's up the shareholders to decide, isn't it? If a majority of them feel that the short-term offer is better than the long-term potential, then they sell and Yahoo goes to Microsoft. If the reverse is true then Microsoft either gives up or raises their offer. What's wrong with that?
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Well, you profited! I mean I could have given you nothing! So you win right!? Maximum profit! Who cares that it cost $100 to make that ten?
Now, keep in mind that some things have very fuzzy values when turned into exchange units. From Yahoo's perspective, Microsoft is giving them an equaly bum deal as I gave you.
Maximum profit, min cost. Remember that, it'll help you more in life then maximum profit, maximum cost.
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Auto industry. Early 20th century. Economies of scale.
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@ReallyEvilCanine
Since when does a capitalist/pro-globalisation piece of sh*t care about a companies employees?? As an "investor" or "shareholder" you would want maximum return on your investment. I fail to see how that happens if Yahoo! were to go under.
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I just want someone to kick Google in the nuts for a reality check- how does investing in model rocketry with nasa, buying wireless spectrum, or getting into health records management improve their own product offering? Seems like they have become bored with being #1.
Really, I don't care how the merger ends up, who does it or who sits on the side for a more formidable competitor to come to the table and push the cogs to innovate.
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It's highly unlikely that the stock you're holding is from the IPO. Which means you bought it from someone else.
In doing so, you've put no money into Yahoo's coffers. Why would they give a rat's ass about you?
The people who put the most into Yahoo are Yahoo employees. Yahoo owes *them*. The employees repay Yahoo by making something of value to Yahoo's customers (also, not you).
The "something of value" tangentially helps you sell scraps of paper which loosely represent some tiny fictional "piece" of the company to other people who can be convinced that they'll then be able to sell those scraps to someone else for more. (Why fictional? Liquidate the company and see the real value of your paper.)
Essentially, your stock, and any "value" it might have, are just a side effect of Yahoo's business and mean nothing concrete to Yahoo except that they vaguely indicate the market's perception of how good a job they're doing at their actual business.
Just dump your Yahoo stock; they don't need you and you're distracting them from their real business: making something useful to a bunch of people.
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Re: Re: Re: for once, I disagree
More to the point, Kevin's right: it's the shareholders' money, and they should be given the opportunity to vote on it.
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And occasionally you get surprising results
Remember: NASA research is responsible for your cordless power tools.
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Re: Re: Re: Re: for once, I disagree
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#38 Is Right
Tell me, is it fiscally better to take a lump sum now, or greater returns over a much longer time period?
A lack of profit now can mean a bigger profit later
Yes the purpose of business is to make money, but which takes precedence? Quick, short-term pay-off?
But you all seem to fundamentally misunderstand how stock markets and decision markets work. Tim is correct here. This discussion isn't about ethics. Actually it is. Ethics, goodwill value, future prospects, future profits...these things are all imputed into the current stock price, as best as THOUSANDS of people can guess them. That's how the current stock price is derived.
Jerry Yang is trying to say that he is smarter than all those millions of investors who choose to buy or not buy Yahoo stock. He thinks it's worth more, and everybody else is wrong. Granted, he may know some big secret as to why Yahoo is worth more, but if that were the case, there would be a big incentive to reveal that secret. The fact of the matter is that Yahoo's options for the future are already integrated into the stock price. That's what a stock price is all about, for goshsakes.
Microsoft, for their part, think that if they could buy Yahoo, then this merger would increase the value of MSFT. They are willing to pay a premium for Yahoo stock to make it happen. This deal is good for Yahoo shareholders, who should be given the opportunity to vote on it, and who should accept it. If the merger succeeds or fails, that's a different question.
Yahoo's price is what it is. The markets have spoken, and for once, this isn't the case of some corporate interests rigging the markets, or getting loosely regulated monopolies and calling it a free market, this is a very democratic decision market (the stock exchange) that has set the price for Yahoo, and MSFT has said it is willing to pay the price. All of you posters that oppose this are off target: if you go to a market to sell potatoes for $5/pound, and I offer you $7/lb, do you not sell me the spuds?
The people who should be questioning this deal, are the MSFT shareholders. Any debates about whether buying Yahoo! or not is a good decision shouldn't be taking place around the Yahoo boardroom, but rather up in Redmond. What did the markets say about MSFTs share price when they announced the deal? That's what we should be talking about.
You don't like it, you stay private, or at least retain a controlling share.
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Re: #38 Is Right
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Re: Re: #38 Is Right
But I believe maybe your missing the point. The corporate entity exists under the IRS Code for one thing- to create a profit for it's shareholders. Social issues, jobs and the like are not addressed under the IRS code. If the board is ill equipped to make a decision, and has to escalate to shareholders, it may signal to the shareholders that the BoD is divided, which may have downstream reprocussions. If the shareholders vote for a buy-out, it could signal a vote of no confidence of the current leadership.
Considering the opportunities listed in the past three weeks of press releases from Microsoft, yahoo should consider the opportunity in an emotional vacuum. Such things to consider may be potential cost, and level of effort/manpower to organically grow a similar opportunity.
I just want someone, anyone with cahones to challenge Google. If it's MicroHoo, great. If it's eBayApple, fantastic. But we're at a standstill from an innovation perspective.
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Microsoft
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Yeah .... Please the shareholders or please the community? I think Yahoo! made the right choice. Not everything is about money here.
MS buying out Yahoo! would be the end to Yahoo!'s community support. I'm sorry to say, as a shareholder, bugger off. Community is more important than earning a quick buck.
I'm definitely gonna have to disagree with Tim's views here.
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Re: #38 Is Right
Sure it would, but it would kill the value of Yahoo!. Sure, it would add a real competitor to Google, but it would inevitably be bad for the web as a whole.
Sometimes a company needs to think what's better for its community than its pockets.
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