Yahoo Inc. has revised the results of a closely watched shareholder vote on its much-maligned board after discovering an error by a tabulation firm grossly exaggerated the number of ballots backing the directors.
The changes made Tuesday revealed that 200 million votes opposing the re-election of Yahoo Chief Executive Jerry Yang, Yahoo Chairman Roy Bostock and another director, Ron Burkle, were improperly registered as supportive at the company’s annual meeting last week. The miscalculations also caused 100 million votes to be miscast in support of two other directors, Arthur Kern and Gary Wilson.
No mistakes were detected in the votes for Yahoo’s four other incumbent directors — Eric Hippeau, Vyomesh Josh, Mary Agnes Wilderotter and Robert Kotick, who is about to give up his seat to make room for dissident investor Carl Icahn.
The recount didn’t alter the outcome of last week’s election, which retained Yahoo’s directors despite shareholder anger about the board’s handling of a now-withdrawn $47.5 billion takeover bid from Microsoft Corp.
But the change adds more punch to the protest against the Yahoo board.
“It’s important for Yahoo’s board to understand there is still pressure on them,” said Eric Jackson, a hedge fund manager who represents a group of stockholders with about 3.2 million Yahoo shares. “I thought Yahoo’s board was kind of let off the hook last week when they didn’t really deserve to be.”
Nearly 40 percent of Yahoo shareholders voted against Bostock under the revised results, an unusually harsh rebuke of a board chairman. The original results listed 20 percent of Yahoo’s shareholders opposing Bostock.
Yahoo named Bostock chairman in January even though more than 30 percent of Yahoo shareholders wanted him off the board in a vote held last year.
Nearly 34 percent of Yahoo shareholders expressed their displeasure with Yang, according to the recount, up from 15 percent in the original results.
The dissent indicates more shareholders are likely to call upon Yahoo’s board to replace Yang as CEO unless he can prove the Internet company he co-founded is worth more than Microsoft offered to pay three months ago. Yahoo’s market value is nearly $20 billion below Microsoft’s last offer, which translated into $33 per share.
Yahoo shares gained 44 cents to $19.82 Tuesday.
Icahn already has made it clear that he believes Yahoo needs a more experienced CEO than the 39-year-old Yang.
Burkle, who became a billionaire running supermarkets, proved to be nearly as unpopular as Bostock. He was opposed by nearly 38 percent of Yahoo’s voting shareholders, up from 19 percent in last week’s tabulation. Kern was opposed by nearly 32 percent, up from 22 percent under last week’s tally.
Burkle, Kern and Bostock sit on a compensation committee that approved a wide-ranging employee severance plan in February shortly after Microsoft made its unsolicited takeover bid. The costs of the severance plan could hurt shareholders by making Yahoo less valuable to Microsoft or the potential acquirers.
The miscounted votes might not have been detected if not for an inquiry lodged Monday by Capital Research Global Investors, which owns a 6.2 percent stake in Yahoo.
Convinced that its opposition to Yahoo’s board wasn’t reflected in last week’s vote, Capital Research demanded an audit from Broadridge Financial Solutions, the processing firm responsible for casting the ballots for a wide range of institutional investors.
Broadridge acknowledged Tuesday that a printing mix-up caused it to understate the number of shares that intended to vote against Yahoo directors. The firm didn’t elaborate on how many shareholders besides Capital Research were affected.
Broadridge processes votes in about 14,000 annual meetings each year, but hasn’t found any similar mistakes in a review covering the past 18 months, said Chuck Callan, the Lake Success, N.Y.-based company’s senior vice president of regulatory affairs. “This was a unique, isolated incident,” he said.
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Capital Research spokesman Chuck Freadhoff declined comment Tuesday.
Capital Research’s fund manager, Gordon Crawford, has ridiculed Yang and Bostock for their tactics in the Microsoft talks. Microsoft withdrew its takeover offer, valued at $33 per share, three months ago after Yang demanded $37 per share with Bostock’s backing.
Yahoo’s board is about to be expanded to 11 people to include Icahn and two of his allies. Icahn still hopes to revive talks with Microsoft.
