Analyzing Marissa — A Rook for a Bishop
Marissa Mayer made what appears to be a shrewd yet risky move this week by adding 4 new board members.
She warded off a looming proxy fight at the annual meeting coming up in June by making a compromise with some unhappy outside investors. Starboard, the activist hedge fund, is trying to take over control of Yahoo. Jeffrey Smith, CEO of Starboard and a very successful activist investor, sent one of his famous letters to Yahoo in March, threatening to completely replace the board.
Just 2 weeks ago Jeff Smith said “This management team has said they were going to do things over the past several years then they didn’t follow through.” He referred to promises made by Mayer with regard to monetizing Yahoo Japan, monetizing real estate, monetizing IP, and turning around the financials.
This week Marissa offered a “settlement” to Smith and he accepted. 4 seats to Starboard, one for Starboard CEO Jeffrey Smith and 3 more to his colleagues. The stipulation that she gets to keep her board seat. There’s a good summary of the changes here. http://nyti.ms/1qTukxD
Ballsy move, get closer to the enemy, play chess face to face. Marissa knows she is letting the fox in the henhouse, but she thinks she can outfox him. We’ll find out over the next couple of months.
A rook for a bishop is risky, means you’re being attacked. You only do that when bigger pieces are at risk — the king or queen. On the surface this is being presented as a way for everyone to get along, to sit together in a room. Here’s the quote from Maynard Webb, Yahoo’s current chairman of the board:
“We are pleased to welcome these four new highly respected, independent directors to our board,” said Maynard Webb, chairman of Yahoo’s board of directors, in a statement. “The additional board members will bring valuable experience and perspectives to Yahoo during this important time for our company.”
Self Preservation
Marissas main goal in all this is clear — to delay the inevitable — the day that she becomes the “former CEO” of Yahoo. She knows her chance is over to fix this as a standalone; that’s why she’s fighting so hard to hold on to that position a bit longer. This settlement could help her hang in for a few months longer, giving her a few million more dollars and possibly help her save face. But maybe not.
When Marissa is fighting for herself, she rises to the occasion and her thinking becomes razor sharp. You can see her best skills. Too bad she can’t do this in running the company and looking after her stakeholders and employees and minimizing turnover.
One of her self preservation tactics has been to ignore outside detractors and pretend everything is o.k. She continuously answers valid criticisms with euphemistic sound bites. “We are making incredible progress.” “Our growth rate in certain markets is much higher than the market.” “We have 500 mobile engineers.” “Our maven businesses are all thriving.”
Outsiders feel that there is urgent need to get someone in there to save the company. It’s like a giant ship at sea that has no one steering it properly and a captain who won’t admit it. Letting Jeffrey Smith and his team on the board could be terminal for Mayer, but it will be good for Yahoo shareholders.
When a CEO doesn’t honestly address criticism or deflects key questions, red flags go up everywhere. Investors start to wonder “Can I work with this CEO?” then they give up. The main job of a CEO is to focus on problems and explain how they will fix them, that’s why they’re there.
When pressed for discussion of difficult topics Marissa usually changes the subject and recites some unrelated positive statistics. She thinks this is clever, but only frustrates and loses the trust of her partners.
This Is Not Normal
By the way, let’s not forget, none of this is business as usual. Yahoo has been losing revenues, profits and market share for the entire time Marissa has been the CEO. She inherited a difficult situation, but should take responsibility for her own mistakes and lack of cohesive strategy.
She has lost over a dozen senior executives and lost close to $1 billion over 4 years in wasted compensation. These executives came in with great fanfare, million dollar signing bonuses and predictions of greatness. Many left after 1 to 2 years. Not good.
The company lost money last quarter and predicts bigger losses going forward. They still have 10,000 employees. They have more cash in the bank than they are shown to be worth, making the operating business.
Now we’ll get to see the next chapter. It’s like Jeff Smith will play the Dr. Drew role at try to bring some clarity and reason to this big, formerly beautiful company and brand name that is now convulsing.
In the end a company has to have growing revenues, market share and profits to be viable. When they stumble, the responsibility goes to the CEO; when they thrive, the spoils should go to the CEO.
Yahoo has stumbled around for 4 years now; that’s too long. Those 4 years turned it from possibly savable to a box of assets to be sadly sold. It’s time to optimize the outcome and move on and watch Yahoo fade into history. As we saw this week, Twitter and Apple could be in this position some day. Hopefully they’re humbly making the right chess moves right now to avoid this. @tomnora
All images ©Tom Nora.
