Yahoo shareholders criticized a defensive and slightly combative Chief Executive Terry Semel for the company's lagging performance after the annual stockholder meeting Tuesday.
While they blasted him during a question-and-answer session, shareholders followed recommendations of the board in rejecting proposals calling for Yahoo to: link executive pay with company's financial performance; oppose Internet censorship demands from China; and establish a human rights committee.
Shareholders also re-elected all the board members, snubbing a request by three proxy advisory firms to protest Semel's US$77 million compensation package by voting against re-electing several of the board members.
Yahoo has been struggling to recover from losing its lead in the lucrative search engine and advertising market to the younger Google. Yahoo's stock is down about 10 percent from a year ago while Google's has risen by about 30 percent. Yahoo has only 27 percent share of the search market share compared with Google's nearly 50 percent. Yahoo took a hit on Wall Street after it reported that first-quarter net profit was down from a year earlier and failed to report any positive effect from its new search advertising platform, Panama.
"I'm surprised you didn't apologize to the Yahoo shareholders for the company's performance" over the last few years, said one shareholder, who said he represented about 100 stockholders. He cited Google's dominance in search advertising, Google's purchase of DoubleClick to boost its graphical advertising business, Yahoo's "missing the boat" on important acquisitions like YouTube, and the surprise resignation of the company's chief technology officer Farzad Nazem.
"Do you have fire in the belly for this job?" he asked Semel.
"Absolutely. I think Yahoo has more opportunity going forward than perhaps at any other time in its history," Semel said. With a renewed focus on search monetization and being a leader in display advertising, "Yahoo will definitely get its fair share of a much larger [online ad] marketplace and we feel confident about that."
"So, you are happy being No. 2 in search?" the shareholder asked.
"I think you're being cute about that," Semel responded.
The shareholder also asked why Yahoo co-founder Jerry Yang, who's serving as interim CTO, couldn't be appointed to the post permanently. "If Jerry would think hard about being our CTO, I would be very flattered and honored," Semel said. Yang said the company was considering job candidates inside and outside the company and did not directly say whether he would consider the job.
In prepared remarks, Semel sounded defensive about the state of Yahoo but said he was optimistic that the company could turn things around. "This is clearly a year of transition for our company," he said. "We believe we are well positioned now to take advantage of strong growth up ahead."
The company's new search advertising platform is expected to have an impact on Yahoo's financials. Semel said he could not say more until the company releases its second-quarter financial results on July 17.
"We think that without any question we are going to narrow that gap," he said, referring to the gap with search monetization leader Google.
Three shareholder-sponsored proposals were rejected: The United Brotherhood of Carpenters Pension Fund wanted the company to adopt a pay-for-performance standard for executive compensation. The New York City Office of the Controller asked for the company to commit not to proactively censor its Internet sites in China and other countries that demand such censorship. And a portfolio manager from Napa, Calif., asked the board to establish a committee on human rights.
Yahoo has been sued in the United States over the jailing of a Chinese journalist who was arrested and sentenced to 10 years in prison after Yahoo provided information to the government of China. Yang said he and other executives were "dismayed and distressed" about the Chinese government's actions with regard to jailing political dissidents and others over their online activities. "We've expressed those views to the Chinese government and to the U.S. government," he said, adding that open and democratic governments can better influence China than private corporations can.
"We remain fully committed to protecting human rights in the business world's most challenging markets," he said.
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