Carol Bartz calls Yahoo board 'doofuses,' investor wants new board [Updated]
Yahoo's ex-CEO Carol Bartz and its third-largest outside shareholder, the investment firm Third Point, lashed out at the company's board of directors Thursday in entirely different ways.
In her interview with Fortune Magazine, Bartz confirmed that she was fired by phone and said that when Yahoo Chairman Roy Bostock called her Tuesday to let her go, he read from a prepared statement drummed up by lawyers.
"I said, 'Roy, I think that's a script,'" Bartz told Fortune. "'Why don't you have the balls to tell me yourself?'"
According to Bartz, Bostock continued reading the statement, and when he was done, Bartz told the chairman, "I thought you were classier."
Bartz told Fortune that her firing had less to do with her performance as chief executive and more to do with the board not wanting to look like "the worst board in the country" after fumbling a bid by Microsoft to take over Yahoo in 2008, which led to the ouster of Bartz's predecessor, company co-founder Jerry Yang.
"They want revenue growth ... even though they were told that we would not have revenue growth until 2012," Bartz told Fortune about the board. "Now they're trying to show that they're not the doofuses that they are."
Third Point, based in New York, said in its letter addressed to Yahoo's leadership that it manages a 5.1% stake in the company and called on Chairman Roy Bostok, and other directors, to step down and allow new board members to step in.
Although Bartz and Third Point seem to agree that the board is a problem for Yahoo, the investment firm didn't express any approval of Bartz's tenure as CEO.
"It is now widely accepted that the board made a serious misjudgment in approving the hiring of Carol Bartz as Yahoo's chief executive officer, given her inexperience in the consumer-oriented internet space," said the letter, written by Third Point's CEO Daniel Loeb. "Although we are pleased that the board has terminated Ms. Bartz's employment, we fail to understand why this decision was so long in coming given her abysmal performance over the last two and a half years."
In the letter, Loeb also criticizes Yahoo's board for ignoring problems in the company under Bartz's leadership:
While the decision to hire her alone is grounds for questioning the Board's competence, its willingness to turn a blind eye to these serious problems and inexplicably remain supportive of Ms. Bartz notwithstanding the negative impact she was having on the company is even more troubling. As recently as June 23, 2011, at the company's annual meeting, Chairman Bostock reportedly stated that the board remained "very supportive of Carol and this management team" and that they were "confident that Yahoo [was] headed in the right direction." These comments demonstrate that this board lacks the courage to urgently make the difficult decisions required by the situation today.
Bartz, although never overwhelmingly popular as Yahoo's CEO, did have success in her previous job, which she held for 14 years, as chief executive of the design software firm Autodesk. Under Bartz's leadership, Autodesk grew in revenue from $300 million to more than $1.5 billion, which Yahoo cited in 2009 as a reason to hire her.
Like Bartz, Loeb mentions the Microsoft deal that never was as another point of criticism against Yahoo's board:
"It is also now widely recognized that the board made a gross error in turning down the $31 per share Microsoft bid in 2008, which would have generated significant returns for Yahoo's shareholders," Loeb's letter said. "This mistake is all the more frustrating given Yahoo's current depressed stock price of $13.61 per share -- far below the company's intrinsic value."
Yahoo has appointed its chief financial officer, Timothy Morse, as interm CEO until it can find a permanent replacement for Bartz. Loeb said in the letter that he didn't like that either:
Mr. Morse's elevation to interim CEO makes him Yahoo's fourth CEO in four years and further demonstrates the poor corporate governance Yahoo investors have been saddled with for too long.... Against this background, it is evident that merely replacing the company's CEO -- yet again –- will not be enough to alter the direction of the company. Instead, a reconstituted board with new directors who will bring fresh eyes, relevant industry expertise and increased investor alignment to the table is immediately necessary.
[Updated 5:04 p.m.: A Yahoo spokeswoman emailed along this response from the company's board of directors in response to the criticism levied by both Bartz and Third Point's Loeb:
The Yahoo! Board recognizes the critical challenges facing the company and appreciates constructive input from all shareholders. Accordingly, the Yahoo! Board welcomes a dialog about the concerns that have been raised by the Third Point filing. The Board is committed to acting in the best interests of shareholders.]
-- Nathan Olivarez-Giles
Photo: Yahoo's then-CEO Carol Bartz speaks at the American Assn. of Advertising Agencies' annual Media and Leadership Conference in San Francisco on March 1, 2010. Credit: Robert Galbraith / Reuters