Yahoo! CEO Carol Bartz's Continued Share Dumps Reflect Poorly on Leadership

October 9th, 2009
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Contributed by: Eric Jackson, Ironfire Capital
As predicted last month, when I first raised this issue, Yahoo! (YHOO) disclosed late Friday that Carol Bartz had sold another $1.3 million of Yahoo! stock at the end of September. This brings her total Yahoo! share sales for the year to $3.3 million.

When I first brought up this issue of how she and several other Yahoo! insiders had dumped shares over the past 2 years, Bartz went on CNBC and flat-out denied that she'd sold any shares.

She later reaffirmed at the press conference announcing Yahoo!'s new $100 million marketing campaign ("It's about Y!ou") that she'd never sold any shares.

I don't understand why she has decided to take this strident denial approach, when her SEC filings clearly show she disposed of (i.e., sold) her shares.

These sales all have to do with a "Make-Up Grant" Yahoo!'s board gave to Carol as part of her employment agreement she signed with the company. They agreed to give her $10 million worth of cash and Restricted Stock Units (basically Yahoo! shares) in blocks each quarter for her first year (2009) on the job to make her whole for the Autodesk stock she left on the table to take the Yahoo! CEO job.

No one has ever explained why Yahoo!'s board decided to give her a $10 million "make-up grant" when, according to SEC filings, she was only leaving Autodesk stock and stock options worth $3.3 million at the time she signed the deal.

Every quarter, when Carol gets her cash and stock from Yahoo! for this inflated "Make-Up Grant," she owes taxes on it. What is unusual about Carol compared to other senior executives who have been well-compensated through the years is that, rather than pay her tax bill herself, she has decided to dump part of her Yahoo! shares every quarter to pay those bills.

If I was an employee or shareholder, I would be disappointed that Bartz didn't want to keep every single share of Yahoo! stock she possibly could -- because I would think she anticipates that the price is going to go through the roof in the months and years to come.

How do I know Carol has enough cash in the bank to pay these tax bills herself? In 2007 alone, she exercised options at Autodesk worth $47 million. That's just that one year. Of course, she has enough.

It comes down to a question of leadership. When she had the choice to demonstrate her desire to keep all the Yahoo! stock that she negotiated so hard to get, she decided that she would rather keep her existing cash in the bank, than keep a few more hundred thousand shares of Yahoo! And then, to go on about how she never sold stock, and get Yahoo! PR to say this is done all the time -- when it's not, by real leaders -- that's bush league.

Disclosure: Jackson's fund holds no position in YHOO at the time of publication.
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Ironfire Capital
Related People: Eric Jackson; Jackson Leadership Systems, Inc
Related Entities: Ironfire Capital US Fund LP
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