Challenges mount for Bostock

Three years after leading his company through an ill-starred romance with Microsoft, Yahoo non-executive chairman Roy Bostock is facing a second big challenge to his behind-the-scenes stewardship.

The retired Madison Avenue advertising executive was thrust back into the spotlight this week after firing Yahoo chief executive Carol Bartz without having her successor in place. Tim Morse, Yahoo chief financial officer, will take the reins as interim chief executive during a search for a permanent replacement.

Ms Bartz had not been out of the job two days when activist shareholder Daniel Loeb, who had quietly bought up 5.1 per cent of Yahoo’s shares, gave the board a series of demands, including that Mr Bostock also be shown the door.

Mr Loeb, who runs $8bn investment group Third Point, said he had been speaking to a number of technology and media industry veterans that could better serve as Yahoo directors if Mr Bostock and some of his allies were willing to go quietly. If not, “we are prepared to propose a slate of directors at the company’s annual meeting next year should it become necessary”.

Such investors fault Mr Bostock, 70, for hiring Ms Bartz in the first place, for keeping her so long while the stock traded sideways, and for rejecting a Microsoft takeover bid for nearly triple the $16bn Yahoo shares are worth now.

Mr Bostock told the Financial Times he wants a new strategic plan and a chief executive who can do more with Yahoo’s large base of users. The group said on Friday it had hired bankers Allen & Co and UBS to advise on future strategy.

A former Duke University American football player who once aspired to play the sport professionally, Mr Bostock is said by associates to be tough to the point of stubbornness. “He does not back down from a confrontation if it is deserved,” said James Gorman, chief executive of Morgan Stanley, where Mr Bostock is a director.

Yet his best career moves have been negotiated deals, careful compromises that rewarded him with a personal fortune. He engineered a series of sales of his advertising businesses that kept him employed as the industry consolidated, capped by the 2002 sale of Bcom3 Group to Publicis for $3bn.

Indeed, Mr Bostock’s first response to the broadside from Mr Loeb was conciliatory, in contrast to Ms Bartz’s direct and sometimes profane public comments.

“The Yahoo board recognises the critical challenges facing the company and appreciates constructive input from all shareholders,” the group said.

Mr Bostock has used both bluster and bonhomie to navigate crises in the past. At the same time as the Microsoft talks were foundering, he chaired Northwest Airlines and steered it into the arms of Delta for $2.6bn.

Perhaps reflecting his lack of Silicon Valley experience, Mr Bostock until now has been less of a forceful internal presence at Yahoo, according to several people who dealt regularly with the board.

One ex-executive said Mr Bostock has to take the blame for presiding over “one of the great dysfunctional boards of all time”.

“He has overstayed his welcome,” the executive added.

But corporate governance expert and former Yahoo critic Charles Elson of the University of Delaware said investors should give Mr Bostock credit for dismissing Ms Bartz.

“Anytime a board terminates a CEO on performance-based issues, we have got to give them their due,” Mr Elson said. “That is a tough decision to make.”

This article has been amended since original publication

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