US Outlook: Was Carol Bartz the problem at Yahoo, or is it the board of directors?
Certainly, Ms Bartz has not gone quietly, and in typically fiery fashion after being sacked this week she lambasted the directors as "doofuses" and quite possibly the worst board in the US. Daniel Loeb, the internet company's third-largest shareholder, has demanded the rolling of additional heads. He is right. Roy Bostock, the chairman who fired Ms Bartz in a phone call on Tuesday night, should consider firing himself next.
At least the board belatedly did the right thing in removing its chief executive. Yahoo has been collapsing before their eyes, as senior technologists have left in droves and Ms Bartz has failed to articulate a galvanising vision. Given those two problems, it hardly seemed likely that a hot new internet sensation would be born from inside Yahoo, no matter Ms Bartz's angry and repeated insistence that it took Apple years to invent the iPod after Steve Jobs returned. The sad fact is that Yahoo is no longer a place where the most creative of Silicon Valley's developers want to work. A new chief executive will hardly be able to reverse it, but by being so combative Ms Bartz had turned herself into an object of ridicule and was making matters worse.
So the board cannot be full of complete doofuses, because it got the message that she must go, but it is too entrenched and too wedded to Yahoo's illustrious past to take the bold steps needed now.
Here is the charge sheet against Mr Bostock, a marketing industry executive who has been on the board since 2003 and chairman since 2008. As Ms Bartz pointed out, the botched takeover negotiations with Microsoft in early 2008 was when the board was first "cast as the worst board in the country". By holding out for an extra dollar or two on the share price, Mr Bostock and Yahoo founder (and still board member) Jerry Yang scuppered the whole deal. The stock is less than half the offer price now.
For more than a year now, Wall Street has been valuing the core Yahoo websites and advertising business at peanuts and focusing instead on where the real value lies, namely its stakes in the soaraway Chinese e-commerce group Alibaba and in Yahoo Japan. That is where the board's thinking now should be directed, but Ms Bartz was fired, it seems, not because her impolitesse had trashed the relationship with Alibaba – though that would have been cause – but rather because she has failed to generate revenue growth at core Yahoo.
Elevating most of the senior directors to become an "executive leadership council" to support Tim Morse, the interim chief executive, as the board did this week, also looked an indulgent thing to do.
Shares in Yahoo spiked 5 per cent on news of Ms Bartz leaving because of this single line in the announcement: "We are committed to exploring and evaluating possibilities and opportunities that will put Yahoo on a trajectory for growth and innovation and deliver value to shareholders," Mr Bostock said. That was enough to set all the speculative hares racing, as investors wondered if Yahoo will entertain bidders or break itself up. On the board's previous form, sniffily rejecting a Microsoft bid at a huge premium and failing to attend to its real value drivers in Asia, I wouldn't take that for granted.
Daniel Loeb and his Third Point hedge fund is threatening a hostile bid to oust Mr Bostock and three other directors at next year's shareholder meeting. This year, the protest vote against the chairman was already nearly 20 per cent. Mr Loeb's campaign looks potent. Yahoo needs directors able to make the hard-headed decisions about slimming the company down and unlocking the value in its constituent parts, not a gang impossibly fixated on restoring the company to passed glories.