Recount shows big protest vote against Yahoo CEO

August 6, 2008, 1:04 AM UTC

By Yi-Wyn Yen

Yahoo (YHOO) on Tuesday disclosed that CEO Jerry Yang and other directors were re-elected last week to its board with far fewer votes than previously thought.

On Tuesday, Yahoo said it learned that Broadridge Financial Services, a proxy accounting firm that handles submitting votes for major shareholders, forgot to include millions of votes in its tally. Five of Yahoo’s nine incumbents received a much lower margin of approval after votes from Yahoo’s largest institutional shareholders, Capital World Investors and Capital Research Global Investors, were belatedly added.

Capital Group on Monday had asked Broadridge re-examine the votes.  Broadridge subsequently found it had failed to include 200 million votes from the Capital Group that were withheld for Roy Bostock, Ron Burkle and Yahoo CEO  Jerry Yang, and 100 million votes withheld for Arthur Kern and Gary Wilson. Instead of an 85.4% shareholder approval, Yang actually received 66% of votes, and Yahoo chairman Bostock had 60% as opposed to 79.5% that was originally reported Friday. Yahoo’s nine directors were running uncontested.

In a statement, Yahoo blamed Broadridge’s mistake on a “truncation error” that resulted when share numbers exceeded eight digits.

Capital Research’s Gordon Crawford has been particularly critical of Yahoo for the way the company handled negotiations with Microsoft (MSFT) over the software giant’s buyout offer. Capital Group spokesman Chuck Freedhoff says the institutional funds, which own 16.3% of Yahoo’s shares, just wanted to make sure its votes were reflected in the election. “We wanted to make sure Broadridge transmitted our votes,” Freedhoff said.

The new findings show greater shareholder dissatisfaction with Yahoo’s directors, but that won’t change the board’s makeup. The nine incumbents were all re-elected last Friday at Yahoo’s annual shareholder meeting. Activision-Blizzard CEO Bobby Kotick announced his resignation two weeks ago and his spot has been filled by shareholder activist Carl Icahn. The billionaire will also get two more seats on an expanded 11-member board.

Former AOL chief executive Jonathan Miller will remove himself from consideration as a board appointee, according to a source familiar with the matter. Time Warner (the parent company of AOL and Fortune) last week said a non-compete agreement Miller signed prevents him from serving as Yahoo director. Miller was unavailable for comment on Tuesday.

Yahoo will name the two additional board appointees by Aug. 15.