In an open letter to Yahoo's board of directors Wednesday, billionaire investor Carl Icahn expressed his dissatisfaction with Yahoo and CEO Jerry Yang and likens them to "self-destructive doomsday machines."
Icahn, who has launched a proxy battle to oust Yahoo's current board, strongly criticized Yang and the board for taking "extraordinary steps" to keep their jobs and to keep shareholders from deciding if they wanted to sell to Microsoft.
What raised Icahn's anger is information contained in a shareholders' lawsuit brought against Yahoo for not taking Microsoft's initial US$44.6 billion acquisition deal, which was first announced in February. The lawsuit, previously under seal, was unsealed by a judge Monday.
The plaintiffs in that lawsuit allege that directors and top managers, including Yang, actively tried to derail Microsoft's efforts to negotiate a mutually beneficial acquisition agreement. They claim that Yang "used that power to delay, to refuse to negotiate in good faith and to erect roadblocks," according to the complaint.
The plaintiffs take particular issue with Yahoo's decision to change employee severance plans. The severance plans, according to the complaint, reward employees "with rich benefits" if they quit as a result of Yahoo getting acquired.
"I am amazed at the length Jerry Yang and the Yahoo board have gone to in order to entrench their positions and keep shareholders from deciding if they wished to sell to Microsoft," Icahn said in the letter. "It may be too late to convince Microsoft to trust Yang and the current board to run the company during that period while Microsoft sits on the sidelines with $45 billion at risk."
Icahn said the best chance to bring Microsoft and Yahoo together is to replace Yang and the current Yahoo board with a new board that will negotiate in good faith with Microsoft. "Until now I naively believed that self-destructive doomsday machines were fictional devices found only in James Bond movies," Icahn said. "I never believed that anyone would actually create and activate one in real life. I guess I never knew about Yang and the Yahoo board."
Yahoo could not be reached for comment. But speaking today on CNBC, Yahoo President Sue Decker defended her company's severance package.
"Many companies have change of control agreements with acceleration in them or some way to keep employees upon a change of control," she said. "In this situation it was the assets that Microsoft was interested in. The assets that our board believed was so valuable is our talent that is creating next generation products and services. And it would be very difficult for an acquirer if our assets left so this was designed to keep our talent there until the date of a closing deal."
In his letter, Icahn said he and many Yahoo shareholders believe that the only way to salvage Yahoo in the long, if not the short run, is to merge with Microsoft.
"If you are not completely disingenuous in your protestations concerning doing 'the right thing' for shareholders, you should rescind the severance plan expeditiously and determine if Microsoft is still willing to purchase our company and thereby create a true competitor for Google. I can only hope that you will finally do what is in the 'best interests of the shareholders.'"