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Tremendous editorial on splitting Chairman/CEO roles appears today in The Wall Street Journal written by Gary Wilson.
 
In addtion to laying out several well-founded points supporting split roles, Wilson reveals a stunning statistic of which even we were unaware:  65% of S&P 500 companies have the same person employed as both Chairman and CEO.
 
Wilson’s opinions carry added weight… he is currently the Chairman of Northwest Airlines, a director of Yahoo, a former director of Disney, and a shareholder-nominated candidate for the board of CSX.
 
To read the editorial, click here.

Shareholder activists have won the revolution… so says today’s The Wall Street Journal.

But let’s not all fly off to Sardinia for that Kozlowski-like party yet.

A superficial article on the front cover of Section C includes some statistics about more board seats won, more resolutions adopted, etc.  But nowhere does the author stop to ask, “If, since 2006, 218 companies have awarded board seats to activists, isn’t it possible that 2,000 more companies are still in need of turnover in their boardrooms as well?”

Certainly some dynamics in shareholder activism have changed for the better.  But many boards still act as if they work for the CEO, and not the other way around. 

Executive compensation continues to skyrocket toward unprecendented levels.  Boards at poorly-run companies are rejecting 62% premium offers because of emotional attachments.  The country is facing a massive credit crisis because directors at investment banks, commercial banks, housing lenders, and other enterprises all failed to understand business fundamentals.

In other words, we still have a long way to go.

To read The Wall Street Journal’s article, click here.

Our favorite barbarian Carl Icahn has published a letter today detailing his growing relationship with Microsoft’s Steve Ballmer.

Particularly troublesome for Yahoo, Icahn noted that “several of our conversations have lasted as long as an hour.”  

The likelihood is low that Carl has been asking Steve about the Windows XP Service Pack 3 patch.  It’s rather high that Carl and Steve are talking about a Yahoo-Microsoft combination.

Yahoo’s board meeting schedule for August 1

For more from Fortune, click here.

InBev NV will file papers with the SEC today to set in motion a fight for control of Anheuser-Busch’s board.

For more from Reuters, click here.

The Wall Street Journal runs an excellent profile today on corporate governance problems at (gasp!) RiskMetrics Group.

RiskMetrics, as owner ISS Governance Services, makes a living by proclaiming good corporate governance standards.  Too bad the company doesn’t live up to its own advice.

This Wednesday, shareholders will have a chance to attend the company’s first annual shareholder meeting since its IPO in January.  Hot on the plate are two shareholder grievances… RiskMetrics has one individual serving as both CEO and Chairman (note to RiskMetrics: you routinely call this inappropriate), and its top officers receive annual bonuses on subjective factors (another note to RiskMetrics:  you have Metrics in your name - use them on yourself!).

Such poor behavior by the industry standard bearer leaves many dismayed if there is any hope at all for improving governance standards.

For The WSJ article, click here.

Two of my favorite topics this spring… Carl Icahn and Yahoo.  So who would have thunk this…

Reports today indicate that Carl Icahn is considering a proxy fight vs. Yahoo’s board.  The deadline is Thursday (May 15) to nominate candidates — no problem for King Carl as he has a stable of ready and waiting executives at every turn.

The question isn’t:  Will Icahn try?  Regardless of whether he wins or loses the vote, there is plenty of money to be made by Icahn by boosting Yahoo’s stock toward $31+ from its current position.  And with Yahoo’s shareholder vote to be held in less than 50 days from now on July 3rd, it can be realized quickly, creating a hefty annualized return. 

The real question that we should ask is:  Can Icahn succeed?  In a battle of wits, Icahn wins hands down.  In a battle of who loves shareholders most, Icahn wins again.  In a battle of proper governance, Icahn wins that too.

Having Yahoo co-founder David Filo (who isn’t even on the board) negotiate with Microsoft was a giant abdication of duties for Yahoo’s board.  That’s like Joe Torre using the bat boy to pinch hit in a playoff game.  Regardless of the directors’ stance on the Microsoft offer, it is cause enough to demand resignation of all independent directors.

Some people claim that Icahn just wants to make a buck.  So what?  All investors do.  If Yang & Co. really believe Yahoo’s stock is worth $38/share, why have they not been buying shares by the truckload?  At $19/share, they could have doubled their money and given even more money to Stanford. 

Heck, even buying at $26/share today, Yang and Filo could become almost as rich as those Google guys.  That is, if they really believe the company to be worth what they claim.

Microsoft’s Steve Ballmer showed fiscal prudence and restraint by refusing to bow to Yahoo’s expensive demands and simply walked away.

Now, Yahoo faces an unenviable position, dealing with the fallout from “winning”.

First, Yahoo didn’t win.  Maybe its employees did, but not the shareholders.  And that’s not how our system is supposed to work.  Come Monday morning, expect Yahoo’s shares to be back down below $20/share, a far cry from the $33/share that Yahoo shareholders could have had via Microsoft’s offer.

How attractive can Yahoo be?  The company talked with everybody in the industry — Time Warner, NewsCorp, Google, etc. — and no one wanted to dance.  Talk about feeling like the ugly duckling today.

Second, as a direct result of the shareholder losses, look for shareholder lawsuits to be filed.  The first was likely typed up this weekend and will be ready to submit the moment Yahoo’s stock opens for trading early Monday morning.  Among the complaints, namely that never before has a 70% premium (based on Microsoft’s increased offer) looked so unfair.

Third, good luck to Yahoo operating alone.  While Yahoo sits on the sideline by itself, Microsoft has shown its willingness to do a major deal to move ahead in the pack.  Other targets may not be as attractive as Yahoo, but Microsoft still could leave Jerry Yang & Co. in the dust by purchasing several companies for the price it offered Yahoo.

Fourth, and most interestingly, don’t rule out the possibility of a slate of dissident investors running for Yahoo’s board in the coming proxy vote.  And not necessarily Microsoft’s nominees.  There are a couple major investment groups with the experience, clout and connections to pull this off, especially if Yahoo’s stock falls into the teens.  These dissident candidates would run on the platform of (1) Yang & Co.’s embarrassing mismanagement of the Microsoft talks, and (2) the candidates’ willingness to accept a $33/share offer, should it still be available.

My guess is that Microsoft, having had no part in the proxy campaign, would still be willing to talk to the new Yahoo board, should they be elected.  To be continued…

With both Microsoft and Blockbuster exhibiting extreme patience with their acquisitions attempts, it’s worth looking at the root cause.

Namely, it’s the lack of other possible buyers.  The turmoil in credit markets has stripped much of the power away from private equity firms, who have dominated the M&A landscape for much the last three years.

Meanwhile, lean-pocketed strategic buyers have little desire to increase their leveraged capital base.

This leaves few buyers in the marketplace, allowing those on the prowl to be extremely patient.  Whereas Yahoo would have likely found several buyers or partners in times past, barely anyone will dance with her now.

And consider Circuit City.  Would you risk your credit rating in this market by taking on this troubled operator?  No, and Blockbuster knows it, allowing it to patienly await Circuit City’s response.

All this creates a tremendous opportunity for these would-be buyers to take their case directly to shareholders, a timely and open process that in the past would have only allowed another buyer more time to come into the picture.

But that buyer is not coming.  And we shall have a fun proxy season.

This week saw both Microsoft and Blockbuster stand firm on their acquisition bids for Yahoo and Circuit City, respectively.

Despite Yahoo’s strong quarterly results, Microsoft maintained its current bid, even hinting that it may drop its bid entirely.  Great negotiating tactic, if you can get the target to believe it.

Microsoft’s Steve Ballmer is pretending to be a disinterested buyer, much like a flea market shopper.  Willing to buy at a good price, but not willing to overspend.

Comcast’s Brian Roberts used this approach on Disney back in 2004, and was highly criticized for not being aggressive.  I think Roberts was being very prudent.   His job is to create shareholder value, not be aggressive.  Like a flea market shopper, sometimes it’s best to simply walk away from the table.

Earlier in the week, Blockbuster indicated that it would walk away from any acquisition attempt before any proxy contest could develop, if the Circuit City board refuses to take Blockbuster’s offer.

This strategy is brilliant.  Legally, proxy contests remove liability away from directors, who can always point back toward the shareholders themselves if faced with a shareholder lawsuit.  With Blockbuster’s indication that it would not proceed with a proxy fight, the pressure is back on the board to deliver shareholder value either through a sale or operating results.  And as we’ve seen, Circuit City has frequently failed in the latter.

What is causing all the acquisitors to go casual?  Coming in Part II.

As expected, Yahoo announced strong results on yesterday’s conference call (see Reuters) and laid out a detailed strategic plan for future growth (see NY Times).

Honestly, it sounded as if the strategic plan presented was simply another in the long line of Yahoo’s grand plans that sound great but fail in the end to deliver.  In fact, these plans might as well have been created yesterday, as no measurable difference in Yahoo’s results or product offering are even visible yet.

As the Reuters piece points out, the financials were strong enough to likely convince Microsoft not to lower its offering price, but this was never a probable scenario.

After trying to make a deal with anybody and everybody with the exception of ProxyMatters.com, and after giving its ultimate pitch on conference call yesterday, Yahoo has no more cards left to draw.