As I wrote last Friday, I went to the Yahoo! shareholder meeting with the hope that I’d find the management team to be open and welcoming to questions from shareholders, but understanding that I was likely to be disappointed.
Unfortunately, the latter proved to be the correct assessment of the situation.
As an ex-Yahoo!, I don’t say this lightly. While I didn’t intend to be a “lifer”, I certainly joined in the hopes that I could add a lot of value to the company while I was there and because I was proud of the many past successes and future opportunities. In retrospect, I would say that I have perhaps given the company too much credit in the past. My time at the company, combined with what I’ve witnessed over the past 6 months has led me to a few personal conclusions about Yahoo!, which were all in evidence at this “shareholder” meeting (quotes included b/c this meeting was not really about shareholders in any way):
1. I don’t actually believe that the Yahoo! board and management team have any interest in engaging in a discussion of the tough questions facing them. That’s totally fine, of course, because every management team is charged with operating their business as best they see fit. Management is an endeavor that is shaped by each individual, their values and personal philosophy. However, as investors, we are all afforded the opportunity to invest in public companies whose management teams match our own values and philosophies. My personal opinion is that a very key trait of management is honesty, combined with a good ear for listening. I think that it’s important as a leader to accept that you’re going to make mistakes, to be focused less on the making of those mistakes and more on the identification and reaction to those mistakes. My philosophy tells me that this will encourage intelligent risk-taking and that I will earn the trust of the people who choose to do business with me.
- Yahoo!’s management team and board clearly have philosophies and values that fail to match mine.
- 2. Words are important, but not as important as your actions. When your words and your actions don’t fit, you need to address that issue and fix it. Focusing on anything else is useless, because you’ll always be battling yourself. By my calculation, it’s been about 2 years since Yahoo! started telling Wall Street and its employees that the company was going to take it on the chin in the near-term in order to invest for the long-term. The thing is, I agree with that choice 100%. I really believe that companies should be managed for the long run and need to avoid focusing on quarterly and annual Wall Street expectations. Which is where the big problem for Yahoo! occurs: the company routinely lies to itself. Sue, Jerry, Blake: stop telling analysts, your shareholders and your employees that you’re making “big bets” and investing in the business for the long term if you’re going to continue to turn the screws on your business lines every quarter. It’s one thing to hold executives accountable (that is smart management). It’s another thing entirely to expect your executives to routinely manage end of the quarter fire drills and create plans for long-term projects that return short-term revenues (that is DUMB management). No wonder execution is lacking at Yahoo!.
- Yahoo!’s management team and board embrace creating cognitive dissonance. The effects are disastrous.
- 3. The environment that you encourage and tolerate determines many of your outcomes. As a former Yahoo!, it was one my great frustrations to discover that the company was intensely political. As far I can tell, not only was this acceptable behavior, it often was rewarded. Executives who were known to be very good at “playing the game” are often the ones who ended up with senior roles. This is but one example of an area where the management team tolerates behavior that has detrimental downstream effects. Another example was the shareholder meeting itself: the management presentations were unsophisticated parroting of the party lines. If you talk AT your investors, guess what? Your investors will talk AT you. Although I was saddened to see it happen, I wasn’t terribly surprised to find that most of the folks who got time on the microphones were basically just using the time to talk for a while. I wish that I’d gotten up right at the beginning and asked one of the questions I typed up, but I think I would have looked quite out of place actually standing up and expecting to hear a thoughtful answer in return.
- Yahoo!’s management team and board aren’t good at creating an environment that transfers responsibility and thoughtfulness to their employees and shareholders.
I walked away from the meeting unsatisfied. I’d hoped for more out of the shareholders in attendance and I’d hoped for more from the management team. I certainly take responsibility for not making more of an effort to take the mic, but I also suspect that if I had done so, it would have been wasted breath.
So, as a shareholder, I’m left with a tough question: do I want to continue holding shares of a company whose management team disappoints me and doesn’t seem capable of making the radical changes that are necessary? If the management team continues to ignore the tough questions that the market has for them, what can I do? Is there a way to get the kind of dialogue that is necessary with the management team of Yahoo!?
Ultimately, I think that the answer to both questions is NO. I don’t trust this management team’s decision-making and I don’t believe that it will change in any meaningful way. I wish that there was another way of communicating with them, but I have to accept that it’s just not realistic. Perhaps other companies will navigate this new communications age more successfully, but I’m not hopeful that Yahoo! will be among their ranks.
My last post on this topic will be an investigation of what Yahoo! could do to change their future trajectory and what it would take. Again, I’m not hopeful that they’ll navigate out of their situation, but if I’m going to criticize, I might as well put out some suggestions as well, right?