Tuesday, July 08, 2008

Why Does Microsoft Need Icahn For?

Microsoft (MSFT) still covets Yahoo (YHOO). They made an offer and Yahoo fumbled the ball spooking their own long suffering investors. Google (GOOG) may do some alliances but anti trust issues will most likely rule. Everyone seems to favour a new board so that the Microsoft offer will work.

Some interesting corporate governance issues are at play. Sure Microsoft wants a new board in place so that their deal is accepted. But is that really the role of a board? Should investors elect board members knowing that there is a built in bias?

The role of a board is to represent the shareholders who own shares now. They do not represent a potential takeover offer which will probably come in soon. If investors are currently dissatisfied with the incumbents, and why wouldn’t they be, then elect shareholders who will discharge their responsibilities properly.

There are many large institutional investors with huge vested interests in Yahoo. If they are truly interested in maximizing their valuations they should have been attempting to recall the board a long time ago. Instead they are letting Icahn run interference for Microsoft and put the fix in.