Yahoo Board Director Maggie Wilderotter Makes for the Door

September 29th, 2009
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Contributed by: Eric Jackson, Ironfire Capital
Maggie Wilderotter -- the most recent addition to Yahoo!'s (YHOO) board, joining in July 2007 (not including Carl Icahn and his band of merry men who joined last September) -- is now its most recent departing director. She gave the company notice last week that she plans to step down at the end of the year.

The fact that she's leaving is "not due to any disagreement with the Company on any matter related to the Company’s operations, policies or practices."

When asked if she quit because of new CEO Carol Bartz, Wilderotter added in an email exchange with the FT that "I think Carol is terrific." The lady doth protest too much.

Of course, it is true that Wilderotter has trouble on the homefront with the company she's actually still the CEO for: Frontier Communications (FTR). She has only been able to squeeze in a few hours for that job over the past few years, while she's been serving as a director for Yahoo, Xerox (XRX), and Proctor & Gamble (PG) -- whose board she joined this year to take Meg Whitman's slot who is now seeking to become California's next Governor.

Wilderotter's directorships pay well. In addition to the $5.5 million she made last year in her real job as CEO, she made $400,000 as a Yahoo! director, $132,000 as a Xerox director and she'll likely get $250,000 this year as a P&G director -- what the average director last year made there. Why give up the money?

I generally don't like former CEOs sitting on boards, as they help perpetuate the "I'll-scratch-your-back-you-scratch-mine" attitude that dominates most boards when it comes to compensation and really challenging the CEO. If you've been a CEO yourself, you would feel sympathy for the current CEO on whose board you sat. You wouldn't want to show him or her up.

But if former CEOs are bad directors, current CEOs are worse. From a shareholder's perspective, they have a job to do and they should be eating, sleeping, and drinking that job -- not flitting off to board meetings across the country. CEOs take on these directorships to network and further their own careers -- not bring back insights from another company to their home company.

Wilderotter is a good example. She joined Xerox's board in 2006. There, she met Robert McDonald, then COO of P&G. They hit it off. When Meg Whitman stepped down from the P&G board and AG Lafley decided it was time to hand the keys of P&G to McDonald, he called his old buddy from the Xerox board, Maggie Wilderotter.

Yet, all this learning, monitoring, and advising that Wilderotter has done as a director in these past few years has not translated well to performance at Frontier Communications -- or for the companies on whose boards she sits. Since she joined Yahoo!'s board in July 2007, Frontier's stock is down 52%, Yahoo!'s is down 36%, and Xerox's is down 60%. The NASDAQ over this time is down 20% (and Frontier's direct competitors have outperformed Frontier's stock by about 20% over this time). (Yet, Wilderotter's total compensation is up about 150% in the last two years.)

So there is an argument to make that she needs to make time for turning around Frontier. Yahoo! would have to feel a little hurt, though, that Wilderotter seems to see Xerox as having a brighter future than the Web portal (as she's staying on the Xerox board).

However, I think there's more going on here. When you join a big-time board like Yahoo!'s, you don't grab your ball and go home after 2 years. You look like a quitter. Heck, becoming a Yahoo! director is like getting tenure as a Professor -- except it pays much much better. You can settle in for as long as you like at Yahoo! -- just ask Art Kern and Eric Hippeau who are about to embark on their 15th year as a director there.

I think it's obvious that Bartz and Wilderotter didn't see eye to eye on something. This is Carol's board now -- and, if you're not on her team, you're off (as would be the case on virtually every other board in America today).

Wilderotter has no business being on any outside boards when her own company's stock is going down the tubes. However, compared to others on Yahoo!'s board, she looked like one of the stronger directors. I specifically recall Chairman Roy Bostock going out of his way at the 2008 shareholders' meeting extolling Wilderotter's virtues as a director.

As bad as Wilderotter was as a Yahoo! director, the remaining directors are worse.

Disclosure: Jackson's fund holds no position in YHOO at the time of publication.
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