ProxyMatters.com

The New York Times is reporting that Microsoft is in talks with News Corp. for a possible business combination with the MySpace business unit.

Yes, Microsoft wants to acquire everyone.

It’s a great maneuver to eliminate a possible white knight for Yahoo, increasing the chances of a Microsoft-Yahoo deal.  And if consummated, the News Corp. deal would give Microsoft a giant step up in social media applications and talent in its fight versus Google.

Most likely, it’s nothing more than a simple tactic to corner Yahoo into have productive discussions.  Microsoft wins another round.  Stay tuned.

When Aflac provided its shareholders this year with an advisory vote on executive pay, Aflac CEO Dan Amos became an instant hero, poster child, Greek God, etc. to shareholder rights activisits everywhere.  Until he spoke with The Wall Street Journal. 

In an editorial published yesterday, Amos squashes “say on pay” fever with this quote:

“Frankly, I don’t care what anybody else does.  What a CEO makes shouldn’t be important to anybody but the owners of the company.  It’s not a public issue.”

As to why Alfac allowed the say on pay, Amos admits that it was an attempt to simply “calm down” criticism.  Not an attempt to assist shareholders.  Not an attempt to curtail out-of-control pay packages.  Basically, appease the natives, but don’t share any food with them.

If you are a tad confused and still unsure as to what side of the fence Mr. Amos stands on, he leaves no doubt behind with this gem:

“When you look at the billions of dollars that a corporation brings in, it doesn’t really matter what the CEO makes.”

Yep, that’s what he said.  Right there in print.  Read it again.  It doesn’t get much bolder than that.

On Monday, just one day before Morgan Stanley’s annual shareholder meeting, The Wall Street Journal printed a revealing article titled “Boards Give Up Taming Act“.

The article details how boards are less reluctant to fight dissident shareholders, often inviting these shareholders onto the board at an increasing rate.

The key insight offered is that the dissident shareholders have been promoting more qualified candidates, agitating not just to have their corporate cronies and personal friends to be placed on the board, but rather independent reputable corporate chieftians.

One only need to keep this in mind when reading the results of CtW’s failed shake-up at Morgan Stanley, which culminated yesterday with all of CtW’s targets receiving high marks from shareholders.  The key failing for CtW was that it failed to propose any alternate solution, any alternate slate of candidates.

Sure, shareholders could have voted no against Morgan Stanley’s board, but if they ultimately succeeded in winning the resignation of key board members, who would replace them?  Would those replacements be any better for shareholders?

Serving on a board is a tough job, particularly at an investment bank where the complexity of operations and financials require much study and insight.  Morgan Stanley isn’t selling simple widgets; they are borrowing some widgets, breaking them apart, loaning some parts back out, packaging some parts together to make something very unlike the original widget, trading for other widgets, selling widgets they don’t own, while advising and investing in other widget and non-widget businesses, all of which may or may not readily appear in financial statements.

The Vote No campaign at Walt Disney Co. in 2004 had an adequate level of success partly because Disney’s board appeared packed with personal friends of Chairman/CEO Michael Eisner, and partly because the average investor felt that he/she could, at a basic level, be capable of serving on Disney’s board.  “Make better movies”, “Make better tv shows”, and “Draw more people to the amusement parks and hotels” are simple directives.  Neither can be said for Morgan Stanley.

In the end, investors do not like protestors; they like problem solvers.

Almost lost in yesterday’s major media coverage of Motorola and Yahoo announcements was Morgan Stanley’s shareholder meeting today, where a campaign had been mounted by a union pension advisor, CtW Investment Group.

CNBC is reporting this morning that both the Vote No campaign and the Say on Pay campaign have failed.  With 85% of the shareholder votes accounted for, all directors have received more than 90% of the vote.  This includes Chairman/CEO John Mack (update: 94.5%) and director Robert Kidder, who were targets of most of the Vote No rhetoric. 

The Say on Pay proposal, which received 35% of the vote last year, will again draw under 50% (update: The Say on Pay proposal garnered only 37%).

Having led a less-than-spirited proxy battle that flew under the radar of most investors, CtW is wasting no time claiming victory on CNBC, noting that “twice the level” of no votes were achieved over last year.  CtW apparently is forgetting that it was attempting to fire Mack and six other directors, all of whom received 90%+ backing and kept their jobs.

For the record, if this how CtW judges victory, we at ProxyMatters.com wouldn’t want CtW to be in control of our pension fund.  “We lost 90% of your retirement savings in six months… victory!” 

Moving the goalposts is a common tactic in politics, but Wall Streeters are a little more savvy when it comes to lazy chicanery.  Not admitting defeat is a simple way to lose credibility with investors and corporate management alike. 

In a quick response to Microsoft’s weekend letter, Yahoo responded loudly today with a letter criticizing Microsoft’s acquisition offer (valued today at roughly $29/share).

What does this rejection mean?  It means that Yahoo CEO Jerry Yang, co-signee of the letter, was NOT busy today negotiating a $36/share deal with News Corp.  It means that Yang was NOT busy today negotiating for an attractive combination with Time Warner’s AOL unit.

It does means that Yahoo and Microsoft are much farther away than previously thought.  You negotiate privately over $0.50-$1.50/share.  You send hastily written letters when the difference is $8.00/share.  This was the latter.

It also means that Yahoo believes that Microsoft will not increase the bid, that there are no other options for deals at this point, and that this will be settled via proxy fight in the shareholder vote.

Meanwhile, Yahoo’s stock fell 2.3% today, in apparent disagreement with Yang’s principle argument that Yahoo would be better off alone.

Stay tuned… we anxiously await Microsoft’s letter tomorrow.  Then again, Microsoft appears content to maintain the upperhand and do nothing but watch Yahoo’s stock drop right back to pre-offer levels.

For more from The New York Times, click here.

One less proxy fight will be decided by shareholders in the 2008 proxy season.

Reuters is reporting that Motorola and legendary corporate raider Carl Icahn have reached an agreement to give two board seats to Icahn’s nominees.

Keith Meister, Icahn’s investment director, will be seated immediately on Motorola’s board, while investment banker William Hambrecht will be officially supported by Motorola in the upcoming shareholder vote.

Motorola reiterated its plan to spin off its cell phone business, with Icahn noting that the new company will be “free from poison pills and staggered boards.”

In a well-publicized letter to Yahoo’s board this weekend, Microsoft announced that it will continue its path toward a hostile proxy fight if Yahoo’s board continues its path in forestalling negotiations.

Sounds like Yahoo’s board has been too busy negotiating with suitors other than Microsoft.

The Wall Street Journal reports that talks between Yahoo and Time Warner “have heated up recently.”  Other talks are rumored to include News Corp.

As depicted in the so-so movie Pirates of Silicon Valley, Microsoft still faces the dilemma of being viewed as the Orwellian big brother.  This fact is hard to underestimate, particularly when viewed in line with the typical psyche of a company about to be acquired. 

Yahoo’s management and board will continue to fight Microsoft for this very reason.  The only remaining question is whether Yahoo shareholders feel the same way. 

If Yahoo shareholders do, in fact, feel animosity toward Microsoft, Yahoo will feel more confident walking into a proxy fight.  If, however, Yahoo shareholders seek to maximize their financial gain, look for Yahoo to strike a deal with another partner prior to its annual shareholder meeting

Our friends at CorporateCounsel.net have highlighted recent data on e-proxy usage, indicating that the current system is failing to increase participation by retail shareholders.  In fact, e-proxy is causing a decrease in participation.

“Retail vote goes down dramatically using e-proxy (based on 80 meeting results); number of retail accounts voting drops from 19.2% to 4.6% (over a 75% drop) and number of retail shares voting drops from 30.1% to 23.3% (a 23% drop)”

Why has e-proxy hurt participation?

Perhaps it’s just the packaging.  According to Dominic Jones at IR Web Report…

“Every other company that has taken advantage of notice-and-access so far this year has failed to provide their online proxy materials in a format that is convenient for online reading, one of the requirements under the SEC’s e-proxy rules.  In easily 80% of cases, companies are posting their information in template-based documents from big vendors where the text is in images or Flash and so cannot be used in several fundamental ways.  Navigation in these cheap, mass-produced documents is also woefully inadequate, particularly for older users.”

In a great post worth reading, Dominic praises Intel’s recent e-proxy format and design.

Wattles Capital Management is getting some free p.r. today, having sent a letter to Circuity City’s board and then disseminating the letter via PRNewswire (to read the letter, click here).

No real news to report here, as Wattles merely reiterates its boilerplate position.  Note to shareholders:  if Wattles leads Circuit City with the same weak effort that Wattles is putting into this proxy fight, Circuit City shareholders will not be better off.  It takes more than letters addressed to the board to win a proxy fight, and it takes more than hindsight to run a company.

Wattles’ slate of 5 directors is still set to compete against Circuit City’s slate at the June 24th annual shareholder meeting.

Shareholders are barking up the tree again in advance of next week’s annual shareholder meeting at Morgan Stanley.

The Wall Street Journal writes a great piece detailing the efforts of CtW Investment Group, the investment arm of labor federation Change to Win.  CtW is urging a “vote no” against three directors:  Chairman/CEO John Mack,  Robert Kidder, and Howard Davies.

For the record, RiskMetrics (formerly ISS) is recommending “vote yes” for the entire slate of Morgan Stanley directors.  Glass Lewis recommends “vote no” on six nominees.  Proxy Governance is advising “vote no” on solely Robert Kidder.