Friday, May 16, 2008

More Of The Same 

There will be more of this kind of fight in the future -- a dissident shareholder attempting to remove directors. Under the law, shareholders have more power than before, and they are using it. It is hard for directors to defend themselves, especially when a shareholder claims they have acted "irrationally."

It is unclear whether Yahoo's directors did act against shareholder interests or whether they understand the situation better than Carl Icahn. On balance, one should give directors the weight of better information. However, that won't stop Icahn from blackening their reputations. This is why it is hard to be a director today. The position carries reputational risk. It is also why boards need PR help. More boards now have their own legal and financial advisors. It is possible they will get their own crisis communications advisors as well. It would be foolish indeed to get into a public battle with shareholders and not have PR counsel in the background.


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