Yahoo may have resumed negotiations with Microsoft, but billionaire investor Carl Icahn remains unhappy: he still wants to fire the company's board and replace it with more Microsoft-friendly directors. Judging by a letter he sent to the Yahoo board today, he has a surprisingly good reason, too.
According to Icahn, CEO Jerry Yang and most of the board members deliberately sabotaged the negotiations by setting up a "doomsday machine" to push Yahoo employees to quit in the event of a buyout:
A complaint that I became aware of yesterday (details Yahoo fought to keep under seal) . . . states: "Viewing employee retention as Microsoft's Achilles heel, Yang engineered an ingenious defense creating huge incentives for a massive employee walkout in the aftermath of a change in control. The plan gives each of Yahoo's 14,000 full-time employees the right to quit his or her job and pocket generous termination benefits at any time during the two years following a takeover, by claiming a "substantive adverse alteration" in job duties or responsibilities." The damage to Microsoft "is compounded by the fact that Yahoo's thousands of engineers, known as "Technical Yahoos!," have detailed job responsibilities and qualifications."
Icahn goes on to say Yahoo "conveniently neglected" to tell the employees that Microsoft "had earmarked $1.5 billion of retention incentives (representing over $100,000 per employee) meant to allay any employee concerns." According to Icahn, the move goes against the board's official claim that it negotiated with Microsoft in good faith. He also claims backing off the "doomsday machine" could have allowed Yahoo to get an even higher offer from Microsoft.