To: Jerry Yang
From: Joe Nocera
Re: Shafting Yahoo’s Shareholders

Dear Jerry,

Congratulations — you pulled it off. You got Microsoft to walk away from your beloved Yahoo for good. The final word went out on Thursday…

…announcing a Google deal just a few hours after you and Microsoft revealed that your talks had officially ended. According to your press release, Yahoo will soon begin running ads sold by your archrival…

…you’ve chosen to become a pawn of the most dominant company on the Internet. How exactly is that going to lead to a brighter future for Yahoo?

…Here’s the problem, Jerry. It’s not your baby. It hasn’t been since 1996, when Yahoo went public.

…It sure didn’t look as though you ever took those negotiations seriously. You rarely brought any of your investment bankers… and sometimes the only person you brought along was Mr. Filo — who isn’t even on Yahoo’s board!

…Yang engineered an ingenious defense creating huge incentives for a massive employee walkout in the aftermath of a change of 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 ‘substantial adverse alteration’ in job duties or responsibilities.”

… it actually encourages Yahoo employees to quit after a takeover, by guaranteeing them a financial windfall that Microsoft would have to pay. And since it cannot be upended even if the board is ousted, or the company is taken over, it also discourages anyone from trying to take over Yahoo.

Jerry, you’re a billionaire because people all over the world bought your stock, and trusted you to do right by them. That’s the compact you make when you take a company public: you get to be really rich, but in return, you have an obligation to do everything you can to ensure that shareholders get a healthy return on their investment. It doesn’t matter that you would like Yahoo to remain independent, or that you can’t stand Microsoft. Your feelings aren’t supposed to get in the way of your fiduciary duty.

A takeover by Microsoft was your last, best hope of rewarding your long-suffering shareholders. Now that opportunity is gone. It says here Mr. Icahn is not going to go as gently into the night as Mr. Ballmer did — and if I were a betting man, I would be taking odds that your days as Yahoo’s C.E.O. are numbered.

It’ll be better for everyone to have someone in that role who understands who he’s supposed to be working for. Wouldn’t you agree?

For entire NYT Post.