Since being offered a 62% premium over their market capitalisation from Microsoft to buy the company, Yahoo executives have been doing everything they can to avoid getting sold. They have shopped around for other buyers and looked to adopt poison pill clauses to make life more difficult for Microsoft if they do pursue a hostile takeover. The poison pills are essentially threats, they make things difficult for a purchaser, but are generally negotiated away as part of a board approved sale.
As is often the case the prime device the management of Yahoo has used for this is ‘severance packages’. While these generally apply to all staff, they are weighted in favour of the executives and ensure they get paid extremely handsomely if they are fired or the company gets sold. The problem with these is that while they are an effective threat to a predatory rival, they also reduce the value of the company and are often seen as self serving to the executives in a publicly traded company.
Now if the potential buyer was trying to get Yahoo for a bargain price to break up and sell for profit the shareholders might have understood. Instead the buyer is a large company with a history of buyouts offering a premium for a company that has had management issues and poor share price performance. In this situation some of the shareholders are understandably upset and have launched a legal action against the Yahoo management.
They do have a point as it certainly seems that the Yahoo board and executive are motivated more by their own personal agenda’s than what is best for the shareholders which is legally their primary responsibility. As the poison pill effects the value of the company it should really not have been instituted without the approval of the shareholders anyway. The board has the authority to act in what it believes the interests of the shareholders are without consulting them. In this case though the shareholders believe that they are wrong, and the error is so obvious as to be either negligent or breach of duty.
I would expect to see an emergency or extraordinary shareholder meeting in the near future. I linked to the Yahoo news posting of the AP article for maximum potential irony.