Also calls for Chairman of Board to step aside

(Update: Yahoo response) Third Point, Yahoo's second largest shareholder, has called for Jerry Yang, the Internet giant's co-founder, to resign from the company's board of directors. This comes amid reports that Yang has been trying to get several private equity firms to back a plan that would keep him and current management in charge of the company. Daniel Loeb, Third Point's CEO, has also strongly suggested that Yahoo's chairman, Roy Bostock, also vacate his board position.

Yahoo has been on a rocky road since September. Early that month, Bostock fired then CEO Carol Bartz, who had been brought onboard after Yang was forced out when he became an obstacle to a deal between Yahoo and Microsoft in 2009. Yahoo then hired several investment banks to conduct a "strategic review." Later that month, Yang revealed that the company was up for sale. Prospective buyers included Alibaba, the Chinese e-commerce company in which Yahoo actually held a 40 percent interest. It was also rumored that Google might be interested in backing a third-party buyout.

Subsequently, it was reported that Yang, hoping to recapitalize Yahoo and take control of management, was engaging in discussions with several private equity institutions including Texas Pacific Group, Providence Equity Partners, Silver Lake, KKR and Blackstone.

Third Point owns approximately 5.1 percent of outstanding Yahoo shares. Loeb felt that Yang was acting inappropriately. Loeb at one time had sided with Yang in calling for Bostock's ouster from the board. That relationship between Loeb and Yang has deteriorated, which was outlined in the letter.

"The Board and the Strategic Committee should not have permitted Mr. Yang to engage in these discussions, particularly given his ineptitude in dealing with the Microsoft negotiations to purchase the Company in 2008," said Loeb in the letter to the board. "At a bare minimum, Mr. Yang must declare whether he is a buyer or a seller -- he cannot be both. If we are correct and he is effectively a buyer, corporate ethics require him to recuse himself from any further discussions on behalf of the Company."

Loeb went on to demand that Third Point be given two additional seats on the board, either "those created by the vacancies of Chairman Bostock and Mr. Yang, or two newly-created ones." [via AllThingsD]

Update: Yahoo issued a response claiming that it's undergoing a strategic review whose results will be in the "best interests of all the company's shareholders." It insisted this was "properly managed" by outside counsel for independent directors and bankers being used by the board. Yang had the same responsibilities, incentives, and oversight to keep him in check as anyone else on the board, Yahoo aded.

It also chastised Third Point and Loeb for calling for certain actions based on unofficial information. "News reports based on rumor and speculation are just that," it explained.

By Electronista Staff