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Apple, Yahoo Boards Face Criticism

Publication Date: 
January 16, 2009
San Jose Mercury News
Brandon Bailey and Troy Wolverton

Professor Michael Klausner and Professor Joseph A. Grundfest, Director of the Arthur and Toni Rembe Rock Center for Corporate Governance, are quoted in a San Jose Mercury News article about the decisions of the Board of Directors of Apple and Yahoo with regard to the companies' CEOs. The Mercury News writes:

By raising as many questions as it answered, last week's announcement that Steve Jobs will take a six-month medical leave has sparked fresh criticism from those who say Apple's board seems more concerned with shielding the charismatic chief executive's privacy than with meeting its obligation to shareholders.

Critics have often accused corporate boards of being too deferential to management or ignoring stock owners' best interests. Last year, some investors accused Yahoo's directors of failing to meet their fiduciary duty by allowing then-CEO Jerry Yang to reject Microsoft's offer to buy the company at a huge premium.


"From my perspective, much of this criticism is based on speculation," said Joseph Grundfest, co-director of the Rock Center for Corporate Governance at Stanford. "Much of this depends on what the board knew and when did they know it."


Board members have an obligation to evaluate whether the chief executive has personal or financial motivations that present a conflict of interest to such negotiations, but the question is ultimately up to the board's judgment, said Michael Klausner, a professor of business and law at Stanford, who added that he wasn't commenting specifically on the Yahoo case.

"The role of the board is oversight, but not necessarily to second-guess, unless there's a red flag," Klausner said.