The key to Yahoo! chief Jerry Yang’s apparently successful attempt to avoid being Microserfed was the threat to enter into a partnership with Google. Under the proposal, Yahoo! would outsource to Google important paid search terms, a move that struck many as all but admitting that Yahoo was incompetent at monetizing search terms and that seems to have driven away Microsoft’s Steve Ballmer.
It was a cagey move but is it legal? Can the management of a public company targeted for opposition adopt a perhaps suicidal business plan to drive away suitor? Maybe not. Although Delaware courts—which, for quirky federalist reasons, get to decide these things—give companies broad leeway to undertake defensive measures, there are supposed to be limits to this sort of thing. Stephen Bainbridge, one of our favorite law professors, explains that Yang’s takeover defense might be acceptable to Delaware courts if he could prove it was part of Yahoo’s long-term business plan. But that seems implausible—everyone knows they came up with this as an ad-hoc defense.
If Microsoft really wanted to get hostile, they might have actually been able to get a Delaware court to stop Yahoo from running into the arms of Google.
Using a strategic partnership as a poison pill [Bainbridge]
Posted by guest , May 05, 2008 11:47AM
There's nothing quirky about why Delaware Chancery courts hear cases of fiduciary duty in potential mergers. Corporate law is state law. Delaware is the the most common state of incorporation, has the most developed body of case law and the most sophisticated corporate-law jurists.
Posted by guest , May 05, 2008 12:05PM
um, I'm pretty sure counselor Carney, formerly of Skadden, is aware of that.
Posted by guest , May 05, 2008 12:07PM
actually, I found the "Corporate law is state law" comment to be helpful. Never thought about it but makes sense.
Posted by american bandersnatch , May 05, 2008 12:23PM
Corporate law is state law was helpful? Did you think corporations were federally domiciled?
Posted by guest , May 05, 2008 1:20PM
If Carney knew much about corporate law then his description of the situation as "quirky" is odd. There's nothing quirky about it.
Posted by Anal_yst , May 05, 2008 2:27PM
@ 1:20
Perhaps Carney is still feeling the effects of opium/rice/12-year-old thai ladyboys?
Posted by guest , May 06, 2008 12:40AM
As a Stanford alumni who thinks Stanford has been going down hill at
least since the demolishment of the Trailers housing option in the 1990s,
I want to comment on the Microsoft, Google, Yahoo legal cess pool. First,
Google's famous secret "Page" algorithm is nothing more than cow towing
to large companies. The primary criteria for search ranking is company
size (media image?) no matter what is actually entered by the searcher.
Although now among equal size companies, I assume amount paid to Google
(and passed through to Yahoo?) is a factor of the "secret" Page algorithm.
See the Mathematical Intelligencer article that unmasked the algorithm.
Try typing "Coffee but not Starbucks" into the Google search engine.
In a country with the highest per capita prison population in the world,
how come convicted anti-trust felons Microsoft management are not serving
hard time?
I wonder how long Yahoo and Yang's donation of a Stanford building Mojo will
continue to work.
Even better try getting your neighborhood lawyer to explain how the
advertization of the American economy can be legal. Then ask more questions
after the Mortimer Snerd "it would have been illegal in the 1960s" answer.
~
Posted by guest , May 06, 2008 12:23PM
guys, the use of "quirky" by Mr. Carney, Esquire, is certainly intended to be humorous (in a Federalist Society nerdfest sort of way).
Duh...
Posted by Novice , May 06, 2008 2:11PM
Carney is probably the best one to answer this question, but what would have been the likelihood that the courts would have blocked the move? I don't have the slightest about the Unocal test that Bainbridge refers to, but broad readings of biz judgment have always been popular.