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IBS Center for Management Research

Banning Flexible Work Options: Yahoo's New Controversial HR Policy

This case was written by Adapa Srinivasa Rao, under the direction of Debapratim Purkayastha, IBS Hyderabad. It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation.

2013, IBS Center for Management Research. All rights reserved.

To order copies, call +91 9640901313 or write to IBS Center for Management Research (ICMR), IFHE Campus, Donthanapally, Sankarapally Road, Hyderabad 501 504, Andhra Pradesh, India or email: info@icmrindia.org

www.icmrindia.org

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Banning Flexible Work Options: Yahoo's New Controversial HR Policy

“Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people and impromptu team meetings. Speed and quality are often sacrificed when we work from home.”i

– Yahoo’s Note Asking all its Employees to Start Working its Offices, in February 2013.

“This seems a backwards step in an age when remote working is easier and more effective than ever… If you provide the right technology to keep in touch, maintain regular communication and get the right balance between remote and office working, people will be motivated to work responsibly, quickly and with high quality.”ii

– Richard Branson, Founder of the Virgin Group1, in February 2013

Internet major Yahoo!, Inc. (Yahoo) found itself losing market share in the early 2000s as competition began to increase. The continuing crisis in the company saw the exit of successive CEOs reportedly due to their non-performance. In July 2012, the Yahoo board appointed a longtime Google, Inc. (Google)2 executive, Marissa Mayer (Mayer), as the new CEO of the internet giant. Mayer was given the task of reviving the company’s fortunes. Soon after taking over as CEO, Mayer began implementing a slew of measures to put the company back on the growth track. She replaced a number of senior executives at Yahoo with new ones. She also focused on changing the culture at Yahoo. She introduced a new suggestion program called Process, Bureaucracy, and Jams (PB&J) to revitalize the spirit of innovation among Yahoo’s employees. Besides, she set up a new framework called the ‘four Cs’ to evaluate the performance of all the employees at Yahoo. Other initiatives included providing free food and free iPhones to employees at the company’s headquarters. Mayer also took some decisions like extending the maternity and paternity leave of the employees.

However, Yahoo implemented a new HR policy in February 2013 which stirred up a hornets’ nest. Under the new policy, all employees were required to work from Yahoo’s offices. In effect, the new policy prohibited employees from working from home. While some analysts supported the new HR policy saying that it would help in trimming the bloated infrastructure that Yahoo had built up over the years, it attracted criticism from other analysts and executives in other companies. Many analysts said that the new policy was regressive and went against the flexible work practices pioneered and followed by technology companies. Some analysts opined that the new HR policy would prevent Yahoo from attracting talented employees at a time when it was looking to hire more such people.

1 Virgin Group, headquartered in London UK, is a British multinational branded venture capital conglomerate

company. 2 Google, Inc., headquartered in Mountain View, California, US is a leading internet company in the world.

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“Employees today are demanding better work-life balance, and employers will need to offer such options if they want to attract and retain the best workers,” iii said Greg Kratz, independent business columnist for Deseret News. But Yahoo defended its policy saying that its new HR policy need not be seen as a general industry trend but just as a new arrangement to suit the needs of the company.

Analysts felt that Yahoo’s controversial decision had brought to the fore many questions related to flexible working. They said that companies often paid lip service to flexible working while discouraging their employees from availing of these options. Experts said they had often found a marked mismatch between the perceptions of employees and employers with regard to flexible working. In the words of Office Insight, a UK-based leading publication dedicated to the design and management of workplaces: “Is it because a lot of firms feel obliged to echo the received wisdom about flexible working in order to fit in to a paradigm and/or attract staff, while believing in practice that it’s best to have everybody in an office for much of the time? Or is that organizations and employees have different ideas about what constitutes flexible working in the first place? Or is it simply that managers don’t trust staff? Something else or a mixture of all of the above?”iv

BACKGROUND NOTE

Yahoo was founded by two PhD. students of Stanford University, Jerry Yang (Yang) and David Filo (Filo), in 1994 in Sunnyvale, California, USA. It was initially started as ‘Jerry and David’s Guide to the World Wide Web (JDG),’ a website which acted as a directory of several other websites. Yang and Filo started the website to cater to the needs of people who wanted to go to a single place and find websites related to diverse areas. Over time, JDG became very popular and became the first choice of people browsing the web to find sites intelligently. It helped people to discover useful, interesting, and entertaining content on the Internet. JDG was later renamed Yahoo3 in 1994 and was positioned as a customized database intended to serve different users. Yang and Filo developed customized software to help users locate, identify, and edit information available on the internet. Yahoo quickly became very popular among internet users and attracted a lot of media attention.

Yahoo was formally incorporated in March 1995 and started implementing a business plan modeled on traditional media companies. Sequoia Capital4, a well-known venture capital firm, agreed to fund Yahoo in April 1995, with an initial investment of US$ 2 million.v Yahoo generated its revenues mainly through online advertisements, banner ads5 and ad placement fees, promotions,6 sponsorships, direct marketing7 and merchandising. It also generated revenues from monthly hosting fees and commissions on online sales from its merchant partners. These included transaction fees generated from the sale of merchandise on its site. In 1995, Yahoo appointed Timothy A. Koogle (Koogle) as its

3 Yahoo is the abbreviation for Yet another Hierarchical Officious Oracle. 4 Sequoia Capital, headquartered in Menlo Park, California, US was a Silicon Valley-based venture capital

firm founded by Don Valentine in 1972. It had invested in many technology companies like Yahoo!, Google, PayPal, Electronic Arts, YouTube, etc.

5 Banner advertisements appear on web pages within various Yahoo channels. Hypertext links were embedded in each banner advertisement to give users instant access to the advertiser's website, to obtain additional information, or to purchase products and services.

6 Promotional sponsorships were typically focused on a particular event, such as sweepstakes. The merchant sponsorship icon advertised products. Users had to click on the icon to complete a transaction.

7 Direct marketing revenues came through e-mail campaigns targeted at Yahoo's registered users who had indicated their willingness to receive such promotions.

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CEO and strengthened its management team significantly. Koogle was an engineering graduate from Stanford University and had spent nine years in Motorola, Inc.8 (Motorola) before joining Yahoo. The appointment of Koogle led to the introduction of more innovations in Yahoo. It was the first company to introduce an online navigational guide on the Internet. It also started offering media content, communication, personalized information, and commerce services on its website. In July 1996, Yahoo launched My Yahoo, a personalized web information service. This allowed users to create their personal profile and access information based on their personal interests. Its new services such as Yahoo Address Book, Yahoo Calendar, Yahoo Briefcase, Yahoo Phone Book, and Yahoo Notepad helped users to manage their personal information. In April 1996, Yahoo raised US$ 33.8 million by selling 2.6 million shares through an IPO. The amount raised through the IPO was used to expand its operations significantly.

By the late 1990s, Yahoo had developed into a leading international web portal. It made a number of strategic acquisitions over a period of time and this helped it to diversify its services and expand its business. It also reported a substantial growth in its revenues between the years 1997 and 2000. More than 85 percent of its revenues came from the sale of banners and sponsorship advertisement while the remaining came from business services and e-commerce transactions. At the end of 2000, Yahoo had been drawing 180 million unique visitors, which made it one of the leading internet brands. By 2006, Yahoo emerged as the world’s largest provider of online services. It offered a variety of products and services that enabled customers to communicate with one another, find information, create, share, and access information.

But the emergence of other leading internet firms like Google increased the competition for Yahoo in key areas like internet search and email. According to many industry experts, Yahoo had also grown complacent and failed to adapt itself properly to the rapidly changing business environment. Also, Yahoo was heavily dependent on the advertising revenues generated by the dotcoms and the dot-com bust of the early 2000s severely affected its revenues. The online advertising market too underwent many changes in the early 2000s and advertisers started to look beyond banner ads toward a new genre of ads that integrated the internet, television, and radio. But Yahoo failed to understand what kind of advertisements worked for its customers. Analysts also said it failed to make any significant changes to its age old business model that would have helped it cater to the needs of a wide range of customers. It deployed a new set of search technologies in 2004 to compete effectively with Google. However, the introduction of new features to its email service in 2007 to compete with Google’s Gmail services did not yield results. It had to lay off a number of its employees in 2008 as it struggled in the market. In February 2008, Microsoft Corporation9 (Microsoft) made a bid to acquire Yahoo for US$ 44.6 billion. The bid was rejected by Yahoo on the grounds that it undervalued the company substantially. Since 2007, Yahoo showed four CEOs the door as they failed to improve the company’s performance. Its share price fell drastically, reflecting the poor performance of the organization (Refer to Exhibit-I for the graph of Yahoo’s share price from January 2006 to January 2013). But none of them could significantly revive Yahoo’s fortunes. For the Fiscal Year 2011, Yahoo had revenues of US$ 4.98 billion (Refer to Exhibit-II for the key financials of Yahoo from 2007 to 2011).

8 Motorola, Inc., headquartered in Schaumburg, Illinois, US was a leading American multinational

telecommunications company. 9 Microsoft Corporation, headquartered in Redmond, Washington, US, is a US-based multinational corporation

that develops, manufactures, licenses, and supports a wide range of products and services related to computing through its various product divisions.

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YAHOO GETS A FIFTH CEO IN FIVE YEARS

In May 2012, Yahoo fired its CEO Scott Thomson (Thomson) just four months after his appointment. Scott was fired by Yahoo’s board after it was found that he had falsified his resumé by including a computer science degree which he did not have.vi Thomson’s sudden ouster led to chaos at the company which found itself confronted with one crisis after the other. Yahoo appointed its head for global media business, Ross Levinsohn, as its interim CEO till they found a new CEO. Later, in July 2012, Yahoo’s board appointed Mayer as its new CEO on the recommendation of the CEO search committee appointed by it. Mayer was the fifth CEO to head the organization in five yearsvii (Refer to Exhibit-III for the list of Yahoo’s CEOs since its inception). A former longtime executive of Google, Mayer had a master’s degree in computer science from Stanford University and began her career at Google in 1999. She was the 20th employee of Google and was involved in the development of Google search services and was in charge of its user experience10 during the first five years at Google. She quickly gained a reputation as an effective leader and was instrumental in the development of some of Google’s iconic products like the Google homepage, Gmail, and Google News. At the time of joining Yahoo, Mayer was responsible for Google’s mapping, local, and location services. Commenting on the appointment of Mayer as its new CEO, Yahoo board’s chairman Fred Amoroso said, “The board was drawn to Mayer’s unparalleled track record in technology, design, and product execution.”viiiMany analysts said that Yahoo wanted to focus on the functionality of its products by appointing Mayer as its new CEO. Industry experts too were excited about the choice of Mayer. Martin Sorrell, the CEO of WPP plc11, said, “She comes with a formidable reputation, but we’ll see how she analyzes it all.”ix Mayer also had a reputation for nurturing talent. During her Google days, she started a leadership training program called Associate Product Manager (APM) for Google’s topnotch engineers. The objective of the APM program was to encourage people to grow into leaders and realize their full potential. The APM program was a big success and later inspired many similar programs by other companies in the Silicon Valley. Though Yahoo was one of the most visited portals on the internet with 700 million monthly visitors, it found itself unable to introduce new products in the search, social, and mobile space to increase its revenue base (Refer to Exhibit-IV for the list of services offered by Yahoo). Yahoo did not come up with new appealing products in areas like social networking and also lagged behind in other key growth areas like mobile internet. Its revenues had been stagnating for several years and industry experts began to wonder about the future of the company (Refer to Exhibit-II for the key financials of Yahoo from 2007 to 2011). The Yahoo board began scouting around for somebody who still had confidence in Yahoo’s future. They finally zeroed in on Mayer as they thought that she could make Yahoo flourish again. Michael J. Wolf, Yahoo director and in charge of the CEO search, said, “The board wanted someone who believed Yahoo can grow again and who believed they could do it.”x

ADDRESSING ISSUES RELATED TO ORGANIZATIONAL CULTURE

Many analysts and some Yahoo insiders themselves blamed the culture at Yahoo for its problems. According to Paul Graham, co-founder of Viaweb12, even in the late 1990s, “The company felt prematurely old. Most technology companies eventually get taken over by suits and middle managers. At Yahoo it felt as if they’d deliberately accelerated this process. They didn’t want to be a bunch of 10 User experience involves taking care of how people navigate the Google’s sites and maintaining the

simplicity of Google’s services. 11 WPP plc, headquartered in London, UK, is a major advertising and public relations company in the world. 12 Viaweb was the first ‘software as a service’ company, which was acquired by Yahoo in 1998, where it

became Yahoo Store.

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hackers. They wanted to be suits. A media company should be run by suits.”xi Unlike some of its competitors like Google, Yahoo couldn’t take decisions speedily. It followed a matrix organization structure13 which, according to its critics, inhibited the speed at which it took decisions regarding new projects and killing unviable ones. Yahoo’s large and interlinked structure made it very difficult for it to launch new products and discontinue unviable ones. The constant change of CEOs also resulted in many key projects being dropped in planning or execution stage whenever there was a change at the top. The lack of stability in the top level management led to many senior executives leaving the company.

The infighting among the top leadership at Yahoo which saw the ouster of Yahoo’s co-founder Jerry Yang in 2012, led to the emergence of a ‘consensus based culture’ at Yahoo. Unlike at other internet companies like Google and Facebook, every major new initiative had to pass through a number of stages. This ultimately led to delayed decision making at Yahoo. Many new initiatives relating to emerging areas like mobile internet became caught in the bureaucratic tangle and never saw the light of day. Commenting on the company’s culture, Rich Rygg, a former manager at Yahoo, said, “This was Yahoo’s most fundamental problem. It was always management by persuasion, not management by dictation.”xii Many efforts taken in the past to introduce a more free culture which can speed up the decision making process had failed. The initial informal culture prevalent since its founding days was converted to a strict formal culture by its subsequent CEOs like Terry Semel (Semel). Over time, this led to the bureaucratic culture getting firmly rooted at Yahoo, preventing any reversal of its fortunes.

As soon as Mayer took over as CEO, she set about the task of reviving the fortunes of Yahoo. One of the key challenges before her was to change the culture at Yahoo to make the company competitive again. She replaced some senior executives of Yahoo with new people whom she perceived to be more growth oriented. She appointed a former Google executive Ken Goldman as the new CFO of Yahoo and Kathy Savitt as the new CMO (Chief Marketing Officer). Another veteran from Google, Henrique De Castro (Castro), was appointed as the new COO (Chief Operations Officer) of Yahoo. Recognizing the need for harnessing the talent of Yahoo’s employees, a new position called executive vice-president of people and development was created. Mayer recruited a veteran investment banker named Jackie Reses (Reses) for the post of EVP, people and development. Reses would be responsible for HR, business development, strategy, and M&A activities at Yahoo. The old HR boss of Yahoo, David Windley (Windley), had been fired immediately after Mayer took charge. Windley’s tenure at Yahoo had seen a lot of brain drain and layoffs at Yahoo.xiii Many analysts opined that Reses would be a key member in Mayer’s core team for restructuring the company by changing its organizational culture. Commenting on the appointment of Reses at Yahoo, Mayer said, “With her energy, insights, and ability to build & transform great teams, I’m thrilled Jackie Reses is joining Yahoo!”xiv Reses’s main task ahead was to recruit more talented people, nurture their skills, and devise better incentive schemes for them. In a statement released after joining Yahoo, Reses said, “As Yahoo! looks to develop and define its future; hiring, managing and incentivizing talent will be of key importance.”xv

Apart from recruiting new people for the top positions in the company, Mayer also started many new initiatives to change the culture of the organization. Within a month of taking over as CEO, she introduced a new initiative called ‘PB&J’ (Process, Bureaucracy, and Jams). PB&J was essentially the new age version of the old suggestion boxes for employees in offices. The PB&J program was intended to collect feedback and suggestions from Yahoo’s employees to rekindle the spirit of

13 A matrix organization structure is an organization structure where employees from different functional

disciplines are drawn into a team to facilitate horizontal flow of skills and information. Employees in a matrix organization structure report to the respective project or product manager whose authority exists horizontal across departmental boundaries.

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innovation at the company and boost the flagging morale of its employees. Mayer appointed Patricia Moll Kriese (Moll), a former Google colleague who followed her into Yahoo, as the leader of the PB&J initiative. Employees had to log in to an internal website and post their ideas and suggestions to improve the working conditions at Yahoo.xvi Employees would also be able to vote on each other’s ideas. The site would later rank the best ideas based on their popularity. The management would then review the ideas and their popularity and implement the finest of the lot. Mayer hoped that the PB&J program would end the gridlock at Yahoo by giving more power to the employees of the organization. In September 2012, Mayer announced the ‘four Cs’ strategy to nurture talent at Yahoo. The four Cs stood for culture, company goals, compensation, and calibration.xvii The performance of all the employees of Yahoo would also be evaluated based on the ‘four Cs’ instead of the outdated revenue based compensation system. She also wanted to replace the ‘consensus culture’ at Yahoo with a more democratic and responsive system in the long-term.xviii Mayer also took some other initiatives, which ranged from providing free food to Yahoo’s employees at the company’s cafeteria to giving free iPhones, which were aimed at making Yahoo an exciting place to work.xix She came up with a new policy for the benefit of Yahoo’s employees who were going to have children. In April 2013, Mayer extended the maternity and paternity leave for Yahoo’s employees.xx As per the new leave policy, new fathers and mothers could avail of eight weeks of paid parental leave. Mothers were entitled to another eight weeks of leave. New parents would also be paid US$ 500 for buying groceries and new clothes for their babies.

YAHOO BANS WORK FROM HOME

As part of the steps she took to improve the fortunes of Yahoo, Mayer implemented a new HR policy in February 2013. The new policy was communicated to the employees of Yahoo in the form of a memo from the HR department (Refer to Exhibit-V for the memo sent to Yahoo’s employees). According to the new HR Policy, employees of Yahoo could no longer work from home; they needed to report to their offices regularly. The new HR policy also stipulated that people who could not comply with the new policy would have to quit the organization. The new HR policy stipulated that all remote workers at Yahoo had to start reporting to the office facilities by June 1.xxi

The announcement sent shock waves across the technology world. Like many other business innovations, American companies had been at the forefront in bringing innovations to the workplace. They had pioneered the concept of work from home for employees and nearly 10 percent of US workers worked from home at least one day every week.xxii According to the Families and Work Institute14, 63% of employers let their team work remotely at least some of the time.xxiii Over the years, many technology companies across the world supported the concept of work from home which offered more flexibility to their employees around the world (Refer to Exhibit-VI for the data table for the Flexible Job Index15). Technology companies fared higher than companies which did not offer flexible working opportunities to their employees. Technology companies had also become the preferred choice for female employees due to the work-life balance they offered.

Many employees of Yahoo who had joined the organization looking forward to a flexible work schedule, were left confused and angry. Some of them even said the new policy went against their employment contract with Yahoo. Kara Swisher, co-executive editor at AllThingsD16, said, “Many 14 Families and Works Institute, headquartered in New York, USA, is a nonprofit organization which works to

provide research for living in today’s changing workplace, changing family and changing community. 15 Flexi Job Index shows the flexi employment opportunities available in top career categories in the past year

divided into 4 quarters. 16 Al’ThingsD, is a website dedicated to news, analysis, and opinion on technology, internet, and media.

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such staffers who wrote me today are angry, because they felt they were initially hired with the assumption that they could work more flexibly. Not so, as it turns out.”xxivIndustry and academic experts too expressed reservations on the new HR policy. Some experts said that a blanket ban on work from home might yield negative results. David Lewin, management professor at the University of California17, said, “A variety of studies show that telecommuting and working from home is associated with higher productivity. Analytically, it’s not at all clear this would benefit Yahoo. They could wind up with negative performance effects.”xxv Some experts felt that the idea that banning flexible work options would promote more innovation seemed “bizarre”.xxvi The new HR policy was expected to affect working women most as it would become difficult for them to take care of their families and children. Jennifer Owens, editorial director of Working Mother Media18, said, “It’s incredibly disappointing. It’s a step backwards—a mindset from the days when Yahoo was launched.”xxvii Critics pointed out that Yahoo was looking to recruit more good people to improve the fortunes of the organization and the new HR policy might prevent that happening.

YAHOO DEFENDS ITS NEW POLICY

However, Yahoo defended its new policy as being necessary for the company.xxviii It said that the new policy would only affect 200 of Yahoo’s 12,000 employees. Mayer initially refused to comment on the criticism of the new HR policy saying it was an internal matter of the company. But she finally gave her opinion on the new HR policy at a conference for HR specialists held at a hotel in Los Angeles. She started explaining Yahoo’s new HR policy saying, “I need to talk about the elephant in the room,”xxix and pointed out to an image of a purple image of an elephant on the projection screens of the hotel auditorium. Mayer said, “People are more productive when they’re alone. But they’re more collaborative and innovative when they’re together. Some of the ideas come from pulling two different ideas together.”xxx As an example of collaboration she cited the example of a new Yahoo weather app for the iOS, the idea for which originated from two software engineers of Yahoo who worked in the same office. The app was very innovative in that it used built-in geolocation technology in Yahoo’s Flickr service for giving a more accurate picture of local weather.

One of the major criticisms leveled against Mayer was that she was trying to force her way of working on the whole organization. Mayer had been five months pregnant when she was recruited. The news regarding her pregnancy was made known to the world only after her appointment as Yahoo’s CEO was announced. After joining Yahoo, Mayer was on leave for just a few days, returning to work within two weeks of delivering the baby.xxxi There was similar outrage in the corporate world at that time as other executives and analysts feared that this might set a bad precedent which might be emulated by others. After delivery, Mayer had a nursery built in her office so that she could bring her baby to work along with her.xxxii As not many people could afford such an arrangement, analysts felt that it would be unfair for Mayer to ask all the employees to return to their offices immediately. Employees in other technology companies too expressed fears that this policy might be implemented in their organizations too. A week after the announcement by Yahoo, Best Buy Company, Inc.19 too announced that it would end its flexible work policy. Employees and analysts started wondering if the new policy would set a precedent which might be emulated by others. However, Yahoo said that this 17 University of California is a public university system in the state of California, USA. 18 Working Mother Media, based in New York City, USA is an advertising circular which deals with the

concerns of working women in the US. 19 Best Buy Company, Inc. headquartered in Richfield Minnesota, USA is an American Multinational

Electronics Corporation. Best Buy has pioneered the Results-Only Work Environment (ROWE) which gave freedom to employees to work on their own term in 2005. The program became popular with other companies.

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new policy had only been brought forward to meet the needs of Yahoo and that other companies need not emulate it. Yahoo’s spokesperson said, “This isn’t a broad industry view on working from home–this is about what’s right for Yahoo, right now.”xxxiii

But not everyone was critical of Mayer’s new HR policy. According to some industry observers, most of the people who were working remotely for Yahoo were not productive and many senior managers too were not aware that these people were still working with Yahoo. Yahoo had built up a bloated infrastructure where employees working even in its engineering departments never showed up at office. The kind of work-from-home arrangements practiced at Yahoo were not common at other bigger technology companies like Facebook and Google. Some industry observers felt that as many of them might not find it possible to report to office every day, they might eventually quit and help in reducing the costs of the company. Analysts said that Mayer had only done something which her predecessors too knew that they had to do, but couldn’t because of various reasons.xxxiv Some critics said the issue had been blown up into a controversy because of the way it was handled by Yahoo. They blamed Yahoo’s executives for not giving proper reasons for the new HR policy.

LOOKING AHEAD

Despite all the criticism leveled against the new HR policy, some analysts said that the one of the main reasons behind the policy was to make some unproductive employees leave the organization on their own. Yahoo’s per employee productivity was US$ 344,758 while Google’s was US$ 931,657. Mayer had been trying to make a lot of Yahoo’s unproductive employees leave the organization since she took over as its CEO. Analysts opined that since many of Yahoo’s employees (who were not productive enough) would find it difficult to report to the office regularly, the new policy might force them to leave the organization without any formal layoffs being announced. And except for a few companies like Best Buy, no other major technology company had followed Yahoo in cancelling the flexible work schedule option for their employees. Some industry observers opined that other technology companies might not feel any need to follow in Yahoo’s footsteps as they had better systems in place which made their employees who were working remotely more accountable. However, many people still wondered whether other companies would follow Yahoo’s lead. While industry observers were still divided on whether Yahoo’s new HR policy would benefit the company, questions were also raised on flexible work options. Greg Kratz wrote: “Has the work-life pendulum swung too far in favor of employees and allowing flexible work options? Or should more companies offer their employees the chance to telecommute, when reasonable?”xxxv

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Exhibit I

Movement of Yahoo’s Share Price from January 2006 to January 2013

Source: http://finance.yahoo.com/.

Exhibit II

Key Financials of Yahoo from 2007 to 2011 (In US$ Thousands) 2007 2008 2009 2010 2011

Revenue 6,969,274 7,208,502 6,460,315 6,324,651 4,984,199

Cost of revenues 2,838,758 3,023,362 2,871,746 2,627,545 1,502,650

Gross profit 4,130,516 4,185,140 3,588,569 3,697,106 3,481,549

Total operating expenses 3,435,103 4,172,177 3,201,877 2,924,582 2,681,208

Income from operations 695,413 12,963 386,692 772,524 800,341

Other income, net 118,771 73,750 187,528 297,869 27,175

Income before income taxes and earnings in equity interests

814,184 86,713 574,220 1,070,393 827,516

Provision for income taxes (322,868) (259,006) (219,321) (221,523) (241,767)

Earnings in equity interests 150,689 596,979 250,390 395,758 476,920

Net income 642,005 424,686 605,289 1,244,628 1,062,669

Net income attributable to non-controlling interests

(2,850) (5,765) (7,297) (12,965) (13,842)

Net income attributable to Yahoo! Inc.

639,155 418,921 597,992 1,231,663 1,048,827

No. of employees 14,300 13,600 13,900 13,600 14,100

Source: Yahoo!, Annual Reports: 2009 and 2011.

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Exhibit III CEOs of Yahoo

Name of the CEO Tenure Reason for Leaving Tim Koogle 1995- May 2001 Resigned in 2001. Terry Semel May 2001-June 2007 Hired from Warner Bros. Stepped down due

under shareholder pressure. Jerry Yang June 2007-January

2009 Agreed to resign under pressure from shareholders in November 2008.

Carol Bartz January 2009-September 2011

Hired from Autodesk Inc., a design and engineering software company. Fired for failing to revive the company.

Tim Morse September 2011-January 2012

CFO of Yahoo. Worked as interim CEO until the new CEO took over.

Scott Thompson January 2012-May 2012

Hired from eBay Inc.'s PayPal. Resigned in May 2012 over a controversy regarding one of his college degrees.

Ross Levinsohn May 2012-July 2012 Worked as interim CEO until the new CEO took over.

Marissa Mayer Joined Yahoo as its CEO in July 2012

Hired from Google, Inc.

Source: “From Koogle to Levinsohn: CEOs at Yahoo,” http://finance.yahoo.com, July 12, 2012.

Exhibit IV Important Internet Services Offered by Yahoo

Search: Yahoo! Web Search helps users to find anything on the Internet. Yahoo! has several products for search like Yahoo! Image, Yahoo! Video, Yahoo! Local, Yahoo! News, and Yahoo! Shopping Search. Content: Yahoo! Sports, Yahoo! Finance, Yahoo! Music, Yahoo! Movies, Yahoo! News, and Yahoo! Games provide content on specific topics. Users also have the opportunity to personalize content through My Yahoo!. Communication: Yahoo! Mail and Yahoo! Messenger enable users to stay connected. My Web, Yahoo! Personals, Yahoo! 360º, Yahoo! Photos, and Flickr are some other communication services from Yahoo!. Mobile: Yahoo! Mobile provides services such as email, instant messaging, information search and alerts on-the-go. It also includes mobile games. Yahoo! Photos is meant for camera phones. Connected Life: Yahoo! offers a range of free and premium Yahoo! content and services to its subscribers by partnering with broadband providers. Commerce: Yahoo! enables consumer transactions on the web, with services such as Yahoo! Shopping, Yahoo! Autos, Yahoo! Auctions, and Yahoo! Travel. They enable consumers to make informed online purchases by providing them with relevant information.

Contd…

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Contd…

Small Business: Yahoo! Small Business enables small business owners and professionals to establish and grow a business presence with services such as Yahoo! Domains, Yahoo! Web Hosting, Yahoo! Merchant Solutions, Yahoo! Business Email, and Yahoo! Store. Yahoo! also offers ‘HotJobs’ to help recruiters find the talent they seek. Advertising: Yahoo! provides a comprehensive set of marketing solutions and tools for businesses. Yahoo! helps marketers create and execute programs that both engage users to interact with their brand as well as provide valuable insights into their customer base.

In addition, Yahoo! Search Marketing helps companies drive traffic to their websites through services such as Sponsored Search, Local Advertising, and Product/ Travel/ Directory Submit. For online publishers and portals, Yahoo! can add new revenue sources and enhance user experience through the Yahoo! Publisher Network.

Adapted from www.yahoo.com. Exhibit V

Memo Sent to Yahoo’s Employees Yahoos, Over the past few months, we have introduced a number of great benefits and tools to make us more productive, efficient, and fun. With the introduction of initiatives like FYI20, Goals21, and PB&J, we want everyone to participate in our culture and contribute to the positive momentum. From Sunnyvale to Santa Monica, Bangalore to Beijing – I think we can all feel the energy and buzz in our offices. To become the absolute best place to work, communication and collaboration will be important, so we need to be working side by side. That is why it is critical that we are all present in our offices. Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings. Speed and quality are often sacrificed when we work from home. We need to be one Yahoo, and that starts with physically being together. Beginning in June, we’re asking all employees with work-from-home arrangements to work in Yahoo offices. If this impacts you, your management has already been in touch with next steps. And, for the rest of us who occasionally have to stay home for the cable guy, please use your best judgment in the spirit of collaboration. Being a Yahoo isn’t just about your day-to-day job, it is about the interactions and experiences that are only possible in our offices. Thanks to all of you, we’ve already made remarkable progress as a company – and the best is yet to come. Jackie

Source: “Why Yahoo’s ‘No Home working’ Rule will Lead us Back into the Office,” www.zdnet.com, February 27, 2013.

20 FYI is a Q&A tool where meetings are held every Friday at Yahoos’ headquarters in which employees could

ask her questions, where new hires are announced, etc. 21 ‘Goals’ is a new initiative started by Marissa Mayer where quarterly and annual goals will be assigned at the

company, department, and individual level. All the employees of Yahoo need to commit themselves for achieving those goals.

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Exhibit VI Data Table for the Flexible Job Index - Top 25 Job Categories

Category Q1 (2011) Q2 (2011) Q3 (2011) Q4 (2011)

Account Management 3.06% 2.87% 2.78% 2.93%

Accounting & Finance 2.90% 2.73% 3.42% 3.95%

Administrative 4.29% 4.43% 5.90% 7.13%

Advertising & PR 1.35% 1.24% 1.31% 1.15%

Art & Creative 1.59% 1.97% 3.80% 2.79%

Bilingual 1.76% 1.29% 2.02% 2.11%

Computer & IT 5.18% 4.64% 5.70% 5.95%

Consulting 1.74% 1.88% 2.51% 2.54%

Customer Service 3.65% 3.65% 4.77% 5.60%

Education & Training 5.16% 4.81% 7.27% 5.89%

Engineering 1.57% 1.30% 1.63% 1.84%

Graphic Design 0.49% 1.17% 2.45% 1.76%

Human Services 2.33% 1.77% 1.97% 2.05%

Insurance 2.29% 2.68% 3.35% 2.67%

Internet & Ecommerce 1.72% 1.38% 2.05% 1.19%

Marketing 3.06% 2.56% 2.82% 2.84%

Medical & Health 7.58% 6.91% 9.54% 8.31%

Nonprofit & Philanthropy 5.64% 3.78% 4.15% 3.73%

Other 26.93% 21.88% 24.70% 27.76%

Project Management 2.16% 2.03% 3.57% 3.19%

Research 2.26% 2.10% 2.55% 3.04%

Sales 7.23% 5.67% 6.01% 5.73%

Web & Software Dev 3.13% 3.98% 6.15% 5.20%

Web Design 0.52% 0.97% 2.43% 1.61%

Writing 2.44% 2.14% 2.46% 2.44%

Source: http://www.flexjobs.com/trends

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End Notes:

i “Why Yahoo’s ‘No Home working’ Rule will Lead us Back into the Office,” www.zdnet.com, February

27, 2013. ii Richard Branson, “Give People the Freedom of Where to Work,” www.virgin.com, February 25, 2013. iii Greg Kratz, “Balancing Act: Yahoo’s Decision Shouldn’t Derail Flexible Work Options,”

www.deseretnews.com, March 12 2013. iv “Yahoo is Not the Only Firm that Doesn’t Like Flexible Working,” http://officeinsight.org, February 24,

2013. v www.yahoo.com vi James B. Stewart, “In the Undoing of a C.E.O., A Puzzle,” www.nytimes.com, May 18, 2012. vii “Google exec Mayer Named Yahoo CEO, 5th in 5 Years,” http://news.yahoo.com, July 16, 2012. viii Ibid. ix Andrew Ross Sorkin and Evelyn M. Rusli, “A Yahoo Search Calls up a Chief from Google,”

http://dealbook.nytimes.com, July 16, 2012. x Patricia Sellers, “Marissa Mayer: Ready to Rumble at Yahoo,” October 11, 2012. xi Paul Graham, “What Happened to Yahoo,” www.paulgraham.com, August 2010. xii As quoted in the article, “Ronald Grover and Heather Inside Yahoo,” by Ben Elgin, Linda Himelstein

Green, posted on www.businessweek.com, dated May 21, 2001. xiii Kara Swisher, “Exclusive: Yahoo’s Longtime HR Head David Windley Out,” http://allthingsd.com, August

10, 2012. xiv Nicholas Carlson, “Marissa Mayer Just Hired an Executive to Solve Yahoo’s Biggest Problem,”

www.businessinsider.com, September 5, 2012. xv “Marissa Mayer’s First 60 Days as Yahoo! CEO,” www.siliconrepublic.com, September 13, 2012. xvi Ibid. xvii Hayley Tsukayama, “Marissa Mayer’s Plan for Yahoo,” http://articles.washingtonpost.com, September 26,

2012. xviii Ryan Tate, “Marissa Mayer Allegedly has 10 or 20 Different Priorities for Yahoo,” www.wired.com,

September 26, 2012. xix “Mayer Strives to Change Yahoo! Culture,” www.forbes.com, September 7, 2012. xx Julianne Pepitone, “Marissa Mayer Extends Yahoo’s Maternity Leave,” http://money.cnn.com, April 30,

2013. xxi Douglas MacMilan and Karl Baker, “Yahoo CEO Mayer Revives Debate over Work-From-Home Merits,”

www.bloomberg.com, February 27, 2013. xxii Elizabeth Weise and Jon Swartz, “As Yahoo Ends Telecommuting, Others Say it Has Benefits,”

www.usatoday.com, February 26, 2013. xxiii Kenneth Matos and Ellen Galinsky, “2012 National Study of Employers,”

http://familiesandwork.org/site/research/reports/NSE_2012.pdf. xxiv Leslie Larson, “Marissa Mayer Tells Yahoo Employees who Work from Home to Get Back to the

Office…will Other Tech Companies Follow Suit?” www.dailymail.co.uk, February 23, 2013.

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xxv Jenna Goudreau, “Back to the Stone Age? New Yahoo CEO Marissa Mayer Bans Working from Home,”

www.forbes.com, February 25, 2013. xxvi Margaret Ryan, “Teleworking: The Myth of Working from Home,” www.bbc.co.uk, February 27, 2013. xxvii Jenna Goudreau, “Back to the Stone Age? New Yahoo CEO Marissa Mayer Bans Working from Home,”

www.forbes.com, February 25, 2013. xxviii Chris Isidore, “Yahoo Defends No-Work-At-Home Policy,” http://money.cnn.com, February 27, 2013. xxix Christopher Tkaczyk, “Marissa Mayer Breaks her Silence on Yahoo’s Telecommuting Policy,”

http://tech.fortune.cnn.com, April 19, 2013. xxx Christopher Tkaczyk, “Marissa Mayer Breaks her Silence on Yahoo’s Telecommuting Policy,”

http://tech.fortune.cnn.com, April 19, 2013. xxxi “Yahoo! CEO Marissa Mayer Back to Work Full Time Just Two Weeks After Giving Birth to Her First

Child,” www.dailymail.co.uk, October 15, 2012. xxxii Leslie Larson, Hayley Peterson, and Reuters Reporter, “Yahoo! Boss Marissa Mayer Under Fire for

Building Personal Nursery Next to Office- Before Telling Employees They Cannot Work from Home,” www.dailymail.co.uk, February 26, 2013.

xxxiii Jenna Goudreau, “Back to the Stone Age? New Yahoo CEO Marissa Mayer Bans Working from Home,” www.forbes.com, February 25, 2013.

xxxiv Nicholas Carlson, “Why Marissa Mayer Told Remote Employees to Work in Office or Quit,” www.businessinsider.com, February 24, 2013.

xxxv Greg Kratz, “Balancing Act: Yahoo’s Decision Shouldn’t Derail Flexible Work Options,” www.deseretnews.com, March 12 2013.