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SLG Team Assignment 1 - Team 7

Jerry Yang, co-founder of Yahoo!, rejected a 62% premium takeover offer from Microsoft in 2008 due to impairments from emotional attachments to Yahoo. Yang founded Yahoo! in 1994 and was highly invested in growing the company. This distorting attachment led Yang to overvalue Yahoo! and reject the offer. Additionally, Yahoo's past successes and public investments enhanced Yang's confidence in his own capabilities to continue growing Yahoo! independently, further clouding his judgment. In the end, Yang's emotional feelings for Yahoo! impaired his decision-making and caused him to turn down the lucrative Microsoft bid.

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36 views

SLG Team Assignment 1 - Team 7

Jerry Yang, co-founder of Yahoo!, rejected a 62% premium takeover offer from Microsoft in 2008 due to impairments from emotional attachments to Yahoo. Yang founded Yahoo! in 1994 and was highly invested in growing the company. This distorting attachment led Yang to overvalue Yahoo! and reject the offer. Additionally, Yahoo's past successes and public investments enhanced Yang's confidence in his own capabilities to continue growing Yahoo! independently, further clouding his judgment. In the end, Yang's emotional feelings for Yahoo! impaired his decision-making and caused him to turn down the lucrative Microsoft bid.

Uploaded by

Kiek
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Mini Case: Why Jerry Yang

rejected the Microsoft

Takeover Bid

Team Number: 7

Date: 27/05/2021

Team Members: Annick Buitenhek – 431517ab,

Carlijn Coops – 548931cc

Pedram Hosseini Dinani - 583375sh

Saskia Lieder - 566100sl

Yinka Peeze Binkhorst- 5481549yp


On May 2, 2008, Jerry Yang, the co-founder of the web services company Yahoo!, turned down

an unsolicited takeover offer from Microsoft, despite a significant 62% premium on Yahoo!'s

market value. The reason for this – mostly considered unreasonable - decision lies in the fact

that Yang’s judgement was impaired by the presence of distorting attachments.

Firstly, when proposed to sell the company, Yang’s emotional tags were unreliable

because of a distorting attachment he had to Yahoo!, which led to an overvaluation of the

company and consequent rejection of the offer. In 1994, Yang and a fellow student founded

Yahoo! from scratch and built it into a successful company over the years. Though it started as

a fun project used mainly by their friends and jokingly named "Yet another hierarchical

officious oracle", Yang was highly invested in the project from the start ("Yang had also

attempted to design websites, including one dedicated to sumo wrestling”). Such early hands-

on involvement, as well as intense co-supervision over the years as “Chief Yahoo!”, reinforced

Yang's emotional attachment to the company. It is thereby probable that the CEO was prone to

biases that caused him to overvalue the company - something that should have raised red flags.

Secondly, it can be argued that Yang’s attachment to the company was further amplified

by capability cues, which increased his boldness that he could continue growing the firm by

himself. For one, Yahoo! had been performing exceptionally well, with “100,000 unique

visitors by the fall of 1994”. As such, the company’s recent success may have stimulated a

sense of eagerness and potency, as well as influenced Yang’s expectations of future success,

particularly by influencing his sense of efficacy. Consequently, the cue acted as a stimulus for

Yang to think that his superior capabilities could make Yahoo! grow even further. In addition,

both public investments, received in April and the fall of 1995, can be seen as capability cues,

in the form of social praise, that were confidence-enhancing for Yang. As a result, Yang

overvalued his capabilities and Yahoo!'s resources instead of appreciating the takeover bid by

Microsoft. Concludingly, Yang's feelings for Yahoo! clouded his decision making as a result

of distorting attachment.
References

Campbell, A., Whitehead, J., & Finkelstein, S. 2009. Why Good Leaders make Bad Decisions.

Harvard Business Review, 87: 60-66.

Chatterjee, A., & Hambrick, D. C. 2011. Executive personality, capability cues, and risk taking:

How narcissistic CEOs react to their successes and stumbles. Administrative Science

Quarterly, 56(2), 202-237.

Tang, Y., Qian, C., Chen, G., & Shen, R. 2015. How CEO hubris affects corporate social (ir)

responsibility. Strategic Management Journal,36(9), 1338-135

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