Terry Semel

Terry Semel
Born	Terence Steven Semel 1943-02-24February 24, 1943 (age 83) Brooklyn, New York City, U.S.
Nationality	American
Education	Long Island University (B.S.)
Alma mater	Long Island University
Occupation	Business executive
Years active	1965-2008
Employer	Warner Bros. (1965-1972, 1975-1999) Yahoo! (2001-2008)
Title	Chairman and chief executive officer
Term	2001-2007 (Yahoo!)
Successor	Jerry Yang
Known for	Co-chairman and co-CEO of Warner Bros. Chairman and CEO of Yahoo! Declined acquisitions of Google and Facebook
Spouse	Jane Semel
Children	4

Terence Steven Semel (born February 24, 1943) is an American business executive who served as chairman and chief executive officer of Yahoo! from 2001 to 2007. He previously spent 24 years at Warner Bros., where he rose to co-chairman and co-chief executive officer alongside Robert A. Daly.

Semel is remembered in the film industry for a period of sustained commercial success at Warner Bros. and in the technology industry principally for two acquisitions that Yahoo did not complete, of Google in 2002 and Facebook in 2006. His compensation at Yahoo, among the largest packages of the period, became a subject of shareholder objection and contributed to his departure.

Early life and education

Terence Steven Semel was born on February 24, 1943, in Brooklyn, New York, to a Jewish family. His father, Ben Semel, was a women's coat designer, and his mother, Mildred Wenig Semel, was an executive at a bus company. He was the middle child of three, with two sisters, and was raised in Bay Terrace, a neighbourhood of Bayside in Queens.

He graduated from Long Island University in Brooklyn at the age of 23 with a Bachelor of Science degree in accounting.

Career

Early film distribution career

Semel began at Warner Bros. in 1965 as a trainee, entering the studio's distribution operation rather than production, the side of the business where he spent most of his career.

From 1970 to 1972 he worked for Cinema Center Films, the theatrical film production arm of CBS, as domestic sales manager. When CBS closed Cinema Center Films in 1972, Semel moved to Walt Disney Productions, where he served as vice president in charge of theatrical distribution until 1975.

Warner Bros.

Semel returned to Warner Bros. in 1975 as president of its distribution business. In 1979 he moved into studio operations as an executive vice president. When Frank Wells announced that he would take a less active role in the company in 1981, Semel became president and chief operating officer of Warner Bros. on January 1, 1982.

Over the following years Semel and Robert A. Daly, the studio's chairman and chief executive, ran Warner Bros. as a partnership that became among the longest-lasting management pairings in Hollywood. The studio released a series of commercially successful films during their tenure and expanded its television and home video operations.

In 1994 Daly announced that Semel would become his co-chairman and co-chief executive. The following year the two also became co-chairmen and co-chief executives of Warner Music, following the removal of Michael J. Fuchs.

Both Daly and Semel resigned from Warner Bros. in July 1999, after 19 years of joint leadership.

Yahoo!

Semel became chief executive of Yahoo! on May 1, 2001. He arrived shortly after the collapse of the dot-com bubble, at a point when Yahoo's share price had fallen sharply from its peak, advertising revenue had contracted and the company was searching for a business model less dependent on display advertising sold to internet startups.

Strategy

Semel brought a media industry approach to a company founded by engineers. He pursued paid services and content partnerships, expanded Yahoo into premium subscriptions, and sought to position the company as a media business rather than a technology one.

He also moved Yahoo back into search. The company acquired Inktomi in 2002 and Overture Services in 2003, the latter holding the paid search advertising model that Google had adapted. These purchases gave Yahoo its own search and search advertising technology after years of licensing from others.

Yahoo's revenue and share price recovered substantially in the first years of his tenure. The company subsequently lost ground to Google in both search share and search advertising revenue, and the gap widened through the middle of the decade.

The Google approach

Shortly after Semel joined, Yahoo founders Jerry Yang and David Filo suggested he consider acquiring Google, then a private company whose search technology Yahoo licensed for approximately $7 million a year.

Semel met Larry Page and Sergey Brin over dinner and proposed a purchase. According to accounts of the discussions, the founders said they wanted $1 billion and did not want to sell. Semel later agreed to $1 billion, at which point they said the price was $3 billion and that they still did not want to sell. No transaction resulted. Google's initial public offering in 2004 valued the company at approximately $23 billion.

The Facebook approach

In 2006 Semel was authorised by the Yahoo board to acquire Facebook for up to $1.2 billion. Mark Zuckerberg had indicated a price of $1 billion. Semel offered $850 million. Zuckerberg ended the negotiations.

Both episodes are frequently cited in accounts of missed acquisitions in technology, though the counterfactual is contested: it is not established that either company would have developed as it did under Yahoo's ownership.

Compensation and resignation

In April 2001 Semel was granted stock options with a fair value reported to the U.S. Securities and Exchange Commission of more than $110 million as an inducement to join Yahoo. His pay was repeatedly among the largest in American business during his tenure. In June 2006 his annual salary was reduced to one dollar, with compensation delivered in equity; in that year his stock options were valued at approximately $70 million.

Shareholder dissatisfaction with the combination of that compensation and the company's performance relative to Google grew through 2006 and 2007, and a substantial protest vote was recorded against directors at the 2007 annual meeting.

Semel ended his six-year tenure as chief executive on June 18, 2007, handing the role to co-founder Jerry Yang. Susan Decker, recently promoted to oversee advertising operations and widely regarded as his likely successor, was appointed president. Semel remained as non-executive chairman until he resigned from the company entirely on January 31, 2008, shortly before Microsoft made its unsolicited bid for Yahoo.

Business philosophy and management style

Semel approached Yahoo as a media property, an orientation formed by 24 years in film distribution. He emphasised content, brand and advertiser relationships, and pursued growth through acquisition and partnership rather than internal engineering.

The approach produced a rapid financial recovery in his early years, when Yahoo's problem was monetising an audience it already had. It proved less effective against Google, whose advantage rested on search relevance and on an advertising auction that improved with engineering investment. Critics argued that Semel underinvested in search technology and in the engineering culture required to compete, and that his Los Angeles base and media background left him distant from the company's Silicon Valley operations.

He was also credited with imposing commercial discipline on a company that had expanded without clear priorities, and with assembling a management team that stabilised Yahoo after the dot-com collapse.

Controversies

Cooperation with Chinese authorities

As chief executive, Semel approved Yahoo's compliance with requests from Chinese officials for user information held by the company. Information provided by Yahoo was used in the prosecution of the journalist Shi Tao, who was sentenced to ten years' imprisonment in 2005 for disclosing state secrets, and in other cases involving Chinese dissidents.

The decisions drew sustained criticism from human rights organisations and from members of the United States Congress. At the Royal Television Society Cambridge Convention in 2005, questioned about the matter, Semel said that the company had to abide by the laws of the countries in which it operated.

In a widely reported exchange at The Wall Street Journal's All Things Digital conference, Semel was asked whether Yahoo would have cooperated with Nazi Germany. Semel, who is Jewish, replied that he did not know how he would have felt then, and added that he did not feel good about what was happening in China. Yahoo later settled litigation brought by families of imprisoned dissidents and established a fund to support human rights causes.

Executive compensation

Semel's pay attracted objection throughout his tenure and featured in shareholder campaigns on executive compensation. Governance analysts questioned the relationship between the size of the awards and the company's performance against its principal competitor.

The declined acquisitions

The failure to acquire Google and Facebook is the most frequently cited element of his record. Assessments differ on whether these represent errors of judgement or reflect that neither founder group intended to sell at any price Yahoo would plausibly have paid.

Personal life

Semel is married to Jane Semel. The couple have four children and have lived in Los Angeles.

He and his wife have been active in philanthropy in Los Angeles, particularly in support of medical research and the arts. The Semel Institute for Neuroscience and Human Behavior at the University of California, Los Angeles is named for the family following their donation.

Semel is co-chair emeritus of the board of trustees of the Los Angeles County Museum of Art. In 2005 he received the UCLA Medal, the university's highest honour, and the Legend in Leadership Award from the Chief Executive Leadership Institute at the Yale School of Management.

Legacy

Semel's record divides sharply between his two careers. At Warner Bros. he was part of a management partnership that ran a major studio successfully for close to two decades, an unusual span of stability in an industry characterised by rapid turnover.

At Yahoo he arrived at a company in crisis and restored its finances, then presided over its decline relative to Google. The acquisitions he did complete, Inktomi and Overture, gave Yahoo capabilities it lacked; the acquisitions he did not complete became the more memorable part of the story.

His tenure is examined in business education as a case in whether an executive's industry background helps or hinders when a company faces a competitor whose advantage lies elsewhere. The Yahoo of his period was a media company competing against an engineering company, and the question of whether different leadership could have altered that outcome remains contested.

External links

• Los Angeles County Museum of Art