Bartz Takes the Hint, Stays away from Alibaba's Board…for Now

Carol Bartz has been the fashionable Silicon Valley punching bag for much of 2010, and that’s no doubt escalating in private conversations in Sunnyvale today as hundreds of Yahoo employees are told they no longer have a job– just in time for Christmas!

But give her credit for one savvy move: Not naming herself to Alibaba’s board as she signaled she would earlier in the year. Or, give the board credit for telling her she wasn’t. Whoever made the decision should be applauded by Yahoo’s shareholders because it would have only made an already intractable situation worse.

Yahoo founder and former CEO Jerry Yang sits on the Alibaba board now and has been a pivotal go-between and the only real palatable representative, as relations between the two companies have deteriorated. But Yahoo had a contractual right to take a second seat in October of this year, and Bartz had said she intended to take it.

You can understand why: Alibaba is propping up a good part of Yahoo’s stock price and the CEO might well want to have some input on that investment. But there were two better reasons not to. The first is that Jack Ma & Co. just loathe Bartz. They want out of the relationship, and she is standing in their way. Add to that some diplomatic gaffes when she first took over as CEO, and she’s a walking symbol of everything Alibaba hates about this tie-up with Yahoo.

The second reason is that American Yahoo having two of five board seats of China’s largest ecommerce company wouldn’t be, let’s say, welcome by the Chinese government. Especially, when you consider Softbank’s CEO Masayoshi Son– who also isn’t Yahoo’s biggest admirer— has a seat as well. Right now Alibaba’s board is made up of two foreign company representatives and two Chinese¬†representatives, and Bartz — or any Yahoo US appointment– would tip that balance to three-to-two.

And that could potentially cause more problems for Alibaba, its employees, investors and the millions of small businesses that rely on it– especially as Alipay seeks to expand its foothold into more traditional small business banking services. Alibaba has been a goldmine of an investment for Yahoo because it gets a stake in the largest and fastest growing Internet market in the world, without having to navigate the country itself. If it hampers Alibaba’s ability to do so– what was the point of the investment?

So it wasn’t too surprising that Bartz didn’t take the seat in October, but it is a bit surprising that two months later, Yahoo still hasn’t named¬†someone to the board. The situation with Alibaba isn’t an easy one. Many Yahoo investors want some sort of tax-advantageous sell off of the assets so they can get a pop and get out of the stock, but Bartz knows full well Yahoo will lose at least a quarter of its value once Alibaba is gone.

The only way this situation gets easier the longer Yahoo stalls? If these rumored Yahoo purchases or private-buyout deals happen. In the event of any deal, Alibaba would almost certainly be free because the company has the right of first refusal if the shares go into play, according to a source familiar with the matter. I think I know what Jack Ma wants for Christmas