Yahoo Investor Steps Up Pressure to Have CEO Fired
Yahoo! Inc. (YHOO) is under pressure from Third Point LLC, one of its largest investors, to dismiss Chief Executive Officer Scott Thompson for failing to correct false academic information on his biography.
Third Point, which is fighting for representation on Yahoo’s board because it says the company is poorly managed, said Yahoo should “terminate Mr. Thompson for cause immediately,” after his resume erroneously said he had a degree in computer science. Yahoo is reviewing the matter.
The investor highlighted the discrepancies in Thompson’s record on May 3, and yesterday complained that Yahoo isn’t responding adequately. The dispute adds to challenges facing Yahoo, which is struggling to revive growth and stem customer losses. The company hired Thompson from EBay Inc. in January after ousting his predecessor, Carol Bartz, who failed to gird Yahoo against threats from Google Inc. and Facebook Inc.
“It is so clear-cut whether one has a degree or not that it is a deliberate lie and the only reason to do it is to misrepresent yourself,” said Janice Bellace, professor of legal studies and business ethics at the Wharton School at the University of Pennsylvania. “The board should certainly be looking at his capacity to lead the company and the example he sets for others in the company.”
Yahoo declined 1.6 percent to $15.15 yesterday in New York. That left it down 6.1 percent since the beginning of the year.
While Thompson lists a bachelor’s degree in computer science from Stonehill College, the school didn’t begin offering such a degree until four years after he graduated, Third Point CEO Daniel Loeb said this week in a letter to the board. Thompson has an accounting degree from the school.
Yahoo’s board plans to review the matter, and will later “make an appropriate disclosure to shareholders,” the company said in response late on May 3. Yahoo, in its first public statement on the issue, had earlier called the discrepancy an “inadvertent error” and said it “in no way alters that fact that Mr. Thompson is a highly qualified executive with a successful track record leading large consumer technology companies.”
Third Point, the owner of about 5.8 percent of Yahoo, announced plans in March to seek shareholder votes for its slate of four directors. Yahoo has been struggling to keep pace with rivals Google and Facebook, which have lured away users and ad dollars. Third Point has demanded changes at Yahoo, calling it one of technology’s “most mismanaged companies.”
In his May 3 letter, Loeb said that Stonehill only had one computer-science course when Thompson attended the Boston-area school. “Presumably, Mr. Thompson took that course,” he said.
Martin McGovern, a spokesman for Stonehill in Easton, Massachusetts, said that Thompson received a bachelor’s of science in business administration, with a major in accounting on May 20, 1979. He declined to comment further.
Thompson’s biography from his time at EBay’s PayPal unit, as submitted to events such as the 2009 Web 2.0 Summit, also stated that he had a degree in computer science. Anuj Nayar, a spokesman for PayPal, said that in recent EBay filings, Thompson’s degree was listed correctly.
“Under Mr. Thompson’s leadership, Yahoo is moving forward to grow the company and drive shareholder value,” Sunnyvale, California-based Yahoo said on May 3.
Questioning Hart’s Background
Loeb said that Patti Hart, a Yahoo board member who chairs the search committee, inflated her degree too. Hart, who also serves as CEO of International Game Technology (IGT), is listed in filings as holding a “bachelor’s degree in marketing and economics” from Illinois State University, Loeb said. “However, we understand that Ms. Hart’s degree is in business administration. She received a degree in neither marketing nor economics.”
Yahoo said in its response that “Patti Hart holds a bachelor of science degree in business administration with specialties in marketing and economics from Illinois State University.”
Jay Groves, a spokesman for Illinois State, corroborated the business administration degree, saying Hart graduated in 1978 with a concentration in economics and marketing.
Embellishing resumes has led to executive firings and resignations. In 2009, Intrepid Potash Inc. President Patrick Avery stepped down after confirming he hadn’t received degrees from two universities listed on a company prospectus. RadioShack Corp. CEO David Edmondson resigned in 2006 after acknowledging he hadn’t earned the degrees in theology and psychology that he listed on his resume.
Kenneth Lonchar, chief financial officer at Veritas Software Corp., quit in 2002 after admitting he had lied about having a master’s degree in business administration from Stanford University.
“It’s an incredibly serious ethical lapse to falsify information on a resume,” said Wharton’s Bellace. “The holes we dig for ourselves, once you start a lie, sometimes it’s very difficult to step back.”
Others who misrepresented their education kept their jobs. Microsemi Corp. CEO James Peterson was censured and fined after a 2009 review found fabricated degrees from Brigham Young University, but the company retained him as CEO. In 2002, Ronald Zarrella, CEO of Bausch & Lomb Inc., was found to have listed an MBA from New York University on his resume, when he had only taken classes at its business school. He kept his job.
Third Point faulted Thompson last month for embarking on a round of job cuts before he articulated a more complete strategy. Thompson is the former president of eBay’s PayPal (EBAY) payment business.
Yahoo named three new independent directors in March, part of its own effort to shake up the board and appease investors. The company had negotiated with Third Point’s Loeb about adding one of his nominees and another that both sides could agree on. The discussions broke down when Loeb insisted that he himself be added, Yahoo said at the time.
“If misrepresentations were made, they would confirm yet again that Yahoo is in dire need of a complete corporate governance overhaul,” Loeb said on May 3. “As we have asserted repeatedly and forcefully, as Yahoo’s largest outside shareholder and a voice for our fellow investors, we believe the Yahoo board requires fresh, outside perspectives from individuals who have no connection to a failed regime and have the expertise to address the serious challenges facing the company.”
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