|The Thompson story has legs. The knives are out. |
Hedge Fund Intensifies Attack on Yahoo Amid Storm Over Padded Résumés
By MICHAEL J. DE LA MERCED
New York Times
May 4, 2012, 9:03 pm
Third Point has intensified its assault against Yahoo.
On Friday, the hedge fund, which is the middle of a contentious proxy battle with Yahoo, called for the dismissal of the technology company’s chief executive, Scott Thompson, after revealing that he had inaccurately stated his credentials.
Mr. Thompson had previously claimed to have earned degrees in both accounting and computer science from Stonehill College. After prodding by Third Point, Yahoo conceded that Mr. Thompson had only an accounting degree, calling it an “inadvertent error.”
Yahoo also said that Patti S. Hart, the director who led the company’s chief executive search, did not graduate with a degree in marketing and economics from Illinois State University. Instead, she earned a degree in business administration.
In a letter to shareholders on Friday, Third Point’s founder, Daniel S. Loeb, called for Mr. Thompson to be fired and for Ms. Hart to resign. Mr. Loeb also raised concerns about whether Yahoo had filed erroneous information in securities filings and other documents.
“Irreparable damage to Yahoo’s culture will continue every day that the board allows Mr. Thompson and Ms. Hart to remain at the helm of the company after having clearly demonstrated that they lack even the ‘minimum qualifications for service as a director of the company,’ ” Mr. Loeb wrote.
A spokeswoman for Yahoo, Amanda Pires, said in a statement: “As we have previously said, the board is reviewing this matter and, upon completion of its review, will make an appropriate disclosure to shareholders.”
Earlier this year, Third Point started an aggressive battle against Yahoo, questioning the company’s strategic direction and its choice of new directors, who Mr. Loeb said lacked advertising and media expertise. The hedge fund is seeking four board seats at Yahoo.
The revelations about Mr. Thompson and Ms. Hart are the latest blow to Yahoo, which has been under pressure from shareholders to redefine itself in a world where Facebook and Google dominate. The struggling Web pioneer had staked its latest turnaround campaign on Mr. Thompson, who was hired in January from eBay’s PayPal unit.
Mr. Thompson sent an e-mail to Yahoo’s employees on Friday, acknowledging the reports and urging them to stay focused on the mission, according two people with knowledge of the matter.
“I’m doing what I hope all of you are doing — staying focused on our customers, our shareholders, our team and moving Yahoo forward, fast,” Mr. Thompson said in the note.
Some corporate governance experts say that the errors in Mr. Thompson’s academic record are unsettling. At a time of uncertainty for Yahoo shareholders, any questions about the integrity of the company’s chief executive may cast doubt on investors’ faith in its turnaround plans.
“It really diminishes his credibility,” said Jeffrey A. Sonnenfeld, the senior associate dean for executive programs at Yale School of Management.
F. Daniel Siciliano, a professor at Stanford Law School, noted that Mr. Thompson and Ms. Hart seemingly had run afoul of Yahoo’s own code of ethics. But he added that the code appeared to allow for some leeway in the board’s response, and that the company’s directors must carefully weigh their next steps.
“The real duty the board has is to ask what is in the best interest of the shareholders,” he said. “If they don’t have a succession plan in place, it might be a costly move to fire him.”
Executives who inflate their credentials have previously found themselves in a tenuous positions. David Edmondson, who became RadioShack’s chief executive in 2005, claimed to have graduated from Pacific Coast Baptist College with bachelor’s degrees in theology and psychology. He later admitted that he did not have either degree, and resigned in early 2006.
Not all executives caught with padded résumés are forced to resign, however. In 2002, Ronald Zarrella, then the chief executive of Bausch & Lomb, admitted that while he attended New York University’s Stern School of Business at night, he did not graduate. Mr. Zarrella retired from Bausch & Lomb in 2008.
Professor Siciliano said the Yahoo board faced a difficult decision. “There are omissions, and there are complete misrepresentations of your fundamental credentials,” he said of Mr. Thompson. “His misrepresentation is to the left of that, but it’s still pretty bad.”