Yahoo's CEO résumé circus keeps getting more ridiculous. But the real joke is the company's beleaguered board of directors, say analysts.
The Web portal announced on Tuesday (May 8) that it has formed a special committee to review CEO Scott Thompson’s hiring in light of the raging controversy surrounding a false degree listed on his résumé. Comprising the committee are newly minted board members Alfred Amoroso, John Hayes and Thomas McInerney. And according to AllthingsD.com, Patti Hart, the Yahoo director who vetted Thompson during his hiring process, is apparently leaving the company.
Despite all this drama in the air, whether Thompson’s on the chopping block at Yahoo remains to be seen. Investor analysts contend that Thompson benefits from having just joined the company and would help himself with a public mea culpa a la Andy Pettite, the former New York Yankee pitcher (and perhaps soon to be roster bound given his comeback try) who owned up to using steroids and avoided the mass-haranguing suffered by Alex Rodriguez among others.
“If Scott delivers on [turning around Yahoo], nobody is going to question [his credentials],” said B. Riley analyst Sameet Sinha. And Colin Gillis, director of research and senior technology analyst at BGC Financial, said for Yahoo to lose another CEO after Carol Bartz’s firing last September would only prolong the company’s turnaround and allow competitors to take advantage of Yahoo being stuck in neutral.
However “if he can’t function with credibility, he has to be cut loose,” Gillis said. But it's the credibility of Yahoo’s board may be even more in question than Thompson.
“I think the biggest fault is with the board, seriously,” said Sinha. “They’ve been missing out on all these different red flags. Going back to them refusing the Microsoft deal, it’s been one thing after another: Jerry Yang coming back, the hiring of Carol Bartz and then the hiring of Scott.”
To review, it's been quite a four months since Thompson was hired; one would think the former PayPal exec must have punched a three-legged puppy in a past life for all the bad juju that’s befallen his short CEO tenure. First there was criticism that the former PayPal president was short on media/advertising experience. Then there was Yahoo’s proxy fight with its largest outside shareholder Third Point, which is looking to reshuffle the company’s board with its own nominees.
Also, Yahoo sued Facebook over alleged patent violations, generating lots of Silicon Valley ire, followed by Yahoo announcing the layoffs of 2,000 employees. Now Thompson’s in the midst of what’s being termed “résumé-gate.”
According to documents Yahoo filed with the Securities and Exchange Commission on April 27, Thompson “holds a Bachelor’s degree in accounting and computer science from Stonehill College.” Problem is, he doesn’t. Yahoo shareholder Third Point revealed as much in a letter last week to Yahoo’s board in which its CEO Dan Loeb wrote that Thompson’s degree was in accounting, not computer science. Loeb confirmed as much with Thompson’s alma mater. On Thursday Yahoo confirmed that Thompson received a B.S. from Stonehill College in business administration with a major in accounting, chalking up the mention of computer science degree as an “inadvertent error.” Oof. Third Point responded by demanding details of the vetting process behind Thompson’s hiring.
That spotty history, amplified by the résumé controversy, only fuels Third Point’s proxy fight with Yahoo. The company saw the departure of four board members this year, including Yang. Subsequently Third Point offered up four nominees—most notably among them was Loeb—but Yahoo counteroffered with two seats—excluding one for Loeb—which Third Point rejected. Yahoo has yet to set a date for its annual shareholders meeting during which investors will vote on Yahoo’s board, but in letters to investors, the company has strictly adhered to its nominees and asked shareholders not to vote for Third Point’s candidates.
But now Yahoo must line up another candidate to replace director Hart. Minor by comparison but unfortunately timed to Thompson’s credential debacle, Third Point revealed that Hart’s purported degree in marketing and economics from Illinois State University was instead a B.S. in business administration “with specialties in marketing and economics.”
Gillis said the latest controversy gives “more credibility to Third Point’s argument that the board is not as functional and efficient as it should be.” That puts Yahoo in the awkward position of deciding to revisit talks with the activist investor.
“If they give Third Point some concessions now,” Sinha said, “people will say, ‘Oh, he’s trying to shut up Loeb, so he’s giving him a board seat and concessions.’ But if he doesn't, then it continues to be an added distraction.”