Second Major Investor Calls for Ouster of Yahoo CEO

 
 
By Chris Preimesberger  |  Posted 2012-05-06
 
 
 

A second major investor in Yahoo has called for the firing of the company's new CEO, Scott Thompson, who didn't earn the computer science degree his resume claims he did back in 1979.

Eric Jackson of Ironfire Capital, which owns about 3.2 million Yahoo shares, has joined another large stockholder, hedge fund director Daniel Loeb, who did some research and found that Thompson actually earned a degree in accounting at Stonehill College.

Yahoo, which confirmed Loeb's finding on May 3, had used the misinformation in a regulatory filing with the SEC last week.

Jackson, a vocal opponent of Yahoo's decision to reject a Microsoft buyout in 2008, told the San Jose Mercury News May 4 that "Thompson's got to go. Putting shareholders aside, I don't know how any engineer at Yahoo could listen to that guy from now on and not think in the back of their mind, 'Why in the heck would you make up that you studied computer science?' It's going to be completely distracting. Maybe he can reconstruct his reputation somewhere else."

Yahoo had responded to Loeb May 3 by saying that the resume was an "inadvertent error" and that the incorrect information "in no way alters that fact that Mr. Thompson is a highly qualified executive with a successful track record leading large consumer technology companies."

But Loeb, in his subsequent response to Yahoo on May 4, described Yahoo's statement as insulting to shareholders.

'This Is a Big Deal'

"This is, in our view, the height of arrogance. Mr. Thompson and the board should make no mistake: This is a big deal. CEOs have been terminated for less at other companies," Loeb said in a letter to the board of directors.

Loeb, whose company, Third Point, owns 5.8 percent of Yahoo's shares, also said Third Point will consider taking additional action€”legal or otherwise€”if the board doesn't take additional steps to rectify the situation by noon May 7. Loeb said he wants the board to disclose the process by which it vetted Thompson as a CEO candidate and whether any board members were aware of the deception before May 3.

In the letter, Loeb also demanded that the board "terminate Mr. Thompson for cause immediately given his demonstrable unsuitability to remain chief executive officer" and accept the resignation of board member Patti Hart, who led the search committee that picked Thompson.

Before coming to Yahoo on Jan. 4, 2012, Thompson was a highly successful CEO at PayPal and was named Ernst & Young Entrepreneur of the Year in 2011.

"If Mr. Thompson embellished his academic credentials, we think that it 1) undermines his credibility as a technology expert and 2) reflects poorly on the character of the CEO who has been tasked with leading Yahoo at this critical juncture," Loeb wrote in his May 3 letter to Yahoo's board. "Now more than ever Yahoo investors need a trustworthy CEO."

Calls for Independent Investigation

Loeb said the mix-up was an example of Yahoo's poor corporate governance and described the misinformation as a violation of Yahoo's code of ethics. He also called for an independent investigation to find out if Thompson had purposely misled the board about his technology credentials.

Yahoo declined 1.6 percent to $15.15 on May 4. It has dropped 6.1 percent since January, when Thompson was named CEO, and has floated in the $10 to $20 range since 2009 after reaching a high of $33 in spring 2008, prior to the proposed Microsoft buyout.

Chris Preimesberger is eWEEK's Editor for Features and Analysis. Twitter: @editingwhiz

Rocket Fuel