They Shoot Yahoo CEOs, Don’t They? But Not Without a Really Smoking Gun and a Much Stronger Board.
Earlier today, Yahoo’s persistent thorn, activist shareholder Dan Loeb of Third Point poison-penned another letter to the board of the Silicon Valley Internet company, demanding that Yahoo fire its new CEO Scott Thompson, as well as director Patti Hart, over bizarre inaccuracies related to their academic achievements.
“Permitting Mr. Thompson and Ms. Hart to stay with the Company after apparently violating the Code of Ethics sends a message to all Yahoo! employees that a different set of rules applies at the top,” Loeb wrote.”[Yahoo must] terminate Mr. Thompson for cause immediately given his demonstrable unsuitability to remain Chief Executive Officer and a director of Yahoo! and accept the resignation of Ms. Hart for similar reasons.”
And while many across the blogosphere — including some very clever tweets — called for his head tout de suite, that’s just not going to happen.
At least for now, at this early point in a controversy over Yahoo filing legal documents that misrepresented Thompson’s long-ago degree from Stonehill College.
In a nutshell: Thompson does not have a computer science degree, as he had maintained he did in public bios for almost a decade, a falsehood that mysteriously seeped into documents Yahoo filed with the Securities and Exchange Commission.
That’s bad news for Yahoo, for sure, on many levels, but moving against Thompson at this moment is not likely to be the answer — for the short term, at least.
That’s due to many reasons, that I like to think of it as three hopelessly complex puzzles that need solving pronto.
The What-Did-Yahoo-Know-and-When-Did-It-Know-It Question
There is no question the first thing Yahoo’s board needs to do is a thorough investigation to determine how a borked bio could proliferate so widely and for so long.
Most importantly, Yahoo will have to reveal if Thompson actually gave them this incorrect information, as he aggressively lobbied for the then-open CEO job.
As I had previously reported several times, Thompson cold-emailed a Yahoo director — Intuit CEO Brad Smith, as it turns out — despite not being on the list of potential candidates. Thompson was then shuttled over to Hart, who was running the vetting process with the help of headhunting firm Heidrick & Struggles, and hired within weeks.
Oddly, sources said Thompson never filled out the required informational papers for the job, nor did Heidrick conduct the normal background check on him. Instead, another forensic firm Yahoo hired did the work.
If it turns out Thompson gave any of them the bad bio info, it would be quick curtains for him.
But if Yahoo’s board members obtained his info on their own, the next key query would be how no one at Yahoo — especially its legal and compliance staffers, as well as outside help — managed to catch the problem during the vetting of Thompson.
Here are some good questions to start with:
Who put a faux computer science degree on Thompson’s bio in the first place, why and when did it happen?
Where did Yahoo get the inaccurate information?
Who was in charge of checking Thompson’s academic record for Yahoo?
And, who checked the work of the checkers?
The problem is made more complicated, because correct information was easily available in the SEC filings of eBay for years, since Thompson was head of its PayPal payments unit.
While the resume information was indeed wrong on eBay’s Web site and on numerous bios of Thompson for years, how did eBay legally get it right while Yahoo did not?
That calls into question the expertise of the company, its directors and those they hired to make sure execs were completely on the up and up, a task they clearly failed at.
If rank incompetence is the reason, which it looks like it might be, expect certain board members and other Yahoo staffers to go, along with anyone who helped in the Thompson vetting, or lack thereof.
Unless, of course, the gang-that-couldn’t-shoot-straight actually did shoot straight and some one at Yahoo found out about the educational discrepancy before the new CEO was announced, but declined to fix it.
While sinister, such a scenario is not entirely implausible, given how much pressure Yahoo was under at the time to hire a CEO quickly, due to Loeb and his looming proxy fight.
If any evidence were to surface that this was so, it is curtains all around, which would rain the kind of disaster down on Yahoo’s Sunnyvale HQ that would make Loeb’s attacks look like a Nerf battle. Instead, it would be “The Hunger Games” — except that no one survives.
The Chaos-in-Sunnyvale Conundrum
Which brings us to the profound implications of Yahoo jacking its second CEO within six months.
While it’s easy to yell “Fire the CEO” on a crowded Twitter, it’s simply not so easy in practice.
How long did it take Yahoo’s lugubrious board to figure out Carol Bartz needed to go? A … long … time. (And, she had a CS degree!)
More to the point, Thompson — and his not-so-merry band of consultants from Boston Consulting Group and, this week, McKinsey & Company — has only just completed a massive layoff of 2,000 employees and a jarring restructuring of management.
He’s also in the early stages of rolling out a new and decidedly still-squishy strategic plan to top execs (also just this week), along with working on some other key initiatives.
That includes renegotiating its search partnership with Microsoft; noodling around on a possible deal with Google; contemplating the sale of a variety of assets; and — oh, yes — trying to take on social networking Godzilla Facebook over patent infringement.
But, most importantly, Thompson is now the umpteenth Yahoo CEO to be working on the never-ending talks with its Asian partners over selling back a piece of the company’s lucrative stake to them.
While Yahoo CFO Tim Morse and head lawyer Mike Callahan are the point men on the deal, the lack of CEO would be an issue in the now-proceeding again talks.
This is a sale that must — and I underscore must — get done and soon, giving Yahoo much-needed breathing room and a whole lot of cash to fork over to increasingly disgruntled shareholders.
So, expect Yahoo to try to milk that deal for all it’s worth in the coming week, in order to give the appearance, at least, of positive forward momentum.
And, like it or not, Thompson has to play a key role in it getting done.
Thus, the likelihood of wait-and-see over point-and-shoot on Thompson is higher than you might think.
That’s especially true given four members of the board are leaving within six weeks and have either or are in the process of being replaced by new members.
Then, Thompson will be their problem to solve.
Again, no small thing, since the old crew — led by feckless Chairman Roy Bostock — is not likely to want to end its appalling tenure with yet another disaster.
Such a move would further tarnish the legacy of its outgoing directors, although I am not sure how it could be any more sullied, given their consistent record of one bad decision after the next.
What do I really think? I think this cursed board will maintain its 100 percent score of doing the wrong thing at the right time.
It could be a different case with the new directors, of course, who all seem pretty sharp and not as easily impressed by a record of failure.
They will surely be monitoring Thompson carefully, as will employees, who have taken to internal message boards with a rage not seen in a while over the resume debacle.
Their morale might be one uncertainty impacting Thompson’s fate. If a lot of key employees continue to bolt Yahoo or those remaining more loudly express their disdain for the bio antics, the new directors might listen.
The Whatever-Loeb-Says-We-Won’t-Do-Till-Later Head-Scratcher
Which brings us back to Loeb, whose noisy campaign to grab seats on the Yahoo board has certainly hit home this week.
And, though Yahoo likes to ding him a lot, since he started his campaign of terribly entertaining investor terror, a lot of what he’s been calling for has happened.
That includes a major flushing of the board — with five longtime members, including co-founder Jerry Yang, going, going and gone.
In addition, Loeb brought pressure to slow down some questionable deals, from Yahoo’s PIPE dream to a tax-free spinoff in Asia in a deal only an accountant could love.
He’s also — though they try to deny it — got the Yahoo directors in the dangerous habit of reacting to him, rather than playing their own game.
While the Yahoo board has resisted any deal with Loeb (pictured here), blaming him for rejecting their kind offers of settlement, it is he who is setting the tone more than Yahoo.
And that tone is of alarm and trouble and chaos at Yahoo.
That’s not going to work to convince other Yahoo investors to back his cause — in fact, Loeb has a decidedly uphill battle to win his proxy challenge — he has still scored a direct win with the bio relevations.
So far, though, Loeb has not sunk Yahoo’s battleship, so it is unlikely the board will acquiesce to his latest demand of Thompson being fired by noon on Monday.
Maybe it will eventually, or maybe it will just scold Thompson or maybe it will do nothing at all.
All that is an unknown — a riddle, wrapped in a mystery, inside an enigma, with a lot of managerial incompetence thrown in. And that, most of all, is the sad definition of today’s Yahoo.
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- Yahoo Officially Confirms ATD Report on CEO Changes and Proxy Settlement
- Meet the Man I Call “The Hair”: The Video Stylings of Yahoo’s Newest CEO Ross Levinsohn
- Will Thompson’s Ouster Mean a Yahoo-Facebook Patent Settlement Too?
- Exclusive: Yahoo’s Thompson Out; Levinsohn In; Board Settlement With Loeb Nears Completion
- Heidrick & Struggles Slaps Back at Thompson’s Yahoo in Blame Game Over ResuMess
- Is He In or Is He Out? Crunchtime for Scott Thompson at Yahoo.
- Not So Scott Free? Yahoo’s Other Big Shareholder — Cap Re — Leaning Toward Supporting Loeb Over Thompson ResuMess.
- Tech Nation’s Gunn Says She and Yahoo CEO Discussed Their CS Degrees Before 2009 Show (Video and Audio)
- Loeb Calls Again for Thompson Firing From Yahoo, as Former eBay Boss Supports Him
- Place Your Bets: Will Loeb Drop Another Bomb on Yahoo at Vegas Confab Later Today?
- Exclusive: Yahoo Director in Charge of Botched CEO Vetting to Step Down From Board
- CEO Says Sorry to Yahoos for Borked Bio “Distraction” — But Will Mea Culpa Work Without an Apology for Error? (Memo)
- Buffett Comments on Trust Issue in Yahoo CEO BioGate: “You’ve Got a Problem”
- Loeb Lobs Lawsuit, as Expected, at Yahoo’s Borked Bio Mess
- As Yahoo CEO Reaches Out to Top Staff, Board Meets to Weigh “Options” (I.E., Deciding Who Gets to Take the Borked Bio Blame)
- Yahoo Should Expect Incoming Lawsuit Lobbed by Loeb Tomorrow on CEO Hiring
- They Shoot Yahoo CEOs, Don’t They? But Not Without a Really Smoking Gun and a Much Stronger Board.
- Yahoo’s Thompson Asks Employees to “Stay Focused” — Except Not on Him
- In 2009 Interview, Yahoo CEO Does Not Deny He Has a CS Degree, and Calls Himself an “Engineer” (Audio)
- Yahoo’s Board Will “Review” Resume Discrepancy of CEO
- How Did a Phantom CS Degree Get on CEO’s Bio in SEC Filings? Yahoo’s Not Saying.
- Yahoo’s Response on CEO’s Computer Science ResumeGate: “Inadvertent Error”
- Dan Loeb Alleges “Discrepancies” on Yahoo CEO Scott Thompson’s Resume Related to Computer Science Degree