Yahoo’s Parting With Thompson Will Be for “Cause” (aka CSLie)
According to numerous sources, Yahoo is claiming “cause” in its parting with former CEO Scott Thompson, related to the fake computer science degree on his resume.
Such a determination will mean the company is not obligated to pay him the large severance that would have been due to him otherwise.
In his offer letter on January 3, Yahoo spelled out the terms of the employment agreement, noting what would happen if he left the company under more positive “without cause” terms.
“If Mr. Thompson’s employment is terminated by the Company without cause or by Mr. Thompson for good reason, the Company will offer him severance benefits similar to the benefits it provides to other senior executives of the Company at the time of his termination,” reads the document, which was filed with the Securities and Exchange Commission. “In addition, if Mr. Thompson’s employment is terminated by the Company without cause, by Mr. Thompson for good reason, or due to Mr. Thompson’s death or disability, the Make-Whole RSUs that are then outstanding and unvested will fully vest upon his termination.”
The “Make-Whole” RSUs — or restricted stock units, related to his time as president of eBay’s PayPal payments division — were valued at $6.5 million in Yahoo’s SEC filings.
But sources said Yahoo has relied on another clause in Thompson’s offer letter, titled “Code of Ethics and Yahoo! Policies,” to make the case that it would not have to pay out such a large sum to him.
Reads the clause:
“Yahoo! is committed to creating a positive work environment and conducting business ethically. As an employee of Yahoo!, you will be expected to abide by the Company’s policies and procedures including, but not limited to, Yahoo!’s Guide2Working@Y!, Yahoo!’s Code of Ethics and Yahoo!’s Corporate Governance Guidelines,” reads the letter. “Yahoo! requests that you review, sign and bring with you on your Employment Start Date, the enclosed Code of Ethics Acknowledgment Form.”
Under the Silicon Valley Internet giant’s ethical terms, the borked bio and how it got that way — which was still under investigation when Thompson stepped down — was the major issue in his ouster, since he was responsible for making sure it was accurate when submitted for regulatory filings.
In addition, while Thompson publicly blamed a headhunting firm for making the error back in the mid-2000 timeframe, that company — Heidrick & Struggles — hit back, saying his claims were “verifiably not true.” According to sources, Heidrick apparently possesses an inaccurate resume submitted to them by Thompson.
Heidrick, which placed Thompson at eBay many years ago, was not involved in his hiring at Yahoo. It had to recuse itself from his vetting as part of its search for a new Yahoo CEO, because it had placed him previously.
In fact, Thompson had nominated himself for the job via cold emails with Yahoo board members and was examined and hired quickly.
Perhaps too quickly, given the poor background check that was discovered by activist shareholder Daniel Loeb of Third Point.
Sources close to the board said that investor pressure relate to these credibility lapses grew too loud, along with employee rancor at Thompson’s actions — forcing the issue this weekend.
What was definitely not a reason for Thompson’s departure from Yahoo — although it was unfortunate timing — was an unspecified “illness” I referenced in my initial story on the subject.
(Note to readers: I found out this weekend that illness was thyroid cancer. But I declined to name it specifically, since I felt it was Thompson’s right to publicly reveal such a personal health issue and not mine. While I recently suffered a stroke and the experience perhaps influenced this editorial decision, the cancer was only a side issue to the resume drama at Yahoo and not naming it specifically seemed, well, more responsible to me. Argue amongst yourselves about it, but that’s my take. And also, I wish Thompson a successful treatment and speedy recovery)
That said, The Wall Street Journal did an entire piece about the cancer today today, noting that “the decision to step down from Yahoo was in part influenced by Mr. Thompson’s cancer diagnosis.”
That might have been true for Thompson — a source close to him characterized the parting as “mutually agreed” — and perhaps his illness accelerated the resume controversy.
But all that aside, he was given no choice in the matter by the Yahoo board, numerous sources said. The parting was almost entirely due to the mess about the botched bio and all its implications.
In fact, in all its public communications about his leaving, Yahoo and its execs offered no token thanks and barely even mentioned Thompson, such as in its official statement yesterday.
It read, referring to newly chosen interim CEO Ross Levinsohn: “Mr. Levinsohn replaces Scott Thompson, former Chief Executive Officer, who has left the Company.”
And left it he has, without a choice and with what will be a much smaller settlement, sources said. It is not clear when Yahoo has to unveil those terms in public documents.
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