The chief executive officer of Yahoo Inc., accused of misstating his academic credentials, has been ousted from the company after only four months on the job, as the faltering Web firm faces yet another embarrassing public setback.
Scott Thompson’s dismissal comes as five other Yahoo board members have agreed not to seek re-election – an indication of just how fragile Yahoo’s executive and corporate governance situation has become, as the company struggles to turn its once-profitable Internet businesses around.
Mr. Thompson becomes the second Yahoo CEO to be unceremoniously dumped by the company in less than a year. In the fall of 2011, the board fired then-CEO Carol Bartz after less than three years on the job. Ms. Bartz retaliated by calling the board members “doofuses” in a media interview. At around the same time, an activist hedge fund firm began hounding the board, demanding its members resign. The same investment firm was largely responsible for the departure of Mr. Thompson on Sunday.
Early this month, New York-based hedge fund investment firm Third Point LLC, which owns almost 6 per cent of Yahoo, alleged Mr. Thompson had falsely claimed he earned a computer science degree from Stonehill College. In fact, the former eBay executive earned an accounting degree from the school. Mr. Thompson has claimed he did not file the erroneous information, which had nonetheless made its way into regulatory filings. Third Point has long criticized Yahoo’s board and the company’s largely futile efforts to return to growth.
Had Yahoo’s management shown any signs of turning the company around, they may have been able to withstand Third Point’s criticism. But the company has largely been unable to make much money off its popular websites, especially in the face of stiff competition from Google and Facebook in the online ad market. Once valued at more than $100 (U.S.) at the height of the tech boom 12 years ago, Yahoo shares have hovered between $12 and $18 for almost four years, with no signs of a turnaround.
Like his predecessor, Mr. Thompson sought to spur a turnaround by cutting costs. He signalled an intent to slash about 14 per cent of all jobs at Yahoo and cut down on the company’s media holdings, which include a large amount of websites.
In only four months on the job, Mr. Thompson nonetheless showed some signs of sparking a rebound. In April, the company posted modestly better than expected results, recording its first year-over-year revenue growth since 2008. But much of that growth came from Yahoo’s equity investments, not its Web businesses.
The scandal over Mr. Thompson’s credentials could hardly have come at a worse time for Yahoo, which has seen its public image take a beating in the past few months. In March, Yahoo sued Facebook for patent infringement. Some critics saw the lawsuit as a sign Yahoo had become a “patent troll,” looking to generate cash by suing successful tech firms rather than by offering a superior service.
Following Third Point’s allegations about Mr. Thompson’s credentials, Yahoo initially stood by its CEO, calling the incorrect biography information an inadvertent error. But as public dissatisfaction grew, the company changed course, saying a group of directors would investigate the issue.
Third Point head Dan Loeb strongly agitated for Mr. Thompson’s firing. In a letter to the Yahoo board earlier this month, he wrote the CEO “cannot possibly have any credibility remaining with the all-important Yahoo engineers, many of which earned real – not invented – degrees in computer science.”
Mr. Loeb also called for the removal of Patti Hart, a Yahoo director who helped recruit Mr. Thompson and who has also been the subject of allegations of misstated credentials.
On Sunday, Yahoo agreed to give Third Point most of what it wanted. Mr. Thompson will step down immediately, to be replaced by Yahoo’s global media head Ross Levinsohn. Roy Bostock, the non-executive chairman of the board, will also step down, and has agreed not to seek re-election. Four more board members, Patti Hart, VJ Joshi, Arthur Kern and Gary Wilson, will also not stand for re-election. Three Third Point nominees – Mr. Loeb, Harry Wilson and Michael Wolf – will join the board.
“The board is pleased to announce these changes and the settlement with Third Point, and is confident that they will serve the best interests of our shareholders and further accelerate the substantial advances the company has made operationally and organizationally since last August,” new board chairman Fred Amoroso said in a statement. “The board believes in the strength of the company’s business and assets, and in the opportunities before us, and I am honoured to work closely with my fellow directors and Ross to continue to drive Yahoo forward.”
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