Yahoo Board Said to Meet Over CEO Record Amid Firing Call
Yahoo! Inc. (YHOO) Chief Executive Officer Scott Thompson, hired from EBay Inc. (EBAY) in January to turn around the struggling Web portal, is stepping down after his academic credentials were misrepresented, according to a person with knowledge of the matter.
Thompson will be replaced on an interim basis by Ross Levinsohn, head of global media at the Sunnyvale, California-based company, said the person, who asked not to be identified because the plans haven’t been made public. Investor Third Point LLC, which is seeking board representation because it says Yahoo is mismanaged, highlighted discrepancies in Thompson’s resume on May 3 and stepped up pressure ever since.
The departure of the third CEO in just over three years adds to upheaval at a company that was once a leader in Web search and online information. Yahoo’s sales tumbled 31 percent last year from a peak three years earlier, while its market value dropped by more than half since the end of 2005. Thompson, 54, was brought in to stem management disarray and orchestrate a turnaround after Google Inc. nabbed market share in advertising and Facebook Inc. lured fans of social networking.
Thompson’s undoing stems from erroneous biographical references to him holding a bachelor’s degree in computer science from Stonehill College. He earned a degree in accounting from the Easton, Massachusetts-based school, and the information is correctly listed in EBay regulatory filings and some Yahoo press releases. Yet the incorrect degree showed up in Yahoo’s April 27 10-K filing, as well as on the company’s website.
Thompson wasn’t the only casualty of his academic record. Yahoo Director Patti Hart, who was on the three-person committee responsible for his hiring, is also leaving the board. She announced her plans on May 8, citing responsibilities as CEO of slot-machine maker International Game Technology. (IGT) Third Point had accused Hart of inflating her academic credentials.
Yahoo shares fell 1.6 percent to $15.19 in New York on May 11 and have declined 5.8 percent so far this year.
Dana Lengkeek, spokeswoman for Yahoo, didn’t immediately respond to a request for comment. Thompson’s departure was previously reported by the technology blog AllThingsDigital.
Thompson, the former president of EBay Inc.’s PayPal unit, was hired in January to replace Carol Bartz, who had been dismissed by the Yahoo board in September. He had cut 2,000 jobs and overhauled management, and Yahoo’s stock had its biggest rally in three months on April 18 after the company reported first-quarter sales that topped estimates, fueling optimism that turnaround efforts may take hold. A day earlier, Yahoo reported its first revenue gain in more than three years.
Third Point’s Pressure
Third Point, the owner of about 5.8 percent of Yahoo, has been locked in a dispute with the company over its direction and appointments to the board, calling it one of technology’s “most mismanaged companies.”
The fund faulted Thompson in April for embarking on job cuts before he articulated a more complete strategy, and criticized earlier management for failing to accept a $44 billion takeover bid from Microsoft Corp.
Yahoo named three new independent directors in March as part of an effort to shake up the board and appease investors. The company negotiated with Third Point’s Loeb about adding one of his nominees and another that both sides could agree on. The discussions broke down when Loeb insisted that he himself be added, Yahoo said at the time. The fund announced plans in March to seek shareholder votes for its slate of four directors.
After the disclosure of the resume error, Yahoo formed a committee led by board member Alfred Amoroso, who joined in February.
The other directors on the panel are John Hayes and Thomas McInerney, who both joined in April. The committee has also retained independent counsel, Terry Bird of Bird, Marella, Boxer, Wolpert, Nessim, Drooks & Lincenberg in Los Angeles.
The company initially called the discrepancy an “inadvertent error” and said it “in no way alters that fact that Mr. Thompson is a highly qualified executive with a successful track record leading large consumer technology companies.” It later said it would begin a review.
Thompson, in a memo to staff on May 7, apologized for the fallout from the disclosures and said he takes “full responsibility.”
“I want you to know how deeply I regret how this issue has affected the company and all of you,” Thompson said.
Thompson’s four months of work at Yahoo were lucrative, and his potential compensation was set at as high as $27 million when he joined. Besides an annual base salary of $1 million, he received a hiring bonus of $1.5 million in cash and $5.5 million in stock, according to Yahoo’s agreement letter filed with the U.S. Securities and Exchange Commission.
He also was set to receive a so-called inducement equity award in February worth $5 million, regulatory filings show. Thompson was eligible for incentive compensation of as much as twice his annual salary, depending on performance, with the bonus guaranteed to be least $1 million for the fiscal year.
Thompson also was slated to receive an additional $1 million stock award in March 2013 and to get long-term equity grants that were projected by the company to be worth $11 million for 2012, according to the regulatory filing.