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Yahoo chief may be breaking company rules by sitting on two other boards Yahoo chief comes under pressure over academic qualifications claim
(about 2 hours later)
Yahoo's chief executive Scott Thompson may be breaking the company's rules on the number of boards its directors can sit on by having a director's seat on two other public companies. Yahoo's chief executive, Scott Thompson, is under increasing pressure after the company formed a special committee to conduct a "thorough review" of his academic credentials, as well as the "facts and circumstances related to the review and disclosure of those credentials" in connection with his appointment in January.
His other boardroom roles could add to the pressure on Thompson, who was forced to apologise after it emerged that he had falsely claimed on his CV to have a computing science degree when he applied for the top job at Yahoo, which he took over in January. Separately, reports suggested that Patti Hart, the Yahoo director in charge of its corporate governance and nominations committee, which chose Thompson, may not seek re-election to the board after two years.
Thompson did not misrepresent his qualifications to the other two companies. He joined one of them, Splunk, in October 2011 when he was president at PayPal, and the other, F5 Networks, in January 2008. Both of those list him as having a bachelor of science degree in accounting from Stonehill College. On his CV at Yahoo he claimed that he also had a computer science degree from the college. Hart, who has been on Yahoo's board since 2010 and is also chief executive of electronic games equipment company International Game Technology, would in effect resign by not seeking re-election at the next annual general meeting, reports said. She has also been under scrutiny when it emerged last week that her CV also contained inaccuracies.
Thompson is under growing pressure after falsely claiming on his CV that he had a computer science degree, as well as his bachelor's degree in accounting, when he applied for the top job at Yahoo, which he took over in January. On Monday, he apologised to staff – but a deadline for action by the board came and passed without any movement.
The revelation last week has rocked Yahoo, which is trying to recover its footing in the competitive internet advertising market. The special committee will be chaired by Alfred Amoroso, an independent Yahoo director who joined the board in February, with John Hayes and Thomas McInerney, who joined the board in April.
Amid the furore over Thompson's incorrect CV, which was lodged in legally binding public filings with the US securities and exchange commission, it emerged that Hart's claims to have a bachelor's degree in marketing and economics from Illinois University were incorrect; instead it was in business administration, specialising in marketing and economics.
That has put Hart directly in the firing line. She was also in charge of the committee which would have to give Thompson explicit permission to sit on two other public boards – as Thompson does, at Splunk and F5 Networks. Yahoo said that Thompson had that permission, but by the time of publication was not able to say when that was granted.
Thompson did not misrepresent his qualifications to the other two companies. He joined one of them, Splunk, in October 2011 when he was president at PayPal, and the other, F5 Networks, in January 2008. Both of those list him as having a bachelor of science degree in accounting from Stonehill College.
That misrepresentation forced an apology from Thompson on Monday. "The board [of Yahoo] is reviewing the issue and I will provide whatever they need from me," he wrote to Yahoo staff. "In the meantime, I want you to know how deeply I regret how this issue has affected the company and all of you. We have all been working very hard to move the company forward, and this has had the opposite effect. For that, I take full responsibility, and I want to apologise to you."That misrepresentation forced an apology from Thompson on Monday. "The board [of Yahoo] is reviewing the issue and I will provide whatever they need from me," he wrote to Yahoo staff. "In the meantime, I want you to know how deeply I regret how this issue has affected the company and all of you. We have all been working very hard to move the company forward, and this has had the opposite effect. For that, I take full responsibility, and I want to apologise to you."
Yahoo, one of the biggest sites on the web, with around 700 million visitors a month, had said that it would make an announcement on the matter on Monday. But although the board met on the day, the deadline passed without comment. Yahoo, one of the biggest sites on the web with around 700 million visitors a month, had said that it would make an announcement on the matter on Monday. But although the board met on the day, the deadline passed without comment.
Thompson is struggling to turn around Yahoo, which has seen revenues and profits slide gradually over the past five years in the face of intensifying competition from Facebook, Twitter and Google for advertising. Having joined in January, he was intended to map out a fresh direction for the company with a focus on improving its appeal and relevance. Thompson is struggling to turn around Yahoo, which has seen revenues and profits slide gradually over the past five years in the face of intensifying competition from Facebook, Twitter and Google for advertising. Having joined in January, he was intended to map out a fresh direction for the company. Thompson's CV has plunged the company into a row with investors, particularly the hedge fund Third Point, which owns 5.8% of the firm's shares and says his incorrect claim "undermines his credibility as a technology expert and reflects poorly on the character of the CEO who has been tasked with leading Yahoo at this critical juncture". Third Point wants to instal its own choice of directors with greater advertising and media expertise.
Yahoo has had three chief executives – Jerry Yang, Carol Bartz and Thompson – since 2009, when a takeover bid from Microsoft fizzled out amid the credit crunch. The company had been trying to offload its share in Alibaba, China's largest online business-to-business trading platform. Yahoo's governance guide on memberships of outside boards states, under a section titled Other Public Company Directorships,: "Without specific approval … no executive officer should serve on more than two public company boards, including the company's board (but not including any boards of entities affiliated with the company)."
But instead Thompson's CV has plunged the company into a row with investors, particularly the hedge fund Third Point, which owns 5.8% of Yahoo shares and says that his incorrect claim "undermines his credibility as a technology expert and reflects poorly on the character of the CEO who has been tasked with leading Yahoo at this critical juncture". Third Point is agitating to install its own choice of directors with greater advertising and media expertise. Neither Splunk nor F5 is affiliated with Yahoo. Both are listed on US stock markets; Splunk went public in mid-April. The company notes in its filing that Thompson has served on its board since October. He received no salary in 2011 for his position on the board, but received 150,000 shares. Those are presently trading at around $32, which would make them worth about $4.8m.
Yahoo's governance guide on memberships of outside boards states under a section titled Other Public Company Directorships that "Without specific approval...no executive officer should serve on more than two public company boards, including the company's board (but not including any boards of entities affiliated with the company)". Kirk Hanson, executive director for the Markkula centre for applied ethics at Santa Clara University in Silicon Valley, said: "The board really is boxed into a corner. They have to ask themselves, 'Can this leader serve as a moral example or moral leader for our company?' Behaviour rolls downhill. If the CEO exaggerates a little, then others in the organisation will exaggerate a lot."
Neither Splunk nor F5 is affiliated with Yahoo. Both are listed on US stock markets; Splunk went public in mid-April. The company notes in its S-1 filing that Thompson had served on its board since October. He received no salary in 2011 for his position on the board, but received 150,000 shares. Those are presently trading at around $32, which would make them worth about $4.8m.
Asked whether Thompson had specific approval to take the additional boardroom roles, Yahoo did not respond.
Thompson's CV with dual degrees periodically cropped up before he joined Yahoo. He was listed with a computer degree on a website touting his appearance at the Web 2.0 technology conference in 2010 while he was running eBay's PayPal payment service. The computer science degree also has appeared in Thompson's biography in connection with his 2008 appointment to a Silicon Valley startup, Zuora. However, eBay listed only Thompson's accounting degree in its SEC filings while he was working at PayPal.
The problems became worse for Yahoo after it emerged at the weekend that Patti Hart, who chairs the board's search committee which would have picked Thompson, herself only has a bachelor's degree in business administration – rather than the bachelor's degree in marketing and economics that she claimed to have.
Kirk Hanson, executive director for the Markkula Center for Applied Ethics at Santa Clara University in Silicon Valley, said: "The board really is boxed into a corner. They have to ask themselves, 'Can this leader serve as a moral example or moral leader for our company?' Behaviour rolls downhill. If the CEO exaggerates a little, then others in the organisation will exaggerate a lot."
Yahoo now has a serious problem whichever way it moves, suggested F Daniel Siciliano, a professor at Stanford Law School. He told the New York Times that the board would have to move cautiously: "The real duty the board has is to ask what is in the best interest of the shareholders. If they don't have a succession plan in place, it might be a costly move to fire him."
Replacing Thompson could create one of the toughest jobs in Silicon Valley: filling the vacant seat. Yahoo has made itself unpopular externally through a lawsuit asserting software patents against Facebook – a move seen as unnecessary – and internally by Thompson's firing of 2,000 people, or 14% of staff, last month.