Yahoo replaces CEO Scott Thompson over resumé
Ross Levinsohn named interim CEO
- Reports suggest departing CEO has thyroid cancer
Yahoo swept out Scott Thompson as CEO Sunday in an effort to clean up a mess created by an exaggeration about his education that destroyed his credibility as he set out to turn around the long-troubled internet company.
Ross Levinsohn, who oversees Yahoo's content and advertising services, is taking over as interim CEO. He becomes the fourth person to run Yahoo in eight months.
Yahoo hired Thompson, the former head of eBay's PayPal, in January to orchestrate a reversal. Although Yahoo is one of the internet's most-visited websites, the company has struggled to grow in face of competition from the likes of Google and Facebook. The company's difficulties have irked investors.
Thompson took the helm as Yahoo's fourth chief executive in less than five years.
Thompson's abrupt exit after just four months on the job came as part of the latest shake-up on Yahoo's board of directors, which has been in a state of flux for several months.
New directors appointed
Yahoo chairman Roy Bostock and four other directors who had already announced plans to step down at the company's annual meeting later this year are leaving the board immediately.
- May 3: Yahoo Inc. confirms that CEO Scott Thompson has only an accounting degree from Stonehill College near Boston, and no degree in computer science. Yahoo also says director Patti Hart holds a bachelor's degree in business administration from Illinois State University, with specialties in marketing and economics — not the degree in marketing and economics mentioned in a recent Yahoo regulatory filing.
- May 7: Thompson apologizes for the error about his degree, without explanation. He says in an email to employees that he won't resign. Activist shareholder and hedge fund leader Daniel Loeb, who revealed the inaccuracies in both bios, demands to see internal Yahoo documents about the research Yahoo's board did on Thompson's background before hiring him in January. He wants Yahoo to fire Thompson and Hart to resign.
- May 8: Yahoo says Hart will step down at the company's annual shareholder meeting, which remains unscheduled. Hart, CEO of gambling-machine maker International Game Technology, says she wants to focus her energy at IGT. She joined Yahoo's board in June 2010.
- May 10: Thompson assures his colleagues at Yahoo that he didn't supply the incorrect information.
- May 13: Yahoo says Thompson has left the company and Ross Levinsohn, an executive in charge of its media operations, will be interim CEO.
Three of the spots will be filled by activist hedge fund manager Daniel Loeb, a disgruntled shareholder who dropped the bombshell that led to Thompson's departure, and two of his allies, former MTV Networks executive Michael Wolf and turnaround specialist Harry Wilson.
Alfred Amoroso, a veteran technology executive who joined Yahoo's board just three months ago, replaces Bostock as chairman.
The appointment of the new directors ends a potentially disruptive battle with Loeb, who was waging a campaign to gain four seats on the company's board. Loeb wound up settling with three board seats and the satisfaction of ushering out Thompson, who antagonized Loeb in late March by telling him he wasn't qualified for the board.
In a statement issued through Yahoo, Loeb said he is "delighted" to join the Yahoo board and promised to "work collaboratively with our fellow directors."
No official explanation
Citing unnamed sources at the company, the Wall Street journal on Monday that Thompson informed the board that he has thyroid cancer ahead of his departure from the company.
The newspaper says it was told by one source that Thompson's decision to resign was partly influenced by his cancer diagnosis.
Yahoo Inc. gave no official explanation for Thompson's departure, but it was clearly tied to inaccuracies that appeared on Thompson's biography on the company's website and in a recent filing with the Securities and Exchange Commission.
The bio listed two degrees — in accounting and computer science — from Stonehill College, a small school near Boston. Loeb discovered Thompson never received a computer science degree from the college and exposed the fabrication in a May 3 letter to Yahoo's board.
The revelation raised questions about why the accomplishment had periodically appeared on his bio in the years while he was running PayPal, an online payment service owned by eBay Inc.
Yahoo initially stood behind Thompson, brushing off the inclusion of the bogus degree as an "inadvertent error," but harsh criticism from employees, shareholders and corporate governance experts prompted the board to appoint a special committee to investigate how the fabrication occurred.
Thompson, 54, spent much of the past week scrambling to save his job. He sent out a memo to employees to apologize for the distractions caused by news of the illusory degree and then sought to assure other Yahoo executives that he wasn't the source of the inaccuracy. He blamed a Chicago headhunting firm, Heidrick & Struggles.
In an internal memo last week, Heidrick & Struggles denied Thompson's accusation. "This allegation is verifiably not true and we have notified Yahoo! to that effect," CEO Kevin Kelly wrote to employees.
On Sunday, a spokesman for the firm declined to comment.
Departure comes at rocky time
Thompson's rapid downfall leaves Yahoo in turmoil amid a reorganization that had only just begun.
Last month, Thompson laid off 2,000 employees, or 14 per cent of the workforce, in the biggest payroll purge in the company's history, and had started to identify about 50 services that he wanted to close or sell.
Now it falls to Levinsohn, who Thompson had promoted to a more prominent role last week, to get Yahoo back on track. He joined Yahoo 18 months ago when the company was still being run by Carol Bartz, who was fired in September because she hadn't developed an effective turnaround plan.
Carlos Kirjner, a senior analyst at Sanford C. Bernstein, suggested that Thompson's previous job, as president of eBay's PayPal, hadn't prepared him for Yahoo.
"It is very different to be CEO of a growth company, making choices between opportunities, and to be CEO of a company in turnaround mode, whose parts are declining or losing share," Kirjner said.
Is the inaccuracy a minor flub?
Thompson's inaccurate resume might have been more forgivable at a company that was posting big returns for its shareholders, said James Post, a management professor at Boston University. But it's likely that Third Point was looking for an excuse to get rid of Thompson, Post said.
"They've had expensive and talented investigators turning over every rock and pebble to find something they could use for leverage," said Post, who specializes in corporate governance and professional ethics.
The resumé fiasco has had a relatively limited effect on the stock price. Shares fell 1.6 per cent to $15.15 on May 4, the day after Third Point unleashed the news about Thompson's resumé .
They closed at $15.19 on Friday. They're up from their $14.44 close on Sept. 8 when Loeb sent his first missive to Yahoo's board urging changes at the company.
But long-term, shares have fallen. They're down about 12 per cent compared to a year ago. They're down 46 per cent from Feb. 1, 2008, when they soared almost 50 per cent after Microsoft offered to buy the company for $31 a share. Yahoo's board rejected the deal, saying it wasn't enough. Four of the five directors who are leaving were on the board at that time.
Yahoo's stock hasn't traded above $20 since September 2008.
"Yahoo has been embattled for such a long time that there are a lot of people prepared to believe the worst about that company," said James Post, a management professor at Boston University.
"When you're angry at the management and the board, when nothing's going right and you're losing money, it's understandable that shareholders would adopt an "off with their head" attitude."
Brian Wieser, a senior analyst at Pivotal Research, said he believes Thompson's ouster will be a positive move, removing an overhanging distraction and adding board members with new perspectives. Wieser said employees he'd talked to believed Thompson was showing a lack of appreciation for some of Yahoo's business units, and that morale had degenerated even more during his tenure.
"It was bad," Wieser said, "and went to worse."
Wieser said that Third Point is "exactly the kind of investor every company should want," since the hedge fund is apparently trying to heal Yahoo, not break it up.
"There are no barbarians at the gate here," Wieser said. "They're actually trying to help."
With files from The Associated Press