Somewhere, Carol Bartz must think this is rich. Less than a year after she was famously fired over the phone by the struggling Internet company Yahoo, the academic credentials of her successor are now being called into question by an activist investor. Yahoo acknowledged Friday that the CEO it hired in January, Scott Thompson, does not have a computer science degree after all, even though that information was included in an SEC filing and in several public bios about him. And on Tuesday, the Wall Street Journal reported that the board member in charge of the company’s CEO search would not be standing for re-election.
Seemingly, this information was not raised by a source without other motives. Dan Loeb, the activist investor behind the hedge fund Third Point LLC, is waging a proxy battle to gain several seats on the company’s board, and on Monday demanded that the company share records about Thompson’s hiring.
But now that Yahoo has acknowledged the error, with the CEO himself issuing an apology to employees on Monday, all kinds of questions are being raised. Who knew about the discrepancy — and if so, when? Why didn’t Thompson correct interviewers about his computer science degrees when asked about them in the past? Why didn’t this issue come up in a background investigation of the CEO before he was hired? And why did the company inexplicably jump to call the issue an “inadvertent error” when the erroneous information had been used in publicly available bios in the past?
Of course, the biggest question of all is this one: What will the board do in response? So far, it has set up a three-person committee of directors to investigate the matter, which will be overseen by an outside law firm and, reportedly, will see one of the key directors in the brouhaha leave the board. But questions are sure to linger as both Loeb and the press stay after the company for a more thorough explanation. (A company spokesperson declined to comment beyond its statement that Yahoo is “reviewing the matter and, upon completion of its review, will make an appropriate disclosure to shareholders.”)
The board may be hesitant to pull the plug on Thompson, as happens to many (but not all) CEOs whose academic records turn out to be incorrect. The beleaguered company has been undergoing many changes and may not want to seem as if they’re bowing too easily to pressures from an aggressive dissident shareholder. But if it turns out that Thompson knowingly perpetuated or didn’t correct false information about his degree, this relatively new board would be wise to act swiftly to replace him, and then take a long, hard look at how their own actions allowed this to happen.
After all, it’s not that having or not having a computer science degree really matters. Of course it doesn’t, not even in Silicon Valley. What does matter is the impact such an error, if it was committed knowingly or missed in a background check, would have on the credibility of a company’s leader or its board. If employees, investors or customers worry that the CEO has not told the whole truth about his background, what else might they have cause to question?
In the end, I think the board’s decision is really a simple one. If Thompson allowed false information about his educational background to linger in his bio, he should be treated just like any other employee who did the same. Say the human resources department discovered that a rank-and-file engineer’s resume contained a faux degree. If that employee knowingly included it there and didn’t correct it, many companies would punish, and likely terminate, him or her. The same standard — if not a higher one, given that Thompson’s actions are watched by thousands of Yahoo employees — should be held for the CEO.
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