Yahoo chief breaks company rules by sitting on two other boards

Scott Thompson already under pressure for falsely claiming on his CV to have a computer science degree

Yahoo’s chief executive Scott Thompson is breaking the company’s own rules on the number of boards its directors may sit on by having a director’s seat on two other public companies, the Guardian has established.

The revelation will add to the pressure on Thompson, who was forced to issue an apology on Monday 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.

The Guardian has also found that Thompson did not misrepresent his education 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 – unlike the claim made on his CV at Yahoo that he also had a computer science degree from the 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.” He added: “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 700m visitors every 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 revenue. 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. 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.

But instead Thompson’s CV has plunged the company into a row with activist investors, particularly the hedge fund Third Point, which owns 5.8% of Yahoo shares and says that the 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.

Those criticisms are likely to intensify at the discovery of Thompson’s multiple directorships. Yahoo’s own governance guide on memberships of outside boards states under a section titled Other Public Company Directorships that “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)”. 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 did receive 150,000 shares. Those are presently trading at around $32, which would make them worth about $4.8m.

Yahoo did not respond to a request for comment.

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.

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