Yahoo has swept out embattled chief executive Scott Thompson to try to clean up a mess created by an exaggeration about his education that destroyed his credibility as he set out to turn the long-troubled internet company around.
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 Mr Thompson, the former head of eBay’s PayPal, in January to orchestrate a reversal. Though Yahoo is one of the internet’s most-visited websites, the company has struggled to grow in the face of competition from the likes of Google and Facebook.
The company’s difficulties have angered investors and Mr Thompson, 54, took the helm as Yahoo’s fourth chief executive in less than five years.
Mr Thompson’s abrupt exit last night after just four months in the job was encouraged by Third Point, the activist hedge fund that owns nearly 6% of Yahoo shares. Third Point claimed Mr Thompson had exaggerated his CV with a degree in computer science from Stonehill College.
He did earn an accounting degree from Stonehill, a Catholic school near Boston, in 1979, a fact that Yahoo correctly lists, but did not earn a computer science degree.
Third Point’s CEO, Dan Loeb, and two of the hedge fund’s other nominees will join the Yahoo board. Five directors who had planned to leave later this year will now leave immediately. Interim CEO Mr Levinsohn is someone that Mr Loeb had suggested for the job.
In a statement issued through Yahoo, Mr Loeb said he was “delighted” to join the Yahoo board and promised to “work collaboratively with our fellow directors”.
Yahoo gave no official explanation for Mr Thompson’s departure, but it was clearly tied to inaccuracies that appeared on his biography on the company’s website and in a recent filing with the Securities and Exchange Commission.
The CV listed two degrees – in accounting and computer science – from Stonehill College. Mr Loeb discovered Mr 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, the online payment service owned by eBay.
Yahoo initially stood behind Mr 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.
Yahoo dumped its previous CEO, Carol Bartz, in September, disappointed that she had not been able to increase revenue. When Mr Thompson came on board, he made big changes immediately. Co-founder Jerry Yang left the board in January. Mr Thompson announced a reorganisation and planned to lose 2,000 workers, or about 14% of the workforce
But Third Point, which had pushed for Mr Yang to leave and applauded Ms Bartz’s dismissal, was still not satisfied. On May 3, it issued a press release with what turned out to be an explosive accusation: Mr Thompson had embellished his CV.
Privately, Mr Thompson told his colleagues that he was not responsible for the incorrect information and blamed a Chicago headhunting firm, Heidrick & Struggles.
In an internal memo last week, Heidrick & Struggles denied Mr Thompson’s accusation. “This allegation is verifiably not true and we have notified Yahoo! to that effect,” CEO Kevin Kelly wrote to employees.
Carlos Kirjner, a senior analyst at Sanford Bernstein, would not comment on whether Yahoo’s board would be wise to oust Mr Thompson. But he did suggest that his previous job, as president of the fast-growing PayPal, had not 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,” Mr Kirjner said.
Mr Thompson’s CV discrepancy might have been more forgivable at a company that was making money for shareholders, said James Post, a management professor at Boston University.
“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 Prof Post, who specialises in corporate governance and professional ethics.
“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.”