Appointing a committee to look into how another committee did its job was like throwing red meat at Daniel Loeb, the dissident Yahoo shareholder who has moved from wanting seats on the board to demanding CEO Scott Thompson’s head on a platter.
Loeb wants an interim CEO appointed now, suggesting either CFO Tim Morse, who was interim CEO between Carol Bartz and Thompson, or global media chief Ross Levinsohn as candidates. From his scathing letter to the current board:
It seems farcical to us that the Board will most likely spend more time deliberating over whether Mr. Thompson should be fired than it did properly vetting whether he should have been hired.
Loeb’s hedge fund Third Point has invested more than $1 billion in Yahoo. He also invested in investigations that turned up details the Yahoo board either missed or ignored when it hired Thompson as CEO, most notably his claim of a computer science degree from a school that didn’t have a computer science department at the time. Yesterday, Patti Hart, head of that search committee, said she would leave the board at the end of her term and three new directors were appointed to a special committee to investigate Thompson’s credentials. Loeb wants her to pay back the fees she earned for leading the search. He also continues to insist he should be appointed to the board along with Harry Wilson, Michael Wolf and Jeff Zucker — something this board is still not likely to do.
We’ll have more as warranted. In the meantime, here’s Loeb’s reply in full:
Six days have passed since Yahoo! acknowledged the fabrications in Chief Executive Officer Scott Thompson and Director Patti Hart’s resumes. Since then, the following has occurred: (i) shareholders have been told that Mr. Thompson’s errors were “inadvertent”, (ii) Mr. Thompson made a classic “I’m sorry you feel that way” non-apology without actually accepting responsibility, (iii) Ms. Hart announced she will not seek re-election to the Board presumably due to her leadership of the botched CEO hiring process but intends to serve out her term, and (iv) the Board has formed a special committee to conduct a “thorough review” into Mr. Thompson’s academic credentials.
It appears very clear to us – and to many corporate governance experts, Yahoo! employees, and fellow Yahoo! shareholders – that Mr. Thompson’s fantasy degree was in no way an “inadvertent error”. The evidence shows he had been using false credentials for years. Mr. Thompson’s “apology” was clearly insufficient and it seems that the only thing he actually regrets is that he has been caught in a lie and publicly exposed. Without any explanation or accountability, Yahoo! has been left to flounder under a discredited leader for an undefined period. So, after six days, we must ask – what is this Board waiting for?
It seems farcical to us that the Board will most likely spend more time deliberating over whether Mr. Thompson should be fired than it did properly vetting whether he should have been hired. The necessary investigation into whether certain senior executives and Board Members knew of Mr. Thompson’s deceptions before hiring him should not delay decisive action over his ethical breaches.
Third Point has over $1 billion invested in Yahoo! and we take no joy in witnessing this carnage. This Board’s unchecked value destruction must stop once and for all. Therefore, we once again call upon the Board to immediately (i) place Third Point’s entire slate on the Board replacing Mr. Thompson and Ms. Hart, (ii) appoint an interim CEO—we would suggest CFO Tim Morse or Head of Global Media Ross Levinsohn (assuming neither had any knowledge of Mr. Thompson’s fabrications) and (iii) allow Third Point nominee Michael Wolf to Chair the Search Committee for a new permanent CEO (Mr. Wolf will waive the $15,000 fee that Ms. Hart received for her work as Head of the Search Committee last year, which we expect she will promptly disgorge).
This is the only way for Yahoo! to move past this embarrassing episode.
Daniel S. Loeb
Chief Executive Officer
Third Point LLC