Yahoo CEO Leaves Company after Discrepancy in Academic Credentials Revealed

May 14, 2012 - By Tom Ahearn, ESR News Editor

On May 13, 2012, Yahoo! Inc. announced that Scott Thompson, the recently hired Chief Executive Officer who was revealed to have a discrepancy in his academic credentials included in online biographies and filings with the Securities and Exchange Commission, has left the company, and that the Board of Directors has named Ross Levinsohn as interim CEO to manage the day-to-day operations, effective immediately. The full text of the press release is available here: 'Yahoo!' Names Fred Amoroso Chairman and Appoints Ross Levinsohn Interim CEO'.

Sunnyvale, California-based digital media company Yahoo! also announced that its Board of Directors has named Fred Amoroso as Chairman of the Board of Directors and that the Board has reached an agreement with Third Point LLC to settle its pending proxy contest related to the Company's 2012 annual meeting of shareholders. Under the Board's settlement agreement with Third Point, which owns 5.8% of Yahoo! common stock, three Third Point nominees - Daniel S. Loeb, Harry J. Wilson, and Michael J. Wolf - will join the Yahoo! Board, effective May 16, 2012.

In a previous press release, Yahoo! announced that its Board of Directors had formed a special committee to conduct a thorough review of former CEO Thompson's academic credentials, "as well as the facts and circumstances related to the review and disclosure of those credentials in connection with Thompson's appointment as CEO." The special committee was chaired by Amoroso, an independent director who joined the Board in February 2012. Yahoo! Inc. also announced that Patti Hart, the Chairwoman of the Search Committee that hired Thompson who was also revealed to have a possible discrepancy in her academic record, had decided not to seek re-election to the Board. Yahoo! appointed Thompson, the former President of PayPal, a division of eBay, as Chief Executive Officer in January 2012.

As reported in the ESR News blog 'Yahoo CEO Education Record Mentioned in Biography Contained Discrepancy in Degree Awarded,' Thompson was found to have a discrepancy in his educational record after a letter from Loeb, Chief Executive Officer of Third Point, to the Yahoo! Board of Directors revealed that while numerous biographies and securities filings claimed Thompson held a Bachelor's degree in accounting and computer science, a "rudimentary Google search" revealed that his degree was in accounting only. The full text of the letter is available here: 'Third Point LLC Letter To Yahoo! Board Of Directors Regarding Discovery Of Discrepancies In Educational Records Of CEO Scott Thompson And Director Patti Hart'.

The letter dated May, 3, 2012, from Loeb to the Yahoo! Board of Directors begins with the following:

According to the Yahoo! Form 10-K/A, filed with the Securities and Exchange Commission on April 27, 2012, newly-hired Chief Executive Officer, Scott Thompson, "holds a Bachelor's degree in accounting and computer science" from Stonehill College. This assertion was repeated in the Company's draft proxy statement, also filed with the SEC on April 27, 2012, as well as on the Company's website.

A rudimentary Google search reveals a Stonehill College alumni announcement stating that Mr. Thompson's degree is in accounting only. That announcement is consistent with other documents (including filings with the SEC) that reflect Mr. Thompson received a degree in accounting, but not computer science.

The letter also questioned the due diligence hiring process, including using education verification during background checks by which Thompson was selected as Yahoo! CEO:

Shareholders must also question how the Board of Directors, specifically the Search Committee chaired by Ms. Patti Hart, could permit the Company to hire a CEO with this discrepancy in the public record. We assumed previously that the Committee would have conducted a thorough background check on Mr. Thompson - and even if not thorough, the most basic of such checks would address Mr. Thompson's education and degrees. Should our concerns about Mr. Thompson's record be accurate, that would call into serious question whether the Board failed to exercise appropriate diligence and oversight in one of its most fundamental tasks - identifying and hiring the Chief Executive Officer.

While checking on Thompson's academic credentials, the letter indicated that Third Point also "discovered another apparent discrepancy regarding the academic background of Ms. Hart":

Specifically, Ms. Hart, we are told in various corporate filings (including the aforementioned Form 10-K/A), holds a "Bachelor's degree in marketing and economics" from Illinois State University. However, we understand that Ms. Hart's degree is in Business Administration. She received a degree in neither Marketing nor Economics, (although we understand that she may have taken a small number of courses - not enough for even a minor degree - in each).

ESR News reported that after the academic discrepancies came to light, Yahoo! issued an initial response saying that Thompson did not earn a degree in computer science and cited "an inadvertent error" for the inaccurate SEC filings and website biographies. Third Point sent a follow up letter to the Yahoo! Board of Directors calling the response "inadequate" and demanding action on the matter. The follow up letter is available here: 'Third Point LLC Letter To Yahoo! Board Of Directors Regarding Company's Inadequate Response To Discovery Of Discrepancies In Educational Records Of CEO Scott Thompson And Director Patti Hart And Demanding Action By May 7th'.

Whether an "an inadvertent error" or done on purpose, studies have found resume' inflation in the highly competitive job market during the recent economic downturn is not uncommon. A 2009 white paper from payroll and HR outsourcing firm Automatic Data Processing, Inc. (ADP) found that 46 percent of employment, education, and/or reference checks turned up discrepancies. The ADP white paper is available here: 'Should Employers Consider Outsourcing Background Checks?'.

However, a 2010 survey from the Society for Human Resource Management (SHRM) revealed that while more than three out of four businesses polled - 76 percent - conducted general reference checks on all job candidates, less than half - 49 percent - always verified the degrees claimed by job applicants. The SHRM survey is available here: 'Conducting Reference Background Checks'.

The Yahoo! case is the most recent example of the need for all businesses to conduct education verifications during background checks.