Will Yahoo CEO's misstep kill company momentum?

Thompson ripped over resume discrepancy; Incident could hurt Yahoo's restructuring plans

All the momentum and vision that Yahoo CEO Scott Thompson has been building for the struggling company may have been thrown off course.

Yahoo CEO Scott Thompson
Yahoo CEO Scott Thompson

Yahoo said late Thursday that its board of directors is looking into a discrepancy in the new CEO's resume that likely means big trouble not just for Thompson but for the company that he's been steering since January.

"Resume-padding is the most bush-league of the many dissimulations available to ambitious executives," said Hadley Reynolds, an analyst with IDC. "His enemies must be amazed at their luck in unearthing a public misrepresentation issue that calls Scott Thompson's ethical judgment, professional competence, and basic intelligence into question all at once."

The issue, added Reynolds, may be enough to make Thompson's reign at Yahoo a short one and put an end to his plans for reviving the financially struggling company, that was once an Internet pioneer.

"He can't survive this assault, and the Yahoo board will be left to its own devices once again," he said. "I expect this episode to hasten Yahoo's transition to its alternative future, just not the one Scott and the board probably had in mind."

Thompson's resume and the company's regulatory filings with the U.S. Securities and Exchange Commission overstated his technology background to include a degree in computer science. The company called it "an inadvertent error."

Thompson received a bachelor of science degree in business administration with a major in accounting from Stonehill College in Easton, Mass. However, Thompson's resume claimed that he also held a degree in computer science.

The claim also made it onto Thompson's biography page on Yahoo's site, as well as on Paypal, where Thompson had served as president. His college credentials are no longer on his Yahoo bio.

In statements to the news media, Yahoo called the misrepresentation "inadvertent," but Reynolds is doubtful about that.

"There's no credible way that 10 years or so of public misrepresentation could be inadvertent," he said. "Also, I ... assume that Scott is personally responsible for the accuracy and veracity of Yahoo's SEC filings under Section 302 of Sarbanes-Oxley. If that's the case, he's at least culpable under those regulations for misrepresenting material info pertinent to investors, inadvertent slips in the curriculum vitae or no."

Rob Enderle, an analyst with the Enderle Group, said the issue should result in Thompson's dismissal from the company.

It's common for large companies to have policies that call for the termination of an executive who misrepresents his background, Enderle said. This kind of discrepancy also speaks to the person's ethics, which would call into question his action as leader of a major company, he said.

"A CEO can't be untrustworthy because they are the face of the company and they stand behind the company's financials," Enderle said. "It is common to ask an executive who has misrepresented their credentials to step down. But Yahoo had a great deal of trouble getting him in the first place... It will be very difficult to get someone to replace Thompson who is as qualified, and that may force a less draconian result."

Once a leader in the online world, Yahoo has been overshadowed by players like Google and Facebook. The company has been struggling over the past year or so to regain its top-tier status. With Thompson in Yahoo's top seat, industry analysts largely said he was working to rebuild the company. Now those plans may be in jeopardy.

Thompson launched a major restructuring of the company that included the layoff of 2,000 workers, or 14% of its workforce, in April. The jobs cuts are expected to save the company $375 million.

That's not the only shakeup at the company.

Since Thompson's arrival, Yahoo co-founder Jerry Yang resigned from Yahoo's board and was quickly followed out the door by board chairman Roy Bostock and three other directors.

Brad Shimmin, an analyst with CurrentAnalysis, said the incident may more be embarrassing than devastating to Yahoo.

"I don't think this will ultimately damage Yahoo's ability to regain its relevancy within the marketplace," Shimmin said. "As we've seen with all such crises of corporate faith, so long as the board acts quickly and with authority in resolving issues like this, Yahoo will be able to regain any ground lost."

Thompson, however, may be facing a longer road.

"Unfortunately, his future is not in his hands," said Shimmin. "If he takes ownership and responsibility for the discrepancies, there is no reason he cannot regain trust that has been lost. However, assuming the allegations are true, regardless of his actions, the board may still choose to resolve the issue by making Mr. Thompson go away."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed . Her email address is sgaudin@computerworld.com.

See more by Sharon Gaudin on Computerworld.com.

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