Yahoo investors up pressure to oust CEO

Scott Thompson comes under increasing fire from Yahoo investors over discrepancy in resume

The row over Yahoo's leadership intensified over weekend as another major investor called for CEO Scott Thompson to be fired.

Demands for Thompson's firing started last week after Yahoo disclosed that its board is investigating a discrepancy in the CEO's resume. The investigation prompted a very public debate over Thompson's ability to continue to lead the struggling company.

The company has acknowledged that both Thompson's resume and Yahoo's regulatory filings with the U.S. Securities and Exchange Commission overstated his technology background to include a degree in computer science that he does not actually have.

The company called it "an inadvertent error."

Some Yahoo investors and industry analysts, however, disagreed with the company's conclusion and have been very vocal in recent days about their desire for Thompson, who joined the company early this year, to be terminated.

Third Point LLC, one of Yahoo's largest investors and the source of reports about the error in Thompson's resume, was the first to pressure the company to make a move.

In a letter to Yahoo's board of directors on May 3, Third Point CEO Daniel Loeb said the company needs to determine if Thompson violated Yahoo's code of ethics.

"If Mr. Thompson embellished his academic credentials we think that it 1) undermines his credibility as a technology expert and 2) reflects poorly on the character of the CEO who has been tasked with leading Yahoo! at this critical juncture," wrote Loeb. "Now more than ever, Yahoo investors need a trustworthy CEO."

Eric Jackson, founder of Ironfire Capital, which reportedly owns about 3.2 million Yahoo shares, this weekend said it's time for Thompson to be replaced.

"I think Thompson's got to go," Jackson said in an interview with the San Jose Mercury News. "Putting shareholders aside, I don't know how any engineer at Yahoo could listen to that guy from now on and not think in the back of their mind, 'Why in the heck would you make up that you studied computer science?'"

Yahoo has not yet made any statements today about how its probe into the situation is progressing.

Industry analysts generally agree that Thompson's reign at Yahoo is now tenuous at best. And that could spell trouble for a company that has been trying to regain its footing for the past year or so.

Thompson has been bullish in leading Yahoo for the past few months, overseeing layoffs and the ouster of board members and coming up with a plan to turn the company around.

"The effect on Yahoo will primarily depend on the outcome of the board's inquiry, but the inquiry alone is a distraction to all Yahoo employees," said Patrick Moorhead, an analyst with Moor Insights & Strategy.

"As long as the inquiry lasts, employees and shareholders will have an uncertain future, and that never has a positive outcome. This is just one more item that drags down Yahoo and could keep them from staging a comeback and becoming more relevant," Moorhead added.

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

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