Pull up a seat and get out the popcorn. High noon came and went with Yahoo refusing the demand by activist shareholder Dan Loeb and his investment company, Third Point, to fire CEO Scott Thompson.
Third Point has just responded with a demand that the company turn over books and records related to Thompson and the board's vetting process.
In a statement issued after Yahoo ignored the deadline, Third Point indicated it plans to scour Yahoo's internal records for evidence that it will no doubt use to press its escalating proxy fight for seats on the company's board of directors. The latest filing stems from the disclosure last week that Thompson had lied about having a degree in computer science. His undergraduate degree is in accounting.
Alleging "wrongdoing, mismanagement and corporate governance failures" connected to Yahoo's appointment of Thompson as CEO in January, Third Point says that it wants the documents in order to examine the following:
- To investigate wrongdoing or possible mismanagement by Yahoo's management or any members or committees of its board of directors in connection with the hiring of Scott Thompson as the CEO and his appointment to the board;
- To investigate wrongdoing or possible mismanagement by Yahoo's management or any members or committees of its board in connection with the appointment of Peter Liguori, John Hayes, Thomas McInerney, Maynard Webb Jr. and Fred Amoroso to the Yahoo board rather than the nominees proposed by Third Point;
- To investigate wrongdoing or possible mismanagement by Yahoo's management or any members or committees of its board in connection with the statements by Yahoo on the afternoon of May 3 that the false filings about Thompson's educational background were "inadvertent."
- To determine whether Thompson, Patti Hart, Liguori, Hayes, Webb, Amoroso, and McInerney are suitable to serve as directors of Yahoo;
- To facilitate communications with other stockholders concerning the matters identified in paragraphs 1 through 4 above, in connection with a proxy contest to replace the current board of directors with nominees proposed by Third Point.
Third Point also said that the board would best serve the interests of shareholders by accepting responsibility "for this latest debacle" and "provide answers promptly."
We believe that this internal investigation by this Board must not be conducted behind a veil of secrecy and shareholders deserve total transparency.
We've contacted Yahoo for comment and will update the post when we hear back.
But Third Point has seized upon Thompson's fib to raise more questions about the competence of Yahoo's board. It was Third Point that first pointed out the discrepancy in Thompson's record. After receiving Yahoo's acknowledgement of what the company said was an "inadvertent" error, ThirdPoint expressed frustration in its letter about the subsequent sequence of events.
No other information has been provided by Yahoo as to how it reached that conclusion, or whether the alleged inadvertence was by Yahoo!, Mr. Thompson or some other unidentified third person. Later on May 3, Yahoo! amended its earlier "inadvertence" response, disclosing that it was commencing an investigation into the matter and would disclose the results to shareholders. No explanation was provided as to why Yahoo had decided to commence an investigation after its failed attempt to placate shareholders with its "inadvertent" error explanation.
Yahoo has not explained how its Search Committee could hire a CEO without doing a rudimentary check on the applicant's credentials - a check that would have quickly revealed that Mr. Thompson did not have a computer science degree, as disclosed in the public filings which Mr. Thompson had endorsed for years.
Similarly, Yahoo has not explained how the Nominating Committee could recommend Mr. Thompson to the Board without doing a basic check which would have revealed that Mr. Thompson did not possess the "computer science" degree that he was representing to shareholders he possessed. This is extremely disturbing given the Nominating Committee's belief that "the minimum qualifications for service as a director of the Company are that a nominee possesses. . . an impeccable reputation of integrity and competence in his or her personal and professional activities." ... Since the revelation that Mr. Thompson does not possess a computer science degree, leading corporate governance experts have made it crystal clear that the consequences of such blatant wrongdoing should be very severe.
Third Point also zeroed in on board member Patti Hart, who led the search committee that picked Thompson. It said Hart exaggerated her own academic background, pointing to Yahoo's 10-K which says she holds a "bachelor's degree in marketing and economics" from Illinois State University. It says that Hart's degree is in Business Administration.