May 9, 2012
Loeb’s Letters Finally Take Their Toll At Yahoo
Michael Harper for RedOrbit.com
Update 10:30 AM CST May 9: Loeb and party have issued another letter to the board at Yahoo, expressing what could be called extreme frustration with the way they´ve handled their requests thus far.
Finding Hart´s statements and Thompson´s apologies unacceptable, Loeb wrote:
Dear Board of Directors:
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
04:30 AM CST May 9: The turbulence created by Dan Loeb and his investment firm Third Point LLC has begun to impact Yahoo at its core, as the board announced late Tuesday evening that Patti Hart will not be seeking re-election for a position on the board once her term is up. Patti Hart, you may remember, was the chair of the committee responsible for hiring CEO Scott Thompson away from PayPal to run the troubled Internet company.
In a statement, the board has said, “We thank Patti for her years of service and wish her all the best.”
Additionally, the board has announced they will put together a special committee to investigate Loeb´s claims that Thompson has falsified his education background, which has been filed twice with the Securities and Exchange Commission (SEC).
Patti Hart not only sits on the board for Yahoo, which has been under fire and facing several hardships as of late. She is also CEO of Reno´s International Game Technology (IGT), makers of electronic gaming equipment, such as slot machines.
Presumably in an attempt to separate themselves from the turmoil going on in Yahoo-land, IGT has also asked Hart not to seek re-election and to remove herself from the company so she can easily focus on IGT alone.
In a statement, Hart has said, “After careful consideration, I have decided not to stand for re-election to the Yahoo! Board of Directors at the upcoming annual meeting of stockholders.”
“My primary responsibilities are to serve as chief executive officer of IGT [International Game Technology] and to eliminate activities that may interfere with my ability to carry out my commitments to IGT and its valued stakeholders.”
This specific mess surrounding Yahoo began when Loeb, head of the company´s largest outstanding shareholder, Third Point LLC, discovered CEO Thompson had falsified information about his education to the board as well as filings with the SEC. Whereas Thompson has claimed he holds a Bachelors degree in Computer Science with Yahoo and former employee PayPal, Loeb´s seemingly rudimentary investigations have found Stonehill college, Thompson's Alma Mater, didn´t offer a computer science degree when he graduated.
Loeb´s investigation and subsequent letters to Yahoo´s board and the SEC have also accused Hart of falsifying information about her educational background, saying she only holds a degree in Business Administration, rather than Marketing and Economics as she claims.
For their part, IGT is sticking behind their CEO, saying in a statement, “After a thorough review, the IGT Board of Directors has found no material inconsistencies in Patti Hart´s academic credentials. The Board unanimously stands behind Patti as our CEO and fully supports her leadership and the direction she has set for the Company. Furthermore, we believe her service as a member of Yahoo!´s Board of Directors could become a distraction from her responsibilities to IGT. We have asked Patti not to seek re-election to the Yahoo! Board and we will closely monitor future developments at Yahoo! and their impact on Patti´s responsibilities to IGT.”
Loeb and team have asked for Thompson to step down as CEO, and while he did apologize to his employees in an email memo on Tuesday, he did not admit to any wrong doing or offer any kind of resignation.
All Things D also cites an unnamed Yahoo! employee as saying, “Sentiment from employees is unanimous that [Thompson] must go.”
“He clearly knew and lied for years; and his handling since exposed has been unacceptable.”
Yahoo has declined to comment on Hart´s resignation. Loeb and Third Point will likely continue their fight to see Thompson removed as the board investigates further into their claims.