Loeb Leans Harder on Yahoo

Dan Loeb is not letting up the pressure on Yahoo, its board of directors or, most certainly, its CEO, Scott Thompson.

Loeb, manager and founder of Third Point, a hedge fund that owns a 5.8 percent stake in Yahoo, has demanded more information about the process that led to the hiring of Thompson, after charging last week that the CEOdid not have a computer science degree as his resume claimed.

Loeb is also seeking information about the selection of certain board members, including Peter Liguori, John Hayes, Thomas McInerney, Maynard Webb, Jr., and Fred Amoroso.

Bitter Proxy Fight

Yahoo and Loeb have clashed on several points in recent months, including the question of who would fill the vacant spots on the board — Loeb wanted to fill one of the slots himself. The heart of the dispute, though, is a difference of opinion as to which direction Yahoo must take. Loeb wants Yahoo to focus on its cash-generating businesses associated with advertising.

Loeb’s attack on Thompson’s credentials has deepened the bitterness between the parties. Yahoo has maintained the error was inadvertent, and Thompson himself has described Loeb’s accusations as part of a personal vendetta. Even before this incident, the two were exchanging sharply worded missives.

When Thompson and the board rejected Loeb’s request for a seat, Loeb wrote to Thompson that “only in an illogical Alice-in-Wonderland world would a shareholder be deemed to be conflicted from representing the interests of other shareholders because he is, well, a shareholder too. This sentiment further confirms that Yahoo!’s approach to Board representation is ‘shareholders not welcome.'”

A Story Still Unfolding

It is impossible to say how this story will end, as some of the details probably have not emerged, said Patricia H. Lenkov, CEO of Agility Executive Search.

For instance, there are questions about the role that Yahoo board member Patti Hart played as head of the search committee that chose Thompson.

Hart made misstatements about her academic credentials as well, Loeb charged, claiming degrees in marketing and economics from Illinois State University instead of a single degree in business administration.

“This won’t get put to bed any time soon,” Lenkov said.

Effective Leadership

Now the board must determine whether it is better off with or without Thompson. On one hand, it is difficult to imagine Thompson leading Yahoo effectively — both internally and externally — after this disclosure, Lenkov said.

“Even giving him the benefit of the doubt — maybe he had a concentration in computer science and an assistant made a mistake — it still looks odd,” she remarked. “He has had a chance to look at his CV for years.”

Ultimately, the question is not about his qualifications to run Yahoo, which by all accounts, are solid, Lenkov concluded. “This is a question of judgment. How could anyone today do something like this?”

Who Would Follow Thompson?

Another issue the board has to consider is who would follow Thompson if he were ejected from the company, noted Gayle Mattson, director, DHR International.

“It will be difficult for the board to capitulate to this investor for that reason,” she told the E-Commerce Times. “Firing the CEO, versus taking some other action against him, could well put the company in jeopardy, because no one will want to assume the position.”

In the end, she said, the board will have to decide how the shareholders are best served.