Yahoo and its CEO: What's the worst that could happen?

Chief Executive Officer Scott Thompson is accused of lying about his college education. Tempest in a teacup, or scandal in the making?

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Yahoo chief executive Scott Thompson has been accused outright of lying on his resume in an already brewing scandal dubbed "Resume-gate."

Carol Bartz: "LOL."

The whole debacle appears on the face of it to be no more than a storm in a teacup. Thompson is alleged to have put a non-existent "computer science" degree on his resume when it transpires he was an accounting major.

But until wilful deception can be proved -- and at this stage it's looking as though it could be -- Thompson could face one almighty backlash from his company's shareholders, the U.S. government, but arguably worst of all, his own employees.

Whether or not his alleged computer science degree may have helped him rise up the ranks towards PayPal president and Yahoo chief executive remains unclear. Someone has to start somewhere, after all.

It does, however, raise questions of his credibility and ongoing competence.

In a nutshell: Daniel Loeb, activist investor with firm Third Point, began his proxy battle with Thompson and the remaining Yahoo board. Loeb wanted more seats on the board, but Yahoo refused. Loeb decided to make the degree allegations public, claiming the college he attained his computer science degree didn't even offer the qualification while he was in attendance.

Yahoo claimed it was an "inadvertent error", but promised an investigation. But Yahoo can't take the hit for Thompson's biography on eBay's pages, which made the same claims. The common connection is Thompson himself.

The once darling of the Internet said in a statement it would investigate the claims and report back:

"In connection with the statement the company made earlier today about Scott Thompson, the Yahoo! board will be reviewing this matter, and upon completion of its review, will make an appropriate disclosure to shareholders."

AllThingsD's Kara Swisher reports that board members are "deeply concerned." It's the board that has the power to can him should his continued presence be deemed a liability to the company. (Swisher put together a well-balanced argument in relation to an interview Thompson gave in 2009, with audio included. It's worth a read.)

Perhaps this will all blow over with a simple explanation. If it doesn't, what's the worst that could happen?

Thompson could get fired (as if that wasn't obvious)
In the short term, it could be the worst-case scenario for the Yahoo chief executive. But the company would fare worse. It would be the second boss Yahoo would have fired in as many years, leaving the company looking weak and as though the board made a wrong choice. If Thompson is proved to have lied, questions will surely be raised of the vetting process behind his hiring.

Yahoo's code of ethics, as noted by Business Insider, says: "Make sure information we disclose about our company is clear, truthful, and accurate." There is an escape clause, but it has to be approved by the board.

Will they, won't they: it's anybody's guess.

Thompson could be investigated by the SEC
In the long term, Thompson's major worry is a possible investigation by the U.S. Securities and Exchange Commission. The allegations may not be as serious as fiddling the numbers in order to gain better traction in the market, but because his biography ported from eBay and Yahoo's pages into SEC filings in effect means either Yahoo or Thompson lied in a government report.

In the SEC filings, it lists the chief executive as having "received a bachelor's in accounting and computer science from Stonehill College." Yahoo removed his bio from its Web site, but SEC filings stay in the system indefinitely.

It's not clear whether Yahoo, or eBay -- which owns PayPal -- could be investigated for deception as a result of the misleading filings. If the SEC decides to probe the two companies, which it is fully entitled to do, it could even lead to the two companies suing Thompson over the claims. There's a whole range of factors, variables, and possibilities out there, and none of them are good.

Thompson loses credibility, and has to 'reboot'
But in both the short and the long term, should Yahoo decide to keep him in play, and regardless of whether the SEC wants to take a jab at him, he will lose Silicon Valley support. Above all else lose respect from his employees.

Being a hardcore coder or techie isn't a prerequisite for holding a C-level position in the Valley. But the rapport he may have built up from the staff and his colleagues has effectively dropped overnight and it will be at least an arduous task -- and at most an impossible challenge to reclaim the respect he lost.

Either way, Thompson will not escape lightly -- in terms of employability, governmentally, or in terms of respect from his peers.

This story originally appeared at ZDNet's Between the Lines under the headline "Yahoo 'Resumegate': Storm in a teacup, or scandal in the making?"

 

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