Services & Software

Yahoo CEO's resume controversy killing employee morale?

Scott Thompson is reportedly keeping his top-level staff abreast of the situation, but employees wonder whether he should be fired, according to a new report.

Scott Thompson, Yahoo CEO

Yahoo CEO Scott Thompson has finally acknowledged to employees that he's facing some trouble, but that doesn't mean they're ready to give him a pass.

"I am sure you have seen the reports of questions raised regarding my undergraduate degree," Thompson wrote in an e-mail sent Friday to employees and viewed by CNET. "As we said yesterday, the board is reviewing the matter and, upon completion of its review, will make an appropriate disclosure to shareholders. In the meantime, I'm doing what I hope all of you are doing -- staying focused on our customers, our shareholders, our team and moving Yahoo forward, fast."

Although the message wasn't the most rousing attempt to keep workers working, it might have been a response to a reported decline in company morale.

According to All Things Digital's Kara Swisher, who claims to have seen dozens of comments made by Yahoo employees about Thompson, "to say morale [at Yahoo] is at an all-time low is perhaps understating the situation." Citing sources, Swisher is reporting that Yahoo's internal message boards are lighting up with negative comments about their CEO.

"He clearly knew and lied for years," one employee said, according to Swisher. "And his handling since (being) exposed has been unacceptable."

Last week, Third Point, which is a hedge fund, Yahoo investor, and major thorn in the company's side, alleged that Thompson did not actually have a computer science degree. Yahoo's company Web site, as well as regulatory filings with the Securities and Exchange Commission, claimed he received both an "accounting and computer science" degree from Stonehill College.

Late last week, Thompson stayed true to his claims that he was focusing solely on Yahoo by oddly deciding to ignore the situation in meetings with top executives, according to All Things Digital.

"It was the gorilla in the room and it was awkward in the extreme," a Yahoo executive told All Things Digital in an interview. "He never brought it up, which was even worse."

However, Thompson reportedly had a change of heart over the weekend, with one source telling All Things Digital that he had been in contact with his top-level staff to tell them that the controversy was the result of a "personal vendetta" by Third Point chief executive Daniel Loeb.

Speaking of Loeb, he's one of the few critics blatantly calling for Thompson's ouster. In fact, he recently demanded Yahoo's board fire Thompson by noon EDT today -- a prospect that seems unlikely, given the state of transition Yahoo finds itself in. Still, it's an easy opening for Loeb, who has launched a proxy fight against Yahoo in the hopes of gaining more control over the company's board and strategic decisions.

Yahoo's board now finds itself in an exceedingly difficult position. If it keeps Thompson in place, it risks losing influence among shareholders to Loeb and Third Point. The company might also suffer from the reported morale issues and watch Thompson lose the faith of his employees. Getting rid of him, however, leaves Yahoo rudderless again at a time when it needs to determine how to address its issues and reestablish itself as a top Web brand.

CNET has contacted Yahoo for comment. We will update this story when we have more information.