Ed. Note-today we have a guest post by Scott Lane, President of the Red Flag Group.
Internet giant Yahoo! has now been forced to undertake another extensive search for a Chief
Executive Officer to help salvage its underperforming business. Today it was announced that
Scott Thompson would be stepping down from his recently appointed position at the
company in the wake of allegations surrounding the accuracy of his education record. The
scenario that Yahoo! is now in serves as a reminder to organisations of the importance of
conducting thorough background checks on new senior executive appointments as a means of
avoiding potential shareholder disputes and detrimental publicity.
Not long after Scott Thompson was appointed CEO of Yahoo! in January 2012, rumours
began circulating about the authenticity his academic credentials as detailed on his CV. Mr
Thompson’s CV listed an accounting and computer science degree from Stonehill College in
the United States. Daniel Loeb, the boss of the hedge fund Third Point who own 5.8% of
Yahoo!, claimed that Mr Thompson had not in fact graduated with a degree in computer
science. The discrepancy in Mr Thompson’s record was deemed to be the result of an
“inadvertent error” by Yahoo!. Mr Loeb initiated a number of inquiries on behalf of other
shareholders as to how Yahoo!’s vetting process had not picked up that Mr Thompson never
graduated with a degree in computer science.
This case divided opinion as to the seriousness of Mr Thompson’s misrepresentation,
particularly as his performances in previous roles had earned him considerable acclaim.
However, Yahoo! had exposed themselves to potential litigation by using Mr Thompson’s
degree information on regulatory filings, and the ongoing discussions about his background
continued to be a distraction from becoming established in his new role. So much so that the
decision has been made that Mr Thompson is to step down as CEO. Not only will Yahoo!
now have to undertake another expensive and time consuming search for his replacement, his
departure also comes at the expense of other existing directors who were responsible for his
employment. More so, over the past number of weeks Yahoo! has been the focus of
considerable media attention for all the wrong reasons, and its board’s reputation to make
decisions in the best interests of all stakeholders tarnished.
This is certainly not the first time a company has suffered the indignity of having to replace
senior executives. Last year the chief executive of InterContinental Hotels Group’s Asia-
Pacific operations, Patrick Imardelli, resigned after it was discovered that he had
misrepresented his academic record on his CV.
This issue could have been addressed if companies:
• Conducting a detailed background check to ascertain the overall accuracy of an
individual’s CV including all previous work and study credentials
• Detailed research into the person’s profile in International media in each of the
markets where they have lived, carried on business or managed people
• Interviews with other colleagues, business associates, and previous employers to
address the overall integrity of the person in all markets in which they have worked
• Interviews with the person to assess their understanding of compliance and legal risks,
their approach to ethical and integrity issues and their answers to a series of
hypothetical corporate situations posing ethical challenges and testing their responses
along the way
• The conducting of psychometric testing based on integrity issues to assess
independently the responses to certain situations
Background screening and integrity assessments should be an essential part of the hiring and
promoting process. This is important with all new employees, but even more so with those
moving into senior positions. The incident involving Mr Thompson will for some time
remain a blight against Yahoo! in the eyes of some of its shareholders, but they will no doubt
adopt screening measures to heavily scrutinise all candidates in the future. Whilst
undertaking extensive screening operations can be time consuming and costly, it is not as
damaging to an organisation as disharmony amongst shareholders when it is discovered that a
recently appointed individual’s credentials are false.
If you are looking to increase your income, move up in your organization or land a position contact:
CB Bowman, MBA, CMC, MCEC at Executive Leadership, LLC 908.509.1744 cb@exec-leadershipllc.com; http://www.exec-leadershipllc.com.
