Yahoo director who led CEO search won't seek re-election: source

SAN FRANCISCO Tue May 8, 2012 7:48pm EDT

The Yahoo! offices are pictured in Santa Monica, California April 18, 2011. REUTERS/Mario Anzuoni

The Yahoo! offices are pictured in Santa Monica, California April 18, 2011.

Credit: Reuters/Mario Anzuoni

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SAN FRANCISCO (Reuters) - Yahoo Inc director Patti Hart, who led the hiring of CEO Scott Thompson, will give up her seat on Yahoo's board as the Internet company launches an investigation into the chief executive's educational background.

Yahoo's board said on Tuesday that is has appointed a special committee and retained a law firm to review CEO Scott Thompson's educational credentials.

The three-person committee will review the "facts and circumstances" surrounding the hiring of Thompson, who it was revealed days ago does not have a computer science degree despite what was stated on his official company biography and in regulatory filings with the U.S. Securities and Exchange Commission.

The controversy has rocked the struggling Internet company, raising questions about the future of Yahoo's fourth CEO in five years and the latest plan to revive the company's revenue growth.

Hart led the search committee that hired Scott Thompson, the president of PayPal, to take the CEO reins at Yahoo in January.

She said in a statement on Tuesday that she was leaving Yahoo's board in order to "eliminate activities" that could interfere with her primary responsibilities as CEO of International Game Technology, a maker of electronic gaming machines.

The Chairman of IGT, Philip Satre, said in a statement on Tuesday that the company's board had asked Hart not to seek re-election on Yahoo's board, noting that the company believed it could become "a distraction" from her responsibilities.

Yahoo said in a statement that it had been informed by Hart that the IGT board requested she not seek re-election as a Yahoo director and thanks her for her years of service. Following the completion of Hart's term at the annual meeting, Yahoo said its board will comprise nine directors.

The revelation about Thompson's educational background was brought to light last week by activist hedge fund Third Point, which is Yahoo's largest outside shareholder and is waging a proxy battle to install its own slate of directors on Yahoo's board.

Third Point has called for Yahoo to turn over all records related to Thompson's hiring and for Thompson to be fired.

The controversy marks the latest setback for Yahoo, a Web pioneer that has seen its popularity and revenue growth ebb amid competition from Google Inc, Facebook Inc and other online companies.

Since taking the reins, Thompson has moved fast to shake things up at Yahoo, laying off 14 percent of the staff last month and filing a patent infringement suit against Facebook.

Thompson sent an email to Yahoo's employees on Monday apologizing for the fallout from the controversy and noting that he hoped the board's review would be concluded promptly, but has not publicly addressed the discrepancy in his educational background.

According to one Yahoo insider, Thompson's brash style has alienated many people inside the company, leaving him with little internal support at a critical time.

"I don't think he's won himself the hearts and minds of everybody at the company," said the Yahoo insider, who did not wish to be named.

Shares of Yahoo, which are down 22 percent from their 52-week high of $19.15, finished Tuesday's regular trading session down 18 cents at $14.94.

Citing the "urgency" of the situation, Yahoo's board said on Tuesday that the special committee will conduct the review in an "independent, thorough and expeditious manner" and will make appropriate disclosures to shareholders when the review is completed.

The committee will be led by Alfred Amoroso, an independent director who joined Yahoo in February, and has hired Los Angeles law firm of Bird, Marella, Boxer, Wolpert, Nessim, Drooks and Licenberg.

Hart, a board member since 2010, will be the latest of several directors to step down from Yahoo's board, amid long-running investor discontent with the company's performance and management.

In February, Yahoo said that Chairman Roy Bostock and three other directors would step down. One month before that, Yahoo co-founder Jerry Yang resigned from the board.

Hart also was accused by Third Point of embellishing her educational record. Third Point alleged last week that she has a degree in business administration, rather than in marketing and economics, as was stated in regulatory filings.

Yahoo confirmed that Hart has a bachelor of science degree in business administration with "specialties" in marketing and economics from Illinois State University.

IGT's Satre said on Tuesday that the company's board had found no inconsistencies in Hart's academic credentials.

(Reporting by Alexei Oreskovic; Editing by Carol Bishopric, Phil Berlowitz and M.D. Golan)

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