Leadership turmoil: Yahoo needs a revolution at the top

For the second time in less than a year, struggling Internet firm Yahoo has seen the exit of its chief executive officer, with Scott Thompson quitting amid allegations of manipulating his resume.

Thompson, who took over the reins of once-dominant Yahoo in January, came under fire from an activist investor Daniel Loeb who alleged that the CEO misrepresented his educational qualifications. Adding another twist to the resignation saga, a media report has said that Thompson has been diagnosed with thyroid cancer, another factor that made him quit the company.

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Yahoo, late on Sunday, announced the resignation of Thompson and he would be temporarily replaced by Ross Levinsohn, who was in charge of content and advertising services. Levinsohn would manage the company’s day-to-day operations with assistance from the senior leadership team.

Yahoo needs more than a revolution at the top. The dysfunctional internet firm is much like a failing country. It has been mismanaged and suffers from bureaucracy and an increasingly uncompetitive business model. It even had, until recently, a dictator for life in founder Jerry Yang. Third Point’s successful shareholder revolt promises a fresh start, but fixing Yahoo won’t be simple. The firm is plagued by many ills.

Faced with declining market fortunes, Yahoo’s management has also been navigating troubled waters as testified by the shunting out of previous CEO Carl Bartz in September last year. Way back in 2009, the Internet firm’s founder and CEO Jerry Yang too made an unceremonious exit. Apart from the top-level shuffle, Yahoo has named Fred Amoroso as chairman of the board of directors, replacing Roy Bostock.

Besides, the board has reached an agreement with activist investor Daniel Loeb’s hedge fund Third Point LLC, that holds 5.8 per cent stake in the Internet firm. Three nominees of Third Point - Daniel S Loeb, Harry J Wilson, and Michael J Wolf - would join the the board from May 16.

Yahoo said its five current board members - Bostock, Patti Hart, VJ Joshi, Arthur Kern and Gary Wilson along with Thompson would step down from the board immediately.

But reinvigorating Yahoo won’t be easy. The firm has had five CEOs over the past five years, and largely missed the social and mobile revolutions overwhelming the Internet. Many of its best employees have emigrated to greener pastures elsewhere. This changing of the guard gives Yahoo a fresh start, but it will be a long, hard march back to relevance.

On May 11, Yahoo appointed Ross Levinsohn as interim chief executive officer and Fred Amoroso as chairman. It also announced it had reached an agreement with the hedge fund Third Point to settle a proxy contest. Three Third Point nominees - Daniel S. Loeb, Harry J Wilson, and Michael J Wolf - will join the Yahoo board effective May 16.

- Scott Thompson, who had been chief executive, had been called out by Third Point for a resume inaccuracy. He claimed to have graduated with degrees in computer science and accounting. The company admitted that he had not studied computer science.

- Roy Bostock, who had been serving as chairman, will step down immediately from the board, along with Thompson, Patti Hart, VJ Joshi, Arthur Kern and Gary Wilson, all of whom previously disclosed their intentions not to stand for re-election.

Agencies