(This story has been posted on All Things Digital, a website owned by Dow Jones.)
By Kara Swisher
Of ALL THINGS DIGITAL
While he has been chief executive of Yahoo Inc. (YHOO) for less than five months, in the next several days Scott Thompson is facing perhaps the most critical moment of his short tenure.
According to sources with knowledge of the situation, the board of Yahoo is not likely to take long in assessing whether he will stay or if he will be let go, due to a controversy around how a nonexistent computer-science degree got on his bio and also in Yahoo regulatory filings.
A special committee of independent directors is now investigating the matter, including trying to assess the damage the controversy has had on Thompson's ability to lead the Silicon Valley Internet giant.
How quickly the board moves is likely to be a sign of their intent. If within the next days, it is likely to let the former president of eBay Inc.'s (EBAY) PayPal unit go and replace him with a current company exec; if it waits longer and shows some public support of him--which the board hasn't done since the scandal erupted--Thompson's chances are better that he will only be given some sort of censure.
One important task is also closely considering the impact of possible legal problems related to Thompson and others signing documents with the Securities and Exchange Commission that were not accurate.
One thing is clear from interviews with multiple sources: Many members of the board have not been happy with how Thompson has handled the matter since activist shareholder Daniel Loeb of Third Point uncovered the problem a week ago.
While first tossing the borked bio as an "inadvertent error," Thompson was then largely silent about the issue with staff, despite being in close meetings with them, which caused stress among key execs.
Then, he made a public announcement in which he apologized for only the "distraction" caused by the incident and not the error itself as some had hoped he would.
Thursday, apparently feeling it was time to try to explain things face-to-face, Thompson made another attempt to explain what happened in two separate meetings with his direct reports and then his senior staff, apparently trying to get through to them that he did not fake his resume nor did he give an inaccurate bio to Yahoo when he was being hired for the job earlier this year.
Thompson thought it was time--now that the board investigation was under way--to answer questions directly, said a source.
Among other things, Thompson gave a somewhat convoluted explanation that it appeared in his bio due to a misunderstanding during an interview with a headhunting firm. And that he never noticed it once it proliferated. And that when an NPR interviewer asked him directly about his CS degree, he did not want to correct her in mid-discussion--although others report he said he did not hear the question fully.
Sources said Thompson--who is on the midst of initiating changes across a large and troubled organization, after laying off 2,000 employees--thought the sessions went well, that he clearly communicated that he was taking blame for the problem and its repercussions. Those sources also noted that he received support for doing so after the talks.
But, more than a dozen others I interviewed who were listening remotely--some of whom I sought out and some who contacted me directly--thought Thompson's complex explanation was deeply problematic and that he tried to foist the blame on others rather than on himself.
Every one of these people expressed the need for him to step down to allow the Silicon Valley Internet giant to move forward.
What the board thought about the performance is still not clear, said sources, but things are coming down to two distinct scenarios.
The first is a quick parting of the ways with Thompson, within days, either for cause or via a negotiated settlement. Others at Yahoo involved with perpetuating the mistake in the bio are also at risk.
This option is perhaps the more likely at this moment, unless the scandal dissipates and employees' continued rancor over the situation can be assuaged soon.
In this case, sources said, Thompson will be replaced by a current board member or a member of the top staff. When directors fired Carol Bartz last fall, Chief Financial Officer Tim Morse became interim CEO, and he is one of the likely candidates for the job again.
The second scenario centers on needing Thompson to complete a number of complex transactions related to the sale of Yahoo's Chinese assets and its re-negotiations with Microsoft Corp. (MSFT) over its troubled search partnership, among other things.
In that case, Thompson will be censured in some manner by the board and will also probably have to endure some punishment for allowing false regulatory documents to be filed by Yahoo. Others at Yahoo will also be subject to the same treatment in such an outcome.
How will it turn out?
Only board member Patti Hart has so far paid for her faulty vetting of Thompson, stepping down from the board earlier this week.
But whether she will be the only shoe to drop in what has turned out to be a bizarre wildfire that as raged across Yahoo's troubled landscape remains to be seen.
Thus, most definitely watch this space.
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