Is CEO Vetting Tough Enough? Yahoo Scandal Fuels Doubt
Jennifer Booton |
May 08, 2012
As little white lies continue to find their way onto resumes,
investors and shareholders are questioning whether the vetting process
on potential employees -- especially high-level executives -- is as
tough and thorough as it should be.
Yahoo (YHOO: 15.38, +0.03, +0.20%)
CEO Scott Thompson is the latest in a long line of people who have been
caught fibbing on their resume. Yahoo has called the resume padding an
“inadvertent error,” but the misdeed has a more serious term -- resume
While it’s only sometimes illegal, it’s almost always grounds for immediate termination.
“There’s nothing inadvertent about putting something down on paper
that you know you didn’t earn,” said Lexicon Communications CEO Steven
Fink “I think it speaks to the man’s character.”
Yet, experts say more than half of resumes feature some kind of
embellishment, if not an all out lie, even with advances in technology
that make finding information about job seekers easier than ever before.
are not just fibs, when you hire anybody who misrepresented their
background, you are overpaying them and they are essentially stealing
- HireSafe President Al Firato
According to data collected by employee background checker Hire
Right, 53% of all job seekers' resumes contain inaccurate information,
while 34% have outright lies about experience, education and ability to
perform essential job functions.
That includes listing college degrees that don’t exist, which is what
Thompson did when he claimed to have dual majored in computer science
and accounting, at a time when Stonehill College only offered one
Thompson’s fib has many people questioning how resume fraud continues
to go unnoticed by some of the world’s biggest organizations,
especially since it has been making headlines for well over two decades.
In 2006, former RadioShack (RSH: 4.96, -0.08, -1.50%)
CEO David Edmondson resigned after he was caught erroneously stating on
his resume that he received a Bachelor of Science degree. Veritas chief
financial officer Kenneth Lonchar resigned in 2002 after he was exposed
for lying on his résumé about an MBA from Stanford, and long-time
Massachusetts Institute of Technology dean of admissions Marilee Jones
was forced out in 2001 for falsely padding her credentials.
Another casualty of Yahoo activist shareholder Third Point's recent
exposure is Patti Hart, a Yahoo director who chairs the beleaguered tech
titan's search committee. Third Point, which owns 5.8% of Yahoo and
first pointed out the resume discrepancies, said she embellished her
resume with a bachelor’s degree in marketing and economics from Illinois
State University, when she actually only earned a degree in business
“Wouldn’t it be logical, if you’re talking about a CEO, to invest
some time and effort to see who you are bringing on board?” said Al
Firato, president of background screener HireSafe. “Background checks
are becoming a very big issue -- ignorance is no defense.”
All Things Digital reported on Tuesday that Hart, who was
directly responsible for the vetting that led to the hiring of Thompson,
would not seek re-election.
Yahoo did not respond to FOXBusiness.com specifically for this story.
But in a statement on Tuesday, it announced the creation of a special
committee chaired by independent director Alfred Amoroso to “conduct a
thorough review” of Thompson’s academic credentials, as well as the
facts and circumstances related to the disclosure.
The “Other Company Syndrome”
Since it’s tough to regulate honesty among individuals, it often
falls on the company to make sure the information presented to employers
by potential hires is accurate -- from mailroom staffers to chief
“It’s very important for companies not to scan someone’s background,
but to thoroughly investigate someone’s background,” Fink said. “The
higher the executive, the more scrutiny they should undergo.”
However, it often fails to happen, especially among the higher-level
industry veterans, as companies assume the person was vetted at their
previous place of employment as a lower-level staffer, what Firato
called “the other-company-syndrome.”
“It’s not uncommon [to lie on résumés] at that level or even at other
levels, and part of it is because in the past nobody ever checked,” he
Employers, trying to stroke the ego of the company’s new leader by
not putting them through the typical application process, sometimes even
skip the background check altogether.
“They don’t want to make their CEO or board member feel like it’s an
entry-level position,” Firato said. “Consequently, they are walking into
the deal blind.”
While it’s Yahoo’s fault for not double checking, Fink, who is the
author of “Crisis Management: Planning for the Inevitable,” also blames
Thompson’s former employers - eBay (EBAY: 40.14, +0.07, +0.17%) and Visa (V: 118.29, -0.22, -0.19%). They “should have found this,” he said.
However, it’s that relaxed attitude toward higher-up employees that
is sometimes preyed on by people who fib on their resumes. Hiring
someone who misrepresents their qualifications could crack the company’s
credibility and even hurt its bottom line.
“These are not just fibs, when you hire anybody who misrepresented
their background, you are overpaying them and they are essentially
stealing from you,” Firato said.
When Veritas, which was acquired by Symantec (SYMC: 15.77, -0.17, -1.07%)
for $13.5 billion in 2004, discovered the fraud behind Lonchar’s
resume, its shares took a 14% dive and the company’s then-CEO Gary Bloom
had to ease jitters by reaffirming its quarterly guidance.
Backlash hasn’t been that drastic for Yahoo, but it nevertheless
pushes the company back a few steps in its ongoing effort to rebuild
after several quarters of lackluster earnings and a slew of managerial
In an apology released to employees this week, Thompson admitted that
while Yahoo has been working very hard to overhaul the company, the
resume bluff has “had the opposite effect.”
Yahoo’s Poker Face
Yahoo has so far backed Thompson, calling his lie an inadvertent
error and claiming it in no way affects his qualifications as CEO.
“They are doing it to save face -- someone vetted this guy’s qualifications, someone dropped the ball,” Firato said.
Fink says Yahoo is just “trying to put a ‘smiley face’ on this,”
while it determines whether the fib is enough to give its new chief the
“They think they found the right guy [to lead their turnaround], so
to publicly fire the guy after what they’ve been through, they just
would wind up with a tremendous amount of egg on their face,” he said.
Meanwhile, Dan Loeb's Third Point has been calling for Thompson's
ouster. The hedge fund continues to mount pressure on the Internet
giant, most recently demanding the release of all documents related to
the hiring of Thompson, who was brought in last year from PayPal to
replace Carol Bartz.
Yahoo said it will make "appropriate disclosures" to shareholders of its decision upon completion of the review.
“The special committee and the entire board appreciate the urgency of
the situation and the special committee will therefore conduct the
review in an independent, thorough and expeditious manner,” Yahoo said.
As of now, the CEO has given no indication of intentions to step down.
- Resume Fraud
- Employment Background Check