Shock over the news that Yahoo CEO Scott Thompson padded his resume with an embellished college degree quickly gave way to two questions: How the hell did this happen? And what should Yahoo, which went through three CEOs in three years, do about it?
"Thompson has quickly lost the confidence of many employees, who think he has to go," one senior Yahoo executive told CNN. "A lot of people are saying, 'How can Yahoo let this happen?'"
The scandal ignited late last week when activist shareholder group Third Point alleged that Thompson lied about his college degree.
Thompson's published Yahoo bios -- including the one in the company's latest annual report, a legal document that CEOs must personally swear are truthful -- have claimed that he holds a bachelor's degree in both accounting and computer science from Stonehill College. His degree is actually in accounting only.
Yahoo (YHOO, Fortune 500) called the mistake an "inadvertent error." The board said Tuesday that it has hired outside counsel to conduct a review of the false statement. Soon after, the director who led Yahoo's CEO search committee announced that she would step down at the end of her current term.
One executive recruiter says she's surprised Yahoo let things get to this point.
Hiring a top executive like Thompson usually involves extensive background checks conducted by a specialized search firm, which digs into candidates' credit histories, arrest records, past employment and more.
"I can't remember a search I've ever done in which [education verification] wasn't something we did," says Jane Howze, managing director of The Alexander Group, which has worked with tech giants including Google (GOOG, Fortune 500) and Cisco (CSCO, Fortune 500). "Clearly something went wrong at major points in the process."
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