Yahoo: Time to give up

(MoneyWatch) COMMENTARY Americans famously love a winner. At best, they can only admire a loser, especially the kind who overcomes great odds and never gives up in the face of adversity. But a quitter? Anathema. And yet there are times in business where staying the course is foolhardy. At a certain point, soldiering on becomes an exercise in futility, wasting time, employee and customer goodwill, and shareholder money. 

That's where Yahoo (YHOO) now stands. The ailing Internet company's new CEO, Scott Thompson, has become a one-man disaster movie -- running in slow motion. Board members associated with some of the worst decisions made in any company are giving up their posts over Thompson's resume, which misrepresented his educational credentials. By now, however, it may be too late for Yahoo to pull itself out of the muck.

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The focus now is on Yahoo's latest bumbling move: hiring a guy who couldn't be accurate on his resume. It was an "inadvertent error," Yahoo tried to say. If you equate "inadvertent" with failing to do a simple background check in making what was the most important hire for a company desperately trying to turn itself around, then, yes, that's what it was.

According to Reuters, Thompson claims that he wasn't the source of the bad resume. Mind you, this is the same resume that used to appear on eBay (EBAY) when Thompson worked there. It's the same degree that he didn't deny when a radio host asked him about it.

Not that Thompson would represent an isolated case. As the Washington Post points out, a number of CEOs have burnished their resumes with imaginary achievements over the years. But to do so when a company is under as much scrutiny as Yahoo has been is inexcusably foolhardy -- particularly when the board and management have been lambasted repeatedly over the last few years. As my MoneyWatch colleague Steve Tobak wrote:

Now, you can think what you want about whether Thompson should be fired or not. But how can the board, shareholders, employees, and customers trust a CEO who at the very least has not been forthcoming about something that's clearly material?

And the board played on

As I've mentioned before, Yahoo's biggest problem has been its board, not its chief executives. Even with some of the company's directors opting not to stand for reelection, those boardmembers who presumably were involved in hiring a new CEO botched the job badly. How else to explain the board following a fast-track vetting process that had some directors voting to hire Thompson only hours after learning about him? That clearly would've left little time to perform their own due diligence.

Why didn't these board members immediately resign, or at least squawk, when asked to rubber-stamp Thompson's hiring, a move that appears to have violated their fiduciary duty as directors to look out for the interests of shareholders? Even more important, as Tobak pointed out, why did they sanction Thompson's "aim, fire, ready" leadership style at Yahoo, an approach that excluded many of his senior managers and that was badly implemented?

Yahoo's only hope might be to bring in an outside consultant who understands corporate governance and can help the company start from scratch in re-composing its board. Because that's what it would require for Yahoo to ensure strong management.

That's unlikely happen, judging from Yahoo's apparent preference for spraying water on the Thompson affair rather than extinguishing the deeper problems in the company's governance. At this point, perhaps the best option is to break the company up and sell off the parts. At the very least, that might help preserve at least a few fond memories of a company that played such a vital role in launching the Web revolution.