David W. Kenny is Yahoo!’s (NASDAQ: YHOO) most important director now. He serves on the Nominating and Corporate Governance Committee. One of the charters of the committee is developing and recommending to the Board a set of corporate governance principles applicable to the Company and overseeing corporate governance matters in general.The other two members of this committee are Patti Hart who has been accused of misrepresenting her educational background, and Arthur H. Kern who has decided not to stand for re-election to the board.
The new problems at Yahoo are well chronicled. CEO Scott Thompson claimed he had a degree in computer science from Stonehill College. He doesn’t. Hart, who led the search for Thompson, claimed she has a degree in degree in marketing and economics from Illinois State University. She does not.
The pressure on Kenny is even greater because of the huge turnover in the Yahoo! board. Roy J. Bostock. Vyomesh Joshi, and Arthur H. Kern have left this year. Peter Liguori, Alfred J. Amoroso, John D. Hayes, Thomas J. McInerney, and Maynard G. Webb, Jr. joined this year. The new members cannot be expected to know as much about the company or management as Kenny who has been there for the longest period of time.
Most governance experts believe that the board has no choice other than to force Hart and Thompson off the board. Each of the two has been accused of lying about an important aspect of their professional qualifications. The board has to hold members and management to high ethical standards. The damage to Thompson’s reputation will certainly critically impair his relationship with investors, customers, and employees. The sole argument that he should stay is based on the notion that hiring yet another CEO would cause irreparable damage to this public corporation which is already in desperate trouble.
Kenny really does not have any choice about the role he has to play in the decisions about Hart and Thompson. His committee membership alone makes him the central figure in guiding the board’s deliberations and decisions. Whatever happens, he will be judged more than any other board member. The structure of public company governance leaves him no alternative.
Douglas A. McIntyre