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Thompson, Yahoo’s fourth full-time CEO in the past five years, had just started to revamp the company, but he probably won’t be around much longer, predicted Kirk Hanson, executive director for the Markkula Center for Applied Ethics at Santa Clara University in Silicon Valley.

“The board really is boxed into a corner,” Hanson said. “If this individual is prone to exaggeration or excessive claims, they have to be worried it might happen again down the road.

“They also have to ask themselves, `Can this leader serve as a moral example or moral leader for our company?’ Behavior rolls downhill. If the CEO exaggerates a little, then others in the organization will exaggerate a lot.”

Although he was well-respected at PayPal, Thompson isn’t getting much support in Silicon Valley.

Thompson alienated much of the technology industry in March when he decided to sue Facebook for alleged infringement on some of Yahoo’s Internet patents. The lawsuit has been skewered in Silicon Valley as a cheap shot at Facebook Inc. as it prepared to complete an initial public offering of stock that is aiming to raise as much as $13.6 billion for the company and its current shareholders. Yahoo critics also viewed the lawsuit as the desperate act of a company that has run out of good ideas.

In his Friday letter, Loeb argued that Thompson has to be dumped to avoid “irreparable damage to Yahoo’s culture.” He argued that Yahoo’s own code of ethics justifies firing Thompson “for cause,” a move that probably would prevent him for qualifying for a severance package. Yahoo’s code states that information filed with the SEC “must be full, fair, accurate, timely and understandable.”

If Yahoo fires Thompson, it will be the company’s second ouster of a CEO in less than a year. The company fired Thompson’s predecessor, Carol Bartz in September after concluding her turnaround strategy wasn’t working.

Thompson so far has been focused on cutting costs. Just last month, Thompson laid off 2,000 Yahoo employees, or 14 percent of the workforce, in the company’s biggest payroll purge in history. He has also promised to close or sell about 50 Yahoo services that haven’t been attracting enough online traffic or generating enough revenue.

Loeb is trying to oust Thompson as he seeks four seats on Yahoo’s board of directors _ one for himself and three for his allies. Yahoo instead added three other directors in late March. Thompson told Loeb he wasn’t qualified to be on the company’s board.

The search for new directors was overseen by Patti Hart, whom Loeb is also attacking as an ethics liability. Loeb is upset that Hart’s bio claimed she held a bachelor’s degree in marketing and economics from Illinois State University. On Thursday, Yahoo clarified that Hart graduated from the college with a bachelor’s degree in business administration with specialties in marketing and economics.

Loeb ended his letter by pressing Yahoo to appoint him and his three preferred candidates to avoid a showdown at the company’s annual meeting later this year. Yahoo hasn’t scheduled the meeting yet.

“The company can ill afford to continue this misguided fight with its largest outside shareholder while it has so many other fires to put out,” Loeb wrote. “There has been enough damage already.”