Investors want Jerry Yang's head on a stick

I'm not a shareholder of Yahoo! (NASDAQ: YHOO) but I know many people who are. And, for the most part, they don't like the company's CEO and co-founder, Jerry Yang.

Isn't the CEO supposed to look out for shareholders? Yes, I'm pretty sure this is the goal of the public markets. Then again, when a visionary founder must ultimately manage a global operation, things can get messy.

Well, there's an excellent piece in the NY Times on the topic by Joe Nocera.

Yang had many chances to do a deal with Microsoft (NASDAQ: MSFT), yet, Yahoo is now left with a quirky marketing arrangement with rival Google (NASDAQ: GOOG). Ironically, such a deal is further evidence that Yahoo! is languishing in the marketplace. Although the deal may not even last long, especially in light of the antitrust implications.

No doubt, I can understand that Yang has an emotional pull with his company and its employees, but unfortunately, this can actually cloud judgment. Too often founders hire friends and keep them on board too long. Yahoo! has become a bloated organization (even though Yang said he doesn't want to become a part of Microsoft because he thinks it will lead to bureaucracy).

Something else to consider: Look at Yang's severance plan, which offers substantial benefits for departing Yahoo! employees (in the event of a change-of-control). It's a ticking time bomb, which goes beyond a typical "poison pill."

Simply put, Yang has failed his most important constituency: the shareholders. As a result, he doesn't have much credibility on a go-forward basis. When this happens, the typical outcome is that the CEO must leave.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.