Activist: Goodbye, Yang, Hello, Change?

There's lots of blame to go around for the current sad state of affairs at Yahoo!, but the press has focused too much on Yang as CEO and not enough on the board. Ultimately, Yahoo!'s failures in negotiating the deal with Microsoft rest with the board.

Chairman Roy Bostock was tied at the hip to Yang for most of the Microsoft discussions. He also received less than 50% shareholder support for his re-election last August, if you also count the votes that Carl Icahn's proxy slate received before he called off his proxy contest. Now, Bostock will lead the search for Yahoo!'s next leader. This is how dysfunctional boards beget dysfunctional boards.

Looking Beyond Yang

Tech bloggers Kara Swisher and Henry Blodget have already floated the names of some potential successors. Here's my take of the much-talked-about top candidates to take over the chief Yahoo! role:

1. Steve Ballmer, CEO of Microsoft. The best outcome for Yahoo! shareholders of course would be if the new search committee never selected a CEO. This company should use this change in leadership to go back and open discussions with Microsoft about selling the company. This made sense when Microsoft made its initial offer last January at $31 a share, and it makes sense (triply so) now that Yahoo! trades around $11.
2. Peter Chernin, COO of News Corp. An ideal candidate who probably wants to spread his wings without CEO Rupert Murdoch looking over his shoulder any longer. Although News Corp's (NWS Quote) stock price has dropped precipitously over the last three months, it's still a safer bet than Yahoo!. Chernin probably would have considered moving last year, but not now.
3. Jonathan Miller, former AOL CEO. Great relevant experience and well-liked by his staff and peers despite being unceremoniously dumped out of his former role heading up AOL. Miller recently set up a new venture fund called Velocity Interactive Group with Ross Levinsohn (ex-head of Fox Interactive Group). Icahn tried to draft him many times over the summer to take the top spot at Yahoo!, but Miller declined because he didn't want to turn his back on his new venture and his investors. He is also not likely to take the job, if asked.
4. Ross Levinsohn. See the Miller description above. Levinsohn would be a solid choice but is unlikely to leave his current gig.
5. Tim Armstrong, senior vice president at Google. The revenue head at Google (GOOG Quote) has relevant experience and is probably ready to take a CEO role. Even though Google has struggled in this recession along with everyone else, it still has much more upside than Yahoo!. It would be tough for Armstrong to turn his back on that safety.

Fresh Perspective

I favor an outsider taking the reins at Yahoo! -- preferably someone who has enough experience and reputational capital that he or she can insist on reshaping the board, as well as the rest of the company. Yahoo!'s board is still very much the board Terry Semel hand-picked, and it's in desperate need of a refresh.

An insider CEO, or someone coming from the current board, would most certainly keep the company on its current trajectory, which is the slow boat to China. For that reason, Yahoo! President Sue Decker or board member Maggie Wilderotter would be poor choices. Former eBay (EBAY Quote) CEO Meg Whitman defines "big company Internet CEO," but her last few years, marked by questionable acquisitions, and eBay's subsequent performance have diminished her luster as a candidate.