Yahoo Problems Belong to Board, Not Just Jerry Yang

(MoneyWatch)  Jerry Yang finally gave in and said that he'd step down as Yahoo's CEO as soon as the board could find a replacement, returning to his job as "chief Yahoo." Shares jumped in response, but anyone who thinks that the change in CEO paves the way for a change in the company's fortunes are going to be disappointed. That is because Yang was more symptom than cause of the malaise that has engulfed the company.

What has dogged Yahoo is the issue of ego. It's almost impossible to find people running large companies who don't have a degree of ego. You'd have to be irresponsible to take charge of a multi-billion dollar enterprise if you lacked the degree of confidence to think yourself able to do the job. And heaven knows that some industries -- high tech, finance, and media are three that jump to mind -- attract leaders whose ego dosage is enough to fill a small cadre of yes-men. Look at Apple's Steve Jobs or Larry Ellison of Oracle. Bill Gates had the self-possession to continue as CEO of Microsoft for years, being one of the few people who could successfully transition from entrepreneur to a chief executive of such a large undertaking.

But even in such cases, for success to happen, ego must take a back seat to the good of the company and accomplishment. The world is willing to forgive much arrogance if the person communicating it has talent and puts in enough hard work to make things happen. From the outside -- sometimes the only place to get clear perspective -- Yahoo has had the arrogance without the talent and vision necessary to transcend the ego.

Look at the wording of the memo, according to the New York Times, that Yang sent the company last night:

In a memorandum typed in his style using no capital letters, he wrote, "i strongly believe that having transformed our platform and better aligned costs and revenues, we have a unique window for the right ceo to take ownership over the next wave of mission-critical decisions facing the company."

How self-deceptive can you be? This calls up memories of Yang's recent appearance at the Web 2.0 Conference. John Battelle, who interviewed him, asked about the discussions with Microsoft about a deal earlier this year and noted that many saw his ego as the reason that nothing happened. Yang answered, "People who know me know I don't have an ego about remaining independent versus not remaining independent," to which Battelle answered, "That's a surprising statement to me."

Of course it was, but to focus on Yang as the sole source of ego is short-sighted. As Yang said about Yahoo's board, "We believed we were doing the right things every step of the way." Of course they did. They thought that the company was worth significantly more than Microsoft had been willing to pay, even though the offer was a significant premium over the value of Yahoo's market value. But it wasn't. Value only exists when people are willing to offer something of value for what you have to offer. No matter what Yang said, the board backed him up completely. Even if Yang is not CEO, the board remains intact with him retaining his directorship.

How will anything change? If the board is sure that it has been right, that the Microsoft and Google deals falling apart were just unfortunate circumstances, then who would it let a new CEO go in another direction? And what person, capable of running the company, would want to walk into a situation where his or her hands might be tied? Unless the egos on the board are willing to admit that they have badly erred and need to change course, there is no reason to think that anything will change for the better over the next few months.

See also The End of Yang's Yahoo: Smaller and Still Looking for a Search Deal in BNET's Media blog.