All of the ingredients you need for a volatile shareholder meeting were swan-diving into the Yahoo! (NASDAQ:YHOO) mixing bowl yesterday. There was a groundswell of investor unrest. The media was pouncing on CEO Terry Semel's excessive compensation. The proxy ballot was freshly stocked with shareholder proposals to change the way the company does things.

Semel fan-club members will note that the independent proposals -- all of which the company's board opposed -- were defeated. And all of the board candidates, including those on the compensation committee who signed off on Semel's gargantuan bonus last year, were re-elected to their posts.

It was the gangland equivalent of bringing a Molotov cocktail, only to realize that nobody brought a match to light it.

However, the damage was done. With some of the dissenting initiatives boasting the support of nearly a third of the company's investors, Yahoo! can't afford to ignore the unrest. If this is what it's like for folks who have patiently held on to their shares through the past few lackluster years of performance, you can only imagine the venom that's pent up in investors who have bailed on the company or refused to back a market laggard.

Working on the engine, instead of fixing a flat
The loudest voice in the dissension has been leadership consultant Eric Jackson. In a series of blog entries -- hosted on Google's (NASDAQ:GOOG) Blogspot -- Jackson carved out a wish list of tactical moves. His Plan B has generated nearly enough media attention as Brad Garlinghouse's internal "peanut butter manifesto" did last year.

Let's take a closer look at where Jackson has it right -- and wrong -- in his jug of traveling-medicine-man elixir.     

His first point is the meatiest: It proclaims that Semel should be replaced as chairman and CEO. Jackson isn't alone here. Back in December, Semel was one of the four CEOs that I figured would get canned this year in my "4 CEOs to Go in 2007" column. Two of the four have already been booted, and a third is just a pending merger away from demotion. That leaves Semel, though I can't say I agree with Jackson's assessment of him.

Let's go over Jackson's beefs with Semel's strategic missteps, verbatim from his blog:

  • Failing to Buy Google in 2002
  • Destruction of Yahoo! Shareholder Value in Past 2 Years
  • Continued Loss of Share in Search
  • Costly creation of Yahoo! Media Group and Burbank Campus
  • Missing the Need to Overhaul the Overture Platform at a Critical Time in Its Drive to Compete With Google
  • Failing to Buy YouTube in 2006
  • Failing to Buy MySpace in 2005
  • Outsized Compensation for Small Shareholder Return

Going by Semel's claim that Google could have been purchased for $3 billion five years ago, it's easy to lament the squandered golden opportunity. However, taking the company to task for not emerging as the top bidder for YouTube or MySpace isn't fair. By that metric, every single company save for Google and News Corp. (NYSE:NWS) should send its CEO to the gallows. Those knocks fail to applaud other worthy Yahoo! purchases, including its acquisitions of paid-search pioneer Overture and social photo-sharing innovator Flickr, as well as its minority stakes in overseas success stories including Yahoo! Japan and China's Alibaba.

Judging Semel based on the stock's lackluster past over the past two years, while dismissing the huge 355% gain the stock amassed over the two preceding years, is also unfair.

Jackson dismisses the gains Yahoo! notched in 2003 and 2004 as a general rebound in online advertising stocks. That is a market, by his own admission, that is dominated by Yahoo!, Google, and Microsoft's (NASDAQ:MSFT) MSN. If that's the peer group, Google didn't go public until the tail end of that two-year span, and Microsoft's shares rose a paltry dividend-adjusted 17%.

Plan B from outer space
I agree with several of Jackson's Plan B points. Some of the points, such as folding Yahoo! Photos into Flickr, have since become reality. However, Plan B isn't a cookbook for the weak of stomach. Several of the points are often contradictory. Like a kid who wants way too many toys from Santa, Jackson wants Yahoo! to initiate a quarterly dividend and step up its share-repurchase efforts.

How does treating Yahoo!'s balance sheet like a pinata help, when many of Jackson's knocks were about companies that Yahoo! failed to buy? With Yahoo! shares running stagnant since 2005, stock-based deals will be tough to broker.

Will Jackson's Plan C next year take Yahoo! to task for not buying Facebook or Digg in 2007? He has to recognize that the company has better uses for its money. Jackson may believe that part of the solution is to ramp up technology-based spending, but this isn't the time to squander Yahoo!'s greenbacks.

Are anti-takeover poison pills and ludicrous compensation policies a problem? You bet. Nobody's saying Yahoo! is perfect. Yesterday's dissension cements what the moribund share price has been saying for two years.

But although Yahoo! and Semel are both bending at the moment, neither is broken. A new chef isn't the answer. A new cookbook, on the other hand? That would be the tastier route.

Yahoo! is a Stock Advisor recommendations. Microsoft is an Inside Value selection. Sample either newsletter with a free 30-day trial subscription.  

Longtime Fool contributor Rick Munarriz thinks the Yahoo! Appreciation Society should be proud of things such as Flickr, Yahoo! Finance, Yahoo! Answers, and He does not own share in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.