I guess shareholders haven't forgiven Yahoo! (NASDAQ:YHOO) CEO Jerry Yang after all.

A colossal blunder by proxy vote tallying firm Broadridge Financial (NYSE:BR) sorely understated the dissenting votes during this past weekend's Yahoo! annual shareholder meeting.

It was originally reported that 85.4% of the votes cast were in favor of Yang maintaining his seat on the company's board. The math immediately smelled funny to a group of dissenting shareholders that controls a sizeable voting stake in Yahoo!, so it filed a complaint with Broadridge.

Well, it turns out that a rare truncation error inflated Yang's support. He actually received just 66.3% of the vote, with slightly more than a third of the shares withheld. The news gets worse for Chairman Roy Bostock, who only wound up with 60.4% of the support (instead of the 79.5% that was originally reported).

The end result is that all of the directors were reelected, but it certainly wasn't the lopsided victory that Yahoo! was hoping for.

The news is certainly troubling from an accountability angle. Can shareholders trust that their proxy votes will be heard? Would this wide "no confidence" statement have ever become known if a recount wasn't formally requested?

These are meaty issues to toss around at the next cocktail party. For now, the real end result stumper behind the corrected results is if Yang and Bostock can continue to lead the company.

One of them has to go
Bostock and Yang were the two voices telling the Yahoo! side of the story throughout the Microsoft (NASDAQ:MSFT) negotiations, but shareholders never got to hear the happy ending. When 39.6% and 33.7% of the votes, respectively, are withheld, Bostock and Yang have to know that their days are numbered.

It's not entirely fair. They can't be blamed entirely for Yahoo!'s malaise. Bostock has been on the board since 2003, but was only tapped as chairman earlier this year. Yang slipped into the CEO seat, but only after Terry Semel was shooed away last year. In other words, these weren't the two guys who drove Yahoo!'s stock down to the high teens when they were approached by Microsoft. However, they're the two guys who fumbled Microhoo, driving the stock back down to where it was before Microsoft stepped in back in January.

In other words, they just didn't happen to be in the wrong seats at the wrong time. They failed to do right by their shareholders.

The board doesn't see it that way. It didn't flinch as the company rebuffed Microsoft's advances and offered fat compensation packages to underperforming executives. However, it can't ignore the tally. Action needs to be taken. Either Bostock or Yang has to go.

Bring in the smoke and mirrors
What can save the Bo-yang duo? Yahoo! needs to juice things up with some non-organic moves to give at least some investors the notion that things may change quickly. Time Warner's (NYSE:TWX) AOL can be had, but likely at too dear a price for Yahoo! if it has to bid against Microsoft.

Smaller deals need to be cut, but in areas where the market can buy into Yahoo! making a difference.

  • It can buy into South Korea's leading online marketplace Gmarket (NASDAQ:GMKT). It already owns a 10% sliver, and the move would enhance its profile of attractive Asian investments.
  • Yahoo! can expand its display advertising strengths by snapping up ValueClick (NASDAQ:VLCK). It can wear the Microsoft pants for a change, as ValueClick's stock got hit last week after an uninspiring quarterly report circa Yahoo! in January.
  • It can beef up its online dating presence by buying sites like Plenty of Fish or going for IAC's (NASDAQ:IACI) Match.com and Chemistry.com.

In short, the verdict is in. Yahoo! can't stand still, so Bostock and Yang may as well become moving targets.

Some other recent Microhoo dealings:

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.