What do you get when you combine a slumping stock price, shrinking market share, and an excessively paid CEO? Why Yahoo!, of course. From USAToday’s “Yahoo CEO Semel faces shareholder grilling“:

Just before Google went public nearly three years ago, Yahoo Chairman Terry Semel assured a roomful of securities analysts and money managers that his company would remain the Internet’s brightest star. To punctuate his high hopes, Frank Sinatra’s “The Best Is Yet to Come” played in the background.

Since then, Google has so thoroughly eclipsed its rival that a growing contingent of Yahoo shareholders believes the company would be better off without Semel, who could face a chorus of discontent when he takes the stage at Yahoo’s annual shareholders meeting Tuesday.

Eric Jackson and approximately 80 other Yahoo! shareholders are among those who will be “grilling” Semel on what they see as poor leadership and an excessive salary for the company CEO. Upset stockholders continue to watch Google tromp Yahoo! with an unrelenting fever each and every quarter.

Why can’t Yahoo compete?

I think Jackson and his supporters are on the right path. But I don’t think Semel is the only management problem faced by Yahoo. The company needs a massive ground-up overhaul that includes middle management. As I said about a week ago… Yahoo needs a big “injection of new“.

Google is beating the pants off of Yahoo because it’s a more nimble, innovative company. Yahoo, on the other hand, always seems to be playing catch up and following in Google’s footsteps. As a whole, the companies are vastly different. Google is a search and search advertising company. Yahoo is a content providing/producing media company that also happens to do search and search advertising.

That shift in focus is no one’s fault but Yahoo’s. And if Sunnyvale wants to steal its thunder back from Google it’s going to have to refocus and start innovating again… not running up to the kids in playground shouting “me too, me too” every time Google does something.

Is the removal of Semel beneficial for Yahoo? At this point… I say yes. Is it the cure-all answer for Yahoo’s problems? Not by a long shot.

Update June 12, 2007:  The results of this meeting are now available.  Non-company sponsored proposals were all defeated.