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After a little more than five and a half months as CEO of  Yahoo! Inc. (YHOO - Analyst Report), Marissa Mayer has received a bonus of $1.1 million. This is in addition to her annual base pay of $1.1 million and long-term stock compensations worth $56 million.

Yet Yahoo shareholders are not complaining. Since Mayer quit Google Inc. to join Yahoo, the company’s stock has risen steadily. From $16.54 in the last week of October, the stock price has risen steadily to $22.80. This 38% gain shows that investors are of the view that Mayer is taking the company in the right direction.

The software major has been faced with several problems over time. Some of them have come from actual performance. Yahoo, once the largest seller of online display ads, has been dethroned by Google and Facebook, Inc. (FB - Analyst Report). Meanwhile, its home page and email services had become nearly obsolete, depending primarily on people who had simply not cared to change habits. Finally, it had missed two key Internet trends – social networking and the proliferation of mobile services.

As the stock continues to appreciate with Mayer’s appearance as the CEO, expectations from her tenure are also high. Most of the company’s problems are internal and have to do with its culture. First, the company has seen six CEOs in five years and needs stability at the top. Additionally, all of them have looked outward instead of fixing internal issues.

This means that some tough decisions need be taken at the rudderless ship that has been Yahoo. Mayer has fired the first salvo, via an internal memo which has ended the company’s work-from-home option. Those privy to hearing her speak on the issue have learned that she wants “all hands on deck.”

The idea is that more people at the workplace would mean more impromptu meetings, brainstorming and quicker decision-making. Around 200 people at Yahoo were working from home, and Mayer was greeted by empty floors and parking lots, contrary to the culture at her earlier employer Google. Many of these employees had low productivity and some of them had even begun working on their own start-ups.

Her decision has been met with much criticism. A spokeswoman for the website Working Mother has said that the new policy was “incredibly disappointing." She said Mayer was taking “her workforce back to the last century” through this move.

Meanwhile Richard Branson, who heads Virgin Media, Inc. , has also criticized the policy claiming that this was “a backward step in an age when remote working is easier and more effective than ever.” He claimed that it reflected her lack of trust in employees, who should be able to deliver work remotely without supervision.

But it’s not all tough talk -- Mayer has provided free food at company cafeterias and handed out iPhones and Android phones to employees in lieu of BlackBerry phones. The free-food policy has resulted in larger crowds eating together and animated discussions which will hopefully spark much-needed ideas. The result is that the external perception of Yahoo is beginning to change. The company is now receiving job applications from workers at rivals Facebook and Google.

While the uproar over her new policy may be diverting attention from the key challenges that Mayer faces, it is important to define the company’s mission in the medium term urgently. For instance, is Yahoo a media company, competing with the likes of Amazon.com Inc. (AMZN - Analyst Report)?

Mayer has chosen to call Yahoo a technology company. However, it continues to act in a manner which is closer to its earlier definition of a digital media company, such as partnering with NBC Sports and Wenner Media.

Meanwhile, Yahoo has decided to prune the number of mobile apps it offers from 60 to 12. The idea is to merge apps into each other and reduce the number of apps which users have to download. The company’s Flickr photo sharing site has also been upgraded. Users can now tag friends using the @ symbol. High resolution photo displays and quicker uploads are some of the other key changes.

Though the company remains far behind Facebook and Google, Mayer is clearly taking Yahoo into a new era. This is reflected in its upward stock price. Only time will tell whether “tougher” internal moves like abolishing work from home will help Yahoo recuperate.

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