Yes, the pay is excessive and probably unnecessary, but BoDs that approve it are often comprised of CEOs at other companies. Quid pro quo.
CEO compensation increased dramatically at around the same time that the finance sector started capturing a bigger chunk of the GDP, which is around the same time that many large companies created mini hedge funds internally. Maybe it's more to do with that, but the country club networking opportunities can't hurt.
Her financial compensation largely depended on stock performance, as is typical with anyone involved at the C-level. A share of YHOO is worth $41 today vs $15 (and lower teens) at the time of her hire five years back.
If the YHOO stock was anywhere near 2012 levels (or lower, or zero), her total compensation would look very different.
There's a lot of randomness in business and in life.