Yahoo’s Chinese employees are hostages to demands by the Chinese security apparatus for information. There is no way Yahoo could have avoided handing out this information without endangering its employees. And writing off its billion-dollar investment in Chinese operations. The real problem was this guy using his workplace to post items on the internet. It’s not his fault - he was just ignorant, but it was his mistake.
Yahoo could have told the Chinese government that it refused to cooperate, and left it up to up to the Chicoms to force the issue. If the Chicoms moved against the employees, Yahoo could have immediately shut down operations, taking it out of the employees' hands, and gone public with the story.
A billion dollars at risk. But worth the risk, in the long run, for a company with moral vision.