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Were they actually shirking? Were they doing all the work expected of them, just in fewer hours?

"I want to see you in your seat at your desk, otherwise I don't think you're working" is a sign of a terrible manager.

If they were doing the work expected of them, they would have been allowed. I know people who continued working remotely. One of them was so good, that when I found out he was working remotely, I was surprised, because in 3 years of dealing with him, I had no idea. He lived in the boonies in Arizona, IIRC.

Not really the issue. As you said, this was a group of less than 200 employees. Probably most of them were doing the work as expected. She cut a hugely morale boosting policy to get rid of a few shirkers and made herself and Yahoo look terrible right across the tech news for it. It was a huge and crucial mistake at a time when it looked like Yahoo might be picking up and it cut an enormous amount of momentum.

Obviously the even bigger mistake was not doing a massive company wide re-organization and throwing out all middle management. Middle management is only an asset if it is helping the business, and as is obviously the case in Yahoo, it is not.

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