eBay $EBAY, is one of the stocks in my portfolio. Their annual meeting is coming up on 5/13/2014. ProxyDemocracy.org had collected the votes of two funds when I checked and voted on 5/7/2014. I voted with management 50% of the time. View Proxy Statement.
Warning: Be sure to vote each item on the proxy. Any items left blank are voted in favor of management’s recommendations. (See Broken Windows & Proxy Vote Rigging – Both Invite More Serious Crime)
I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions if warranted. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay), aggregate compensation by public companies to NEOs increased from 5 percent of earnings in 1993-1995 to about 10 percent in 2001-2003.
Few firms admit to having average executives. They generally set compensation at above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average, with their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third world. The rationale for peer group benchmarking is a mythological market for CEOs.
eBay’s Summary Compensation Table shows CEO John J. Donahoe, was the highest paid named executive officer (NEO) at about $13.8M in 2013. I’m using Yahoo! Finance to determine market cap ($64B) and Wikipedia’s rule of thumb regarding classification. eBay is a large-cap company. According to Equilar (page 6), the median CEO compensation at large-cap corporations was $9.7 million in 2012, so eBay is well over median. Therefore, I voted against the pay package, stock plan and against the members of the compensation committee: Edward W. Barnholt (Chairman), William C. Ford, Jr., Kathleen C. Mitic, and Thomas J. Tierney. However, Barnholt is the only one up for reelection.
The GMIAnalyst report I reviewed gave eBay an overall ‘B.’ From their report:
One concern is that the board has executed a formal CEO employment agreement, which may bind the ability of the compensation committee to make compensation decisions that tie pay to performance. Employment agreements also make it more difficult for the company to eliminate excessive golden parachute arrangements, which can yield significant payouts to executives despite poor performance.
• The CEO’s potential cash severance pay exceeds five times his or her annual pay, which occurs in only 17.6% of companies in the home market. Such excessive ‘golden parachute’ payments weaken the pay for performance linkage and enable pay for failure.
• Unvested equity awards partially or fully accelerate upon the CEO’s termination, characteristic of 90.2% of companies in the home market. Accelerated equity vesting allows executives to realize pay opportunities without necessarily having earned them through strong performance.
• The company has not disclosed specific, quantifiable performance target objectives for the CEO, in contrast to 73.9% of companies in its home market that have provided such metrics. Disclosure of performance metrics is essential for investors to assess the rigor of incentive programs.
With regard to shareowner proposals, I voted in favor of John Chevedden’s proposal to allow shareowners to act by written consent. This proposal would empower shareholders by giving us the ability to effect change at our company without being forced to wait until an annual shareholder meeting. Shareholders could replace a director using action by written consent. Shareholder action by written consent could save our company the cost of holding a physical meeting between annual meetings. For additional background, see Alyce Lomax’s post, Shareholders Want This Power, at The Motley Fool.
How I voted (CorpGov) below, with votes against the Board’s position noted in bold:
| # | PROPOSAL TEXT | MGMT | CBIS | CALVERT | CorpGov |
|---|---|---|---|---|---|
| 1.1 | Elect Director Fred D. Anderson | For | For | For | For |
| 1.2 | Elect Director Edward W. Barnholt | For | For | For | Against |
| 1.3 | Elect Director Scott D. Cook | For | For | For | For |
| 1.4 | Elect Director John J. Donahoe | For | For | For | For |
| 2 | Advisory Vote to Ratify Named Executive Officers’ Compensation | For | For | For | Against |
| 3 | Amend Omnibus Stock Plan | For | For | Against | Against |
| 4 | Ratify Auditors | For | Against | For | For |
| 5 | Provide Right to Act by Written Consent | Against | For | For | For |
| 6 | Vote on Company’s Spin Off (Withdrawn) | None | N/A | N/A | N/A |
Mark your calendar:
You may submit proposals for consideration at future annual stockholder meetings. To be considered for inclusion in the proxy materials for our 2015 Annual Meeting of Stockholders, your proposal must be received by our Corporate Secretary at our principal executive office no later than November 24, 2014. Your proposal must comply with the procedures and requirements set forth in Rule 14a-8 under the Securities Exchange Act of 1934, as amended. Your proposal should be sent via registered, certified or express mail to our Corporate Secretary at our principal executive office (2065 Hamilton Avenue, San Jose, California 95125); no facsimile submissions will be accepted.
Looking at SharkRepellent.net, no action can be taken without a meeting by written consent. Shareholders cannot call special meetings without at least 25% support. From Yahoo! Finance, eBay Inc.’s ISS Governance QuickScore as of May 1, 2014 is 6. The pillar scores are Audit: 1; Board: 8; Shareholder Rights: 6; Compensation: 6. Brought to you by Institutional Shareholder Services (ISS). Scores range from “1” (low governance risk) to “10” (higher governance risk). Each of the pillar scores for Audit, Board, Shareholder Rights and Compensation, are based on specific company disclosures.
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