For a few more specifics from Mr. Icahn:
(1) at least two board members are directly competing with eBay, (2) one board member is demanding eBay cease hiring the most talented employees, (3) another board member is routinely funding competitors while buying companies from eBay and reaping significant personal riches, (4) at least two board members appear to have put their own financial gain in ongoing conflict with their fiduciary responsibilities to stockholders and (5) the CEO seems to be completely asleep or, even worse, either naive or willfully blind to these grave lapses of accountability and stockholder value destruction?
The entire letter is worth reading, but basically, he contends that board members Marc Andreesen and Scott Cook do not have the company’s best interests in mind and in some cases are actually competing against it. Oh yeah, and CEO John Donahue is ‘asleep at the wheel’ and complacent for letting this go on. On the surface, some of the specifics brought up by Mr. Icahn sound problematic and as the WSJ notes, these governance issues are not isolated to EBay, but are endemic within Silicon Valley companies.
EBay responded rather quickly with a press release of its own swatting away Mr. Icahn’s claims and defending both its execs and its corporate governance practices:
New eBay shareholder Carl Icahn has cherry-picked old news clips and anecdotes out of context to attack the integrity of two of the most respected, accomplished and value-driven technology leaders in Silicon Valley. Marc Andreessen and Scott Cook bring extraordinary insight, expertise and leadership to eBay’s board, which is scrupulous in its governance practices and fully transparent with regard to its directors’ other affiliations and businesses. And eBay Inc. President and CEO John Donahoe is widely respected for his turnaround of eBay and leadership of the company over the past six years.
The letter also accuses Mr. Icahn of ‘resorting to mudslinging’ and of basically wasting their time. The company also reiterated its position that ‘shareholders are best served by keeping PayPal part of eBay,’ which is the real issue at play here.
Mr. Icahn got some unexpected (and seemingly begrudging) support for his breakup campaign from former PayPal CEO and Mr. Midas Touch Elon Musk who was quoted in a recent and excellent Forbes article on the company as saying that:
“It doesn’t make sense that a global payment system is a subsidiary of an auction website. It’s as if Target owned Visa or something.” PayPal, he adds, “will get cut to pieces by Amazon Payments, or by others like Apple and by startups if it continues to be part of eBay.
Later on he adds:
“It will either wither or be spun out,” says Musk. “Carl Icahn can see it, and he’s not exactly super tech savvy.”
While many will dismiss Mr. Icahn as just trying to make a quick buck or as not knowing the business, the words of a Paypal veteran and ‘visionary’/’pioneer’ like Mr. Musk will certainly raise some eyebrows. Of course, those comments are rather rich coming from the guy who sold PayPal to EBay in the first place.
It’s worth noting that Mr. Andreessen isn’t up for election this year so a resignation would be the only way for him to exit the board. This battle is starting to heat up and I expect it to only get more interesting as time goes on.
Disclosure: Author holds no position in any stock mentioned.
