EBay (NASDAQ:EBAY) has officially recommended that shareholders vote against candidates to the company’s board nominated by new investor Carl Icahn at the upcoming shareholder meeting. Icahn has been publicly battling against eBay CEO John Donahoe and board members Marc Andreessen and Scott Cook since taking a stake in the company in January.
“The Corporate Governance and Nominating Committee gave serious consideration to the two employees of Carl Icahn that he nominated to the Board. After careful review, the Board concluded that they are not qualified candidates based on the criteria that have consistently been applied by the Committee, including in particular that neither nominee has relevant experience or expertise. In addition, neither nominee would comply with the Board’s governance guidelines on overboarding — each is on four public company boards and Mr. Ninavaggi is co-CEO of Federal Mogul,” said eBay’s nominating committee chairman, Richard T. Schlosberg III, in the company’s preliminary proxy statement for the upcoming meeting, which is expected to take place sometime in the spring.
Icahn has been putting out regular letters to eBay shareholders informing them of what he believes to be huge “lapses in corporate governance” and calling for the online payments system PayPal to be spun off from the company in order to maximize shareholder value. “We have found ourselves in many troubling situations over the years, but the complete disregard for accountability at eBay is the most blatant we have ever seen,” Icahn said in the first of several letters.
Icahn takes biggest issue with Andreessen and Cook for holding what he believes to be conflicts of interest that prevent them from acting in the best interest of eBay shareholders. He specifically accuses Andreessen and eBay of cheating shareholders out of the profits Andreessen’s venture capital firm made from the sale of Skype to Microsoft (NASDAQ:MSFT).
EBay bought the messaging service Skype in 2005 and sold a controlling interest in the business to Andreessen’s venture capital firm, which in turn sold Skype to Microsoft for a huge profit. Icahn believes that eBay shareholders were cheated out of the cash they deserved in the sale of Skype. EBay has claimed that it “explored all possible options” with the Skype sale.
Icahn also has a problem with Cook’s investment in PayPal competitor Intuit. “In our opinion, having Mr. Cook on the board while planning PayPal’s future is akin to having Pete Carroll, coach of the Seattle Seahawks, sitting in when the Denver Broncos were constructing their game plan for the Super Bowl,” Icahn said in one of the letters.
After eBay issued its statement, Icahn fired back with another letter, claiming that “Donahoe’s inexcusable incompetence cost eBay stockholders over $4 billion,” in reference to the profit that Andreessen’s venture capital firm made from selling Skype. “We believe that eBay is the quintessential example of what is wrong with corporate governance at many of our public corporations and why the system is dysfunctional,” Icahn went on to say, before reiterating previous arguments that PayPal needs to be spun off and Donahoe, Andreessen, and Cook ousted.
EBay has attempted to blow off Icahn’s accusations, saying, “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.” Both Icahn and Donahoe have issued conflicting claims, with Icahn saying that the majority of eBay shareholders agree with him and Donahoe saying the majority of eBay shareholders agree with the company. Looks like we won’t know who will win this battle until the shareholder meeting.
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