Fuel for Icahn’s Fire: EBay Slashes Donahoe Salary By Over Half

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While eBay (NASDAQ:EBAY) has vigorously defended the performance of CEO John Donahoe against accusations made by activist investor Carl Icahn that he’s doing a far from satisfactory job, a proxy filing with the Securities and Exchange Commission made earlier this week showed that eBay is slashing the CEO’s salary by more than half.

The filing showed that Donahoe’s salary has been cut by 53 percent for 2013 versus 2012. “The Committee concluded that while Mr. Donahoe continued to perform well against many of the goals, the company’s performance for 2013 and positioning relative to its competitors at the start of 2014 did not fully meet expectations,” the filing reads.

For 2013, Donahoe was paid about $13.8 million consisting of a $993,269 salary, a performance-based bonus of $1.6 million, and $11.1 million in stock and option rewards. In 2012, the CEO made a total of $29.7 million, including a $14.9 million performance-based share reward that was not included in his 2013 pay. Donahoe wasn’t the only executive taking pay cuts, as eBay missed financial targets for 2013.

EBay released a statement defending Donahoe on Wednesday, saying that, “Since John Donahoe joined eBay Inc. in 2008 as president and CEO, the company has flourished.” The company said its share price has grown 441 percent since Donahoe took the helm.

All this will only be fuel to Icahn’s fire in demanding that Donahoe and board members Marc Andreessen and Scott Cook be ousted, and online payments service PayPal be spun off. Icahn has been issuing strongly worded letters to eBay shareholders regularly in the past weeks. Icahn has said that eBay suffers from huge “lapses in corporate governance.”

“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 one letter, also saying that Dohanhoe “seems to be completely asleep or, even worse, either naive or willfully blind to these grave lapses of accountability.”

Icahn has made his own nominations to eBay’s board, but in another proxy filing eBay said that Icahn’s candidates are not qualified for the position. The company has refuted Icahn’s claims that its sale of Skype to Andreessen’s venture capital firm resulted in a lose of $4 billion for eBay shareholders when Skype was eventually sold to Microsoft (NASDAQ:MSFT).

In a response to Icahn’s letters, eBay claimed that, “The company explored all options for divesting Skype,” and pointed out that “because Mr. Andreessen’s fund had a small stake in the acquiring group, Mr. Andreessen was recused from all decision making.” The company also said that 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.”

“Carl Icahn doesn’t let the truth get in the way of a good story. And while his letters and media interviews may be entertaining, they are not factually accurate,” eBay has stated.

Ichan’s most recent letter states that he will continue pursuing eBay for financial records that he says investors are entitled to under Delaware law. Ichan asked, “Why, if there is nothing to hide, would records relating to a 5 year old transaction not be permitted to be shared with all stockholders?” The fact that Donahoe’s performance-based pay has been slashed will only add to Ichan’s evidence that the CEO should be ousted.

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