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eBay Financial Performance Weighs on Executive Compensation

By most objective measures, 2013 was a good year for John Donahoe. But it was nothing compared to 2012.

Last year, the eBay CEO raked in nearly $14 million in salary, stock and cash incentive payouts. But that was less than half of what Donahoe took home in 2012, when he netted an eye-popping $29.7 million.

To be sure, that year was an aberration, with around half of that compensation tied to a one-time performance bonus. But even subtracting that payout, Donahoe’s overall 2013 compensation checked in below each of the two previous years.

Last year, Donahoe netted a total of $13.83 million, less than half of the bonus-inflated 2012 compensation, but also well below the $16.47 million the eBay chief took home in 2012.

eBay explains that its executive compensation committee has aimed to craft a compensation program “that serves the long-term interests of our shareholders.” As a result, executive pay is closely coupled with the company’s financial performance and share price.

“Alignment of interests between our executives and stockholders is core to our compensation philosophy,” eBay explains in its 2013 proxy statement, describing its payment program as “highly performance-based.”

That’s why equity grants make up the biggest single element of the executive compensation program. “To ensure long-term alignment with stockholders,” eBay says, equity grants in the form of restricted stock units and options accounted for roughly 80 percent of each named executive’s target pay in 2013.

Of the cash incentives that eBay offers its named executives under what’s known as the eBay Incentive Plan, 75 percent of the target bonus is staked to the company’s balance sheet, with the remaining quarter based on the individual’s performance. Based on eBay’s lower-than-expected 2013 financial results, the portion of the cash incentive bonus based on company performance was funded at 87 percent of its target. Combined with the individual performance component, eBay executives took home 81.6 percent of the target through the cash incentive program.

Because the company failed to meet a target for improvement in customer satisfaction, known as the net promoter score, no executive bonus was paid out in that category.

Donahoe’s salary of $993,269 accounted for just 7 percent of his overall compensation in 2013. Of the other executives whose compensation was disclosed in the proxy statement, salary comprised 12 percent of their collective take.

eBay’s compensation committee convened several meetings in 2012 and 2013 to set Donahoe’s salary and targets for incentives awards, weighing his performance and the company’s, input from the board of directors, and the compensation figures reported by companies with which eBay competes for talent, such as Amazon, Google and Visa.

“When determining Mr. Donahoe’s compensation, the committee takes a multi-year view of total compensation with the objective of retaining and motivating him over the long term while providing a strong pay for performance element,” eBay explains.

The committee cited a number of factors in justifying Donahoe’s compensation package, including his role in driving global expansion in countries such as Brazil, Japan and Russia, and developing the company’s executive bench.

But the company’s 2013 financials weighed heavily on Donahoe’s pay, particularly in the annual cash incentive payout, which tumbled 43 percent from 2012, dropping from $2.84 million to $1.62 million.

The cash incentive payouts were down among each of eBay’s other named executives. Aside from Donahoe, that group includes Chief Financial Officer Robert Swan, Marketplaces President Devin Wenig, PayPal President David Marcus, and Chief Technology Officer Mark Carges.

Donahoe is uniquely positioned among eBay executives with a cash incentive target of 200 percent of his base salary. The targets for other named executives were set at either 100 percent or 75 percent.

Those targets translated into cash payouts of $1.62 million for Donahoe; $687,792 for Swan; $647,010 for Wenig; $553,370 for Marcus; and $379,030 for Carges.

Donahoe, Swan, Wenig and Carges saw only modest increases in their base salary, ranging from 2.6 percent (Donahoe) to 3.3 percent (Carges). Only Marcus saw a double-digit increase of 12.9 percent, rising to a base salary of $700,000, a spike the committee said was intended to “further align his cash compensation with the market.”

With the exception of Carges, the other named executives saw their total compensation drop from 2012 to 2013. Swan, the second-highest paid executive, received total 2013 compensation of $7.9 million, down from $11.83 million in 2012. Wenig’s compensation dipped from $6.94 million to $6.68 million, while Marcus’ overall pay tumbled from $8.28 million in 2012 to $6.04 million last year.

Carges, meanwhile, saw his compensation jump from $3.68 million in 2012 to $4.35 million last year, though those figures were both well off 2011, when the CTO took home $9.7 million.

Kenneth Corbin on Linkedin
Kenneth Corbin
Kenneth Corbin
Kenneth Corbin is a freelance writer based in Washington, D.C. He has written on politics, technology and other subjects since 2007, most recently as the Washington correspondent for InternetNews.com, covering Congress, the White House, the FCC and other regulatory affairs. He can be found on LinkedIn.