eBay Board Withholds Bonuses, Freezes Salary for Execs
By Ina Steiner
eBay's Board of Directors found the company under-performed in 2008 and is awarding no eBay Incentive Plan bonuses to top executives. In addition, the board is freezing executive salaries this year. The board's compensation committee also created a new peer group by which to measure executive performance going forward, choosing to eliminate consumer products companies such as Nike and Polo Ralph Lauren, and adding companies such as American Express and Mastercard.
The compensation committee noted, "we no longer looked to companies in the consumer products industry as a source for executive talent and that as our Payments business continued to grow, we were increasingly competing with financial services companies for talent."
The committee also said that, "in light of the financial uncertainties caused by the global macroeconomic recession and credit crunch, the committee decided to freeze 2009 salaries for executive officers, including our CEO, at 2008 levels (except in a small number of individual cases where adjustments were deemed warranted)." In 2008, the committee reevaluated CFO Bob Swan's compensation arrangements and decided to increase his salary above the range for his job level to reflect his increased role and responsibilities.
Despite Meg Whitman's pending run for governor of California, eBay continues to provide her with use of office space and IT and secretarial services through 2011 as part of the agreement she made with the company related to her retirement as CEO. Those perks cost eBay less than $250,000 per year, according to eBay's Proxy statement, which also revealed the company paid $16,823 in health insurance premiums in 2008 for the benefit of founder and chairman Pierre Omidyar.
The company's annual meeting is being held at its headquarters in San Jose on April 29, 2009. Shareholders will be asked to approve amendments to existing equity incentive plans to allow for a one-time option exchange program for employees other than named executive officers and directors.
The program would permit some employees to surrender certain outstanding stock options that are significantly "underwater" (i.e., those options with an exercise price that is significantly greater than the current trading price) for cancellation in exchange for a lesser number of restricted stock units, or RSUs. Each RSU issued in the option exchange program would represent an unfunded right to receive one share of common stock on one or more specified future dates when the RSU vests.
The Board said it believes the option exchange program would enable the company to motivate and engage eligible employees to continue to build stockholder value.
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NOTE: Full details on the board's decision-making process with regard to issuing executive bonuses and equity incentives can be found in the proxy statement found here. It appears bonuses are based on a performance target set in the first quarter, and equity incentive awards are based on peer reviews.
About the author:
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to email@example.com.
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