This is not a political post. Shall I repeat that? This is not a political post, it is about karma, (def.# 2 - 4) and Auntie May’s favorite cosmic theory, “What goes around comes around.”
Meg Whitman, billionaire former CEO of eBay Inc., was rejected in her $142 million dollar bid to buy the Governorship of the State of California, but don’t feel sad for her, it’s only money and she has lots more.
I have never met Meg Whitman. I am told by those who have that she is a warm and charming, witty and very likable person. Unfortunately for Meg, this was not the message California voters absorbed in a solid year of advertising spin by the Whitman campaign.
Life before eBay
Meg Whitman did not have a particularly stellar career before eBay.
Her first CEO position was at FTD.com, it lasted two years. While Whitman was in control orders fell to a new low of 12 million, at it’s previous height FTD was taking 22 million orders a year. Next came a stint (def.#5) as head of toymaker Hasbro’s Playskool division for a year. No miracle turnaround there either, stock prices stagnated. Then came eBay, which was called AuctionWeb at the time.
Now Gimme Money (that’s what I want)
eBay made Meg Whitman rich. Her starting salary as CEO was a mere $175,000 with a $25,000 signing bonus, but the plan was to take eBay public and that opened the door to wealth.
As is standard in big business, executives get stock options as part of their compensation package. Ms Whitman’s initial option grant allowed her to buy 2,400,000 eBay shares at 20c with a January 20th 2008 expiration date and staggered vesting schedule. (eBay Inc SEC filings Form S-1/A Filed 8/19/1998 page 58)
- 30,000 shares vested immediately,
- 570,000 shares vested on February 14, 1999
- and the balance vested at the rate of 50,000 shares at the end of each month thereafter.
Spin Baby Spin
When opportunity knocked on Ms Whitman’s door she was not slow to open it. As CEO of eBay, Whitman hired Goldman Sachs to handle the company’s IPO (initial public stock offering) at $18 a share in 1998 and the second stock offering at $170 per share in April 1999. At this point Meg’s options on 650,000 shares had fully vested.
In 2001 Goldman Sachs formally became eBay’s investment banking advisor and Meg Whitman became a director of Goldman Sachs with an honorarium (def.#2) reputed to be in the range of $475,00 a year. As this 2004 legal action filed by eBay shareholders shows, there were other benefits, nicely summarized by the Sacramento Bee. Between 2001 and 2002 Goldman Sachs made $8 million in fees from eBay.
In fairness, I should point out that the spinning sweetheart deals were not illegal at the time they occurred and Whitman settled the shareholder lawsuit for a reputed $3 million, without admission of guilt.
Shop Shop Shop
Shortly after being appointed a Director of eBay Meg Whitman embarked on a shopping spree. eBay’s acquisition of Skype in 2005 is probably the most famously puzzling of Meg Whitman’s purchases but there have been others.
In April 1999 eBay announced the purchase of Butterfield & Butterfield, at the time one of the world’s largest and most prestigious auction houses for approximately $260 million. The 135-year-old company was preparing at the time to go public at a fraction of what eBay paid for it.
“This is a profitable company with a solid business plan and a first-rate management team. Butterfield & Butterfield also has strong relationships with major auction houses around the world.” Whitman said. “We will be able to bring fine and decorative art and collectibles online allowing eBay members unprecedented access to many of the world’s outstanding collections.”
By July 2002 scores of Butterfields staff had been laid off and eBay sold the company to the venerable British auction house Bonhams for $21.8 million.
In May of 1999 eBay announced the acquisition of Billpoint, the payment processing firm and Kruse International, a high end collectible auto auction house for a total of $275 million. Based on stock prices of May 18th 1999 Kruse cost eBay approximately $18.65 million. eBay phased out Billpoint early in 2003.
Kruse International, like Butterfields was a sad story. It was a 75-employee company based in Auburn, Indiana and had a premium name in the collectible car market with about 400,000 registered collectors. It helped locate parts for out-of-stock cars, and provided other information and services to car collectors.
At the time of acquisition eBay spokesman Kevin Pursglove said “No layoffs or personnel changes are planned, and Kruse will maintain its local charitable and civic activities. We will continue our commitment to the employees and to the community.” By the time eBay divested Kruse in October 2002 it had 40 employees, it never really recovered from the eBay experience and is now owned by a Canadian corporation.
There are parallels between the blundering Whitman campaign strategy and the way eBay was run in Meg Whitman’s final years as CEO, perhaps the foremost being the presumption that the worker bees are too dumb to fact check the BaySpeak.
Did this lead the average person to wonder how much grasp Whitman has of the differences between running a corporation and a State with a Democratic Legislature and unionized workforce?
Or did the majority of California voters see the other Meg, the Meg of whom Craigslist CEO Jim Buckmaster was warned “We would be best served to know that Meg could be a monster when she got angry and frustrated”?
Either way, for now, hopefully California is safe from eBay style management and Ms Whitman will find another hobby.
Y’all come back!