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Calpers Opposes eBay's Options Plan

Updated from 1:10 p.m. EDT

Opposition is mounting to eBay's (EBAY - Get Report) plan to expand its pool of stock options, with the nation's largest public pension fund deciding to vote against the proposal.

Calling it "excessive," the California Public Employees' Retirement System, or Calpers, said it will vote its shares against the plan. Calpers owns 213,000 shares in eBay, worth about $21.6 million in recent trading.

eBay did not return calls seeking comment.

Not only do options dilute shareholder value, but corporate governance critics have linked them to the scandals at Enron and WorldCom, charging that their use tends to encourage short-term -- and sometimes illegal -- actions to boost stock prices.

While not among the very largest institutional holders of eBay's stock, Calpers, with its $138 billion investment portfolio, is among the most influential. And it is taking a reformist bent in some of its votes.

They Object

The options plan is not the only issue on which Calpers plans to vote against. The pension fund also plans to vote against the board's selection of PricewaterhouseCoopers as the company's auditor. Calpers opposes this choice because PricewaterhouseCoopers, which has served as eBay's auditor since 1996, has also performed consulting work for the online auctioneer.

Last year, for instance, PricewaterhouseCoopers charged eBay $1.2 million in audit fees and $747,000 more in audit-related fees, which includes due diligence reviews of acquisitions and divestitures. Meanwhile, PricewaterhouseCoopers billed eBay $19,000 for consulting work regarding tax planning and advice, and another $91,000 for legal and other services.

"The Audit Committee has determined that the rendering of non-audit services by PwC was compatible with maintaining their independence," eBay said in its proxy statement.

But Calpers disagrees. For companies in which it invests, the pension fund has decided it will vote against their choice of auditors if the auditor is doing consulting work as well, said Brad Pacheco, a spokesman for agency.

"It doesn't matter the degree of consulting work. We still think there's a conflict there when they're taking on those dual roles," Pacheco said.

Calpers is taking this opposition to auditors doing consulting work a step further. The agency is voting against company directors who as members of an audit committee approve their auditors' dual role.
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