eBay's Plan Too Big for Some Rulebooks

Two of eBay's (EBAY) biggest shareholders will vote against the company's plan to expand its options pool -- assuming that they stick to their guidelines.

Both Fidelity and Vanguard have proxy voting guidelines that instruct portfolio managers how to evaluate stock plans offered by companies in their portfolio. eBay's plan violates specific rules within each mutual fund company's proxy guidelines.

Neither Fidelity nor Vanguard discloses how it votes on particular proxy issues. A new regulation that will force mutual fund companies to disclose their proxy votes doesn't go into effect until next year.

However, in the first half of last year, Vanguard voted against 64% of the stock-based compensation plans proposed by companies it invested in, according to information sent to shareholders. Meanwhile, Fidelity's guidelines are a good indication of how the mutual fund company votes, said company spokesman Vin Loporchio.

"We follow our proxy voting guidelines in the overwhelming majority of cases," he said.

eBay representatives did not return calls seeking comment on potential opposition to its options proposal.

Fidelity and Vanguard, the fourth- and eighth-largest stakeholders in eBay, respectively, would be among the most high-profile -- and largest -- investors to vote against eBay's options proposal. The California Public Employee Retirement System, the nation's largest pension fund, has already said it will vote against the plan, but it holds a much smaller stake in eBay.

Scrutiny

Shareholders will get a chance to weigh in on eBay's options plan at the company's annual shareholder meeting June 26. If approved, eBay's proposal would increase by more than 50% the amount of options it could grant under its current options plan. The proposal would authorize the company to issue 14 million more shares, tantamount to more than 4% of the company's outstanding stock, to employees and executives in the form of options.

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