This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

eBay Vote Shows a Return to Complacency

With nary a question from investors about a management-enriching stock plan, eBay (EBAY - Get Report) concluded its annual shareholder meeting on Thursday in less than 40 minutes.

Almost as quickly, it seems, once-rabid investors have shelved their suspicions that generous benefits for top executives come at the expense of average shareholders. Last week's vote at eBay suggests that typical investors -- no matter how much they complained after the fact about abuses at Enron, WorldCom, Tyco (TYC) and others -- still vote with their pocketbooks.

If a company's stock is rising, as eBay's surely is, shareholders aren't likely to rock the boat. Their restraint shows the limits of the corporate reform movement that followed a series of high-profile scandals and a long bear market on Wall Street.

With the full approval of its board, eBay is issuing ever-increasing amounts of stock options, transferring an unusually large portion of the company's market value to corporate insiders. And many of these insiders are cashing in, selling hundreds of millions of dollars worth of stock, even as other investors, especially mutual funds, have bought up the shares.

Barely a year ago, Congress, the Securities and Exchange Commission and other regulators were rushing to pass legislative and regulatory reforms to stop the practices that are believed to enrich corporate managers at the expense of shareholders. Responding to investor outrage over corporate excesses, accounting scandals and a declining market, the Sarbanes-Oxley Act and other reforms were intended to improve corporate governance and transparency. Pending reforms could limit companies' use of stock options by requiring such compensation to be counted as a regular business expense.

But last week, eBay shareholders overwhelmingly approved a proposal that would increase the number of shares available under the company's stock plan by more than 50%. Now eBay is cleared to give away an estimated $1 billion worth of options, about $250,000 per employee, this year alone. This year's potential handout is more than four times eBay's net income last year.

"This expanded options plan is exactly the kind of plan that got some of the Enrons and the WorldComs of the world in major trouble," said Scott Harshbarger, former Massachusetts attorney general who now heads up the corporate governance practice of Boston law firm Murphy, Hesse, Toomey & Lehane. "This ought to remind you that it takes very little to deflect the winds of change."

1 of 6

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AMZN $372.71 -0.50%
EBAY $57.70 -0.39%
INTC $31.30 -0.51%
KO $40.55 0.10%
YHOO $44.44 -1.10%

Markets

DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs