Calpers Opposes eBay's Options Plan

In eBay's case, Calpers is voting against Dawn Lepore, the only member of eBay's audit committee who is up for election this year. LePore, who serves as vice chairman of technology, operations and administration at Charles Schwab, has served on eBay's board of directors since 1999.

Options, Options Everywhere

San Jose, Calif.-based eBay has asked shareholders to approve a proposal that would increase by more than 50% the number of options it can grant under its current stock options plan. If approved, the plan would augment eBay's options pool by 14 million shares, which is equal to about 4% of the company's outstanding shares.

The proposal is only the latest effort by eBay to increase its options pool. In the past two years, eBay shareholders have approved three similarly large increases in eBay's available options.

eBay has drawn scrutiny from investors and compensation critics in recent weeks because its options practices appear to be out of step with its peers -- as well as prevailing sentiment.

"I'm befuddled at how something this inefficient can take place in the market," said Ken Broad, a portfolio manager at Transamerica Investment Management in San Francisco. (Transamerica does not have a position in eBay.)

"As a business model, it's a fabulous business," said Broad. "It's custom-made for the Internet. But its options model makes it non-starter for us."

The online auction company handed out options worth about 4% of outstanding shares last year, which was a far higher proportion than companies such as Amazon.com (AMZN Quote) and Cisco(CSCO Quote). According to one estimate, the amount of options cashed in by company employees in 2003 was greater than the company's reported net income of $250 million.

These prolific practices come in spite of growing concern over the use of options.