eBay Vote Shows a Return to Complacency

Because eBay does not include stock options -- an important component of its compensation expenses -- on its income statement, most measures of the company's performance and valuation, such as its earnings growth or its price-to-earnings ratio, are built on illusion, he said.

"That's not an investment that bears up under rational analysis," Lutin said.

The danger is that if the stock market continues to go up, investors' tolerance for corporate excesses may increase.

"eBay can be a good example of what can happen more broadly," said Lutin, who led the charge in questioning Amazon's use of pro forma accounting methods during the dot-com boom. "A couple of years ago, this kind of thing was going on at hundreds of companies with what may have been a majority of the investment community."

Meanwhile, others say some pending and enacted reforms could improve the system. The requirement that mutual funds disclose how they vote on proxy statement could focus fund managers' attention on governance issues, said Greg Taxin, CEO of Glass Lewis.

"When bad things happen, people may look back to their voting," Taxin said. "If they were asleep at the switch, it won't be looked fondly upon by regulators or the plaintiffs bar -- or for that matter, shareholders."

More transparency may well help, acknowledged the hedge fund analyst. But then again, investors may choose to ignore what they hear. That seems to be what happened at eBay.

"People are willing to live with the problems," said the analyst. "A lot of people [at eBay] are going to be rich beyond their wildest dreams. But you're not going to hear lot of criticism about that, because [investors] want a shot at that."