Carl Icahn today continued his campaign to separate eBay and PayPal by sending an open letter alleging conflicts of interest within the company’s board of directors. The allegations focus primarily on Marc Andreessen — a personal investor in Pando — and his investments in Skype, Kynetic, and a variety of PayPal competitors.
How can Mr. Donahoe and the eBay Board allow Mr. Andreessen to advise these competitors while he simultaneously possesses not only nonpublic eBay Board information but also intimate proprietary information about PayPal’s operations? But perhaps more importantly, how can Mr. Andreessen be trusted to objectively advise Mr. Donahoe and the eBay Board about the strategic direction of PayPal when he has vested interest in so many of its competitors?
The letter continues by alleging conflicts of interest on the part of Intuit founder Scott Cook, a member of eBay’s corporate governance and nominating committee:
How can the board have a conversation about the strategy or performance of PayPal when a representative of a direct competitor who has so much at stake is in the room?
Is Mr. Cook wary of how a standalone PayPal could impact the company he founded? Is he worried that it would diminish the value of his $1 billion in Intuit stock?
Icahn also writes that Cook organized a deal that prevented eBay from poaching Intuit employees, a tactic similar to those employed by “the Techtopus,” a group of companies that conspired to keep wages down by restricting their recruitment tactics. (In its response to Icahn’s letter, eBay says that such an agreement ended years ago — more on that in a second.)
In other words, Icahn, a vulture capitalist-slash-activist investor who purchases large portions of companies before bullying them into “unlocking shareholder value” at the company’s expense, is condemning members of eBay’s board for allegedly using their position to make money at the detriment of the company. That’s irony that could be cut with a dull knife someone stole from their great-grandmother and then turned around and sold on eBay.
For its part, eBay responded with a point-by-point rebuttal to Icahn’s claim. It’s pretty standard stuff: the company says that Andreessen was “recused from all decision making” when Skype sold to Microsoft; that the competitive investments are an inherent risk to having a venture capitalist on the company’s board; and that the “overlap between Intuit and eBay is small, fully disclosed and within the SEC safe harbor for interlocking directorates.”
Reactions from around the Web
Quartz’s corporate reporter, John McDuling, makes the back-and-forth seem popcorn-worthy:
This latest scuffle pits one of Wall Street’s loudest voices against one of Silicon Valley’s most prominent thinkers—a proxy battle for the war between the gritty straight talk of finance and the blue-sky thinking of the tech world.
The Verge’s business editor, Ben Popper, thinks that this conflict won’t be resolved any time soon:
The battle between [Icahn and eBay] will likely continue to heat up as we get closer to the board election that could replace Cook. Unlike in his recent contest with Apple, in which Icahn backed down after getting part of the buyback increase he wanted, it’s difficult to see how the sale of [PayPal] could be anything but total.
First Round Capital partner Josh Kopelman — another personal investor in Pando — tweeted his response to the letter:
Elon Musk tells Forbes that Icahn is right about separating eBay and PayPal:
It doesn’t make sense that a global payment system is a subsidiary of an auction website… It’s as if Target owned Visa or something.
[PayPal] will get cut to pieces by Amazon payments or by other systems like Apple and by start-ups if it continues to be part of eBay… It will either wither or be spun out…Carl Icahn can see it, and he’s not exactly super tech savvy.
[image via wikimedia]