eBay Cuts CEO's Pay by 53% - Analyst Blog

E-Commerce giant eBay Inc. (EBAY) announced a reduction in Chief Executive Officer (CEO) John Donahoe’s remuneration for 2013. Donahoe received $13.8 million (£8.3 million) as compensation package, which marked a 53% decline from 2012.

The CEO’s total compensation package includes a base salary of $993,269, a performance-based bonus of $1.6 million and stock and option awards of about $11.1 million for 2013. Excluding the stock and option awards, Donahoe's compensation for 2013 fell 30% year over year.

The steep drop in pay comes amid an ongoing scuffle between the company and activist investor Carl Icahn (owns about 2% of eBay stock) over its online payments business, PayPal. The latter had proposed to spin-off PayPal under a different management and accused two eBay board members of investing in companies that are direct competitors to eBay. However, eBay believes that its management team is completely transparent and PayPal is the company’s best-performing service and fastest-growing unit.

Icahn nominated two of his employees — Daniel Ninivaggi and Jonathan Christodoro — to eBay’s board who were rejected by the company as being unqualified for the position. The company also requested shareholders to vote against them in the next annual meeting.

Notably, Donahoe’s package plunged primarily due to the weaker-than-expected financial results in 2013. Though eBay maintained an average positive surprise of 2.0% in the trailing four quarters, the company’s 2013 results missed its expectations. Also, in its analyst day meeting in Mar 2013, the company lowered its annual sales forecast from $21.5 –$23.5 billion to $20.5–$21.5 billion for 2015, which indicates persistent pressure on eBay’s top line due to tough competition.

It goes without saying that major online retailers, such as Amazon.com (AMZN), are not going to make things easy for eBay. Additionally, Google Inc.'s (GOOG) foray in the online retail/payments segment potentially increases competition for the company. While eBay’s payments business shows great promise and innovation, competition is not far behind.

Currently, eBay carries a Zacks Rank #4 (Sell). Another stock worth considering in the same sector includes Liberty Ventures (LVNTA), sporting a Zacks Rank #1 (Strong Buy).

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