Sounding Populist Themes, Carl Icahn Campaigns For eBay Votes

Sounding Populist Themes, Carl Icahn Campaigns For eBay Votes
Image source: CNBC Video Screenshot

Calling for a “watershed moment for stockholder participation,” activist hedge fund manager Carl Icahn called into question the current system of electing directors to corporate boards – and attacks his current favorite target, eBay Inc (NASDAQ:EBAY)’s management and board of directors.

Blog post focuses on popular issues, avoids discussion of impact of PayPal losing customer revenue stream from eBay

In a blog post today, Icahn focused on the larger – and politically populist – issue of shaking up corporate boards and giving a voice to average shareholders. Starting with popular macroeconomic issues and then diving into issues of shareholder rights, one of the most successful activist hedge fund managers in history argued his position as a May 13 eBay shareholder meeting looms that could hand Icahn a rather public loss.

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Great dangers facing our country: underfunded pensions, high unemployment, manipulated markets

“There are a number of great dangers facing our country,” Icahn wrote, sounding like a politician on the stump stating indisputable facts before delivering the more controversial appeal.  “Our pension funds are underfunded.  Unemployment remains frustratingly high.  The Federal Reserve continues to artificially prop up the economy. But throughout history it has been proven that the corruption that results from unchecked power, whether criminal or otherwise, exacerbates all other dangers.  It diminishes morale, reduces productivity, hinders development and encores cynicism.”

Noting a previous Securities and Exchange effort to reform corporate board election methods, Icahn first drew an analogy and then attacked a popular target: the business lobby.  Asking readers to imagine if the U.S. Senate was entitled to pick and endorse those who would run for the Senate, and had unlimited access to funds at the U.S. treasury to support those campaigns, Icahn then paints the picture by stating “would anyone doubt that rampant corruption would result?”

Icahn then draws a comparison to the current system for electing corporate boards, where board members themselves nominate candidates and use the corporate funds for their election. “The SEC sought to eliminate this crucial flaw in the corporate voting system years ago,” he wrote. “Not surprisingly, those efforts were thwarted by litigation and political lobbying from The Business Roundtable and the usual cast of characters from the corporate bureaucratic establishment, including executives and their highly-paid advisors, who remain aligned against stockholder rights.”

Power tends to corrupt, and absolute power corrupts absolutely

Continuing to set up his arguments in the eBay Inc (NASDAQ:EBAY) dispute, Icahn focused on popular issues that were difficult to dispute at a macro level. Citing a quote from Sir John Dalberg, “Power tends to corrupt, and absolute power corrupts absolutely,” Icahn said the “passive stockholder model ultimately leads to mediocrity, complacency and a tendency towards a form of the very corruption identified by Sir John Dalberg long ago, whereby businesses are run with an inappropriate focus on enriching management and board members instead of stockholders.”

“Not so world class board”

After asking “How much candy would be left in the candy store if employees reported only to themselves?” Icahn turned specifically to eBay Inc (NASDAQ:EBAY). “This brings me again to Mr. Donahoe, eBay and its not-so world-class board,” he writes. “Over the past month we have highlighted the numerous conflicts of interest and questionable transactions that have become commonplace at eBay. I am deeply disturbed by the fact that eBay CEO John Donahoe blithely dismisses the concerns of his stockholders as mere ‘distractions.’ His contempt displays a profound misunderstanding that is endemic to many public companies…”

Then, sounding presidential, he draws a conclusion.  “My fellow investors, there are moments in history when otherwise small, discrete acts greatly influence the larger destiny of secular changes, and I believe we are at one of those moments now,” he writes, comparing the eBay situation to Hans Christian Andersen’s famous tale “The Emperor’s New Clothes,” illustrating how “everyone can see what is going on, but no one has said anything about it.”

“The eBay Inc (NASDAQ:EBAY) annual meeting is a tremendous and completely appropriate opportunity to turn the tide – for stockholders to show the management of a large, underperforming technology company with what I believe are obviously self-interested board members, that we are paying attention and will demand accountability,” he wrote.  “The eBay board and management believe that because they operate in Silicon Valley – where ‘every prominent player is just an adviser, an investor, a co-founder, an acquirer, or a director away from another’– that blatant conflicts of interest and self-dealing will be tolerated.”

“So let’s bring some sanity to the process by electing our nominees to the eBay board,” he concluded.  

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Mark Melin is an alternative investment practitioner whose specialty is recognizing a trading program’s strategy and mapping it to a market environment and performance driver. He provides analysis of managed futures investment performance and commentary regarding related managed futures market environment. A portfolio and industry consultant, he was an adjunct instructor in managed futures at Northwestern University / Chicago and has written or edited three books, including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008). Mark was director of the managed futures division at Alaron Trading until they were acquired by Peregrine Financial Group in 2009, where he was a registered associated person (National Futures Association NFA ID#: 0348336). Mark has also worked as a Commodity Trading Advisor himself, trading a short volatility options portfolio across the yield curve, and was an independent consultant to various broker dealers and futures exchanges, including OneChicago, the single stock futures exchange, and the Chicago Board of Trade. He is also Editor, Opalesque Futures Intelligence and Editor, Opalesque Futures Strategies. - Contact: Mmelin(at)

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