Proposal 2 — Advisory Vote to Approve Named Executive Officer Compensation
|Say-on-Pay: Advisory Vote to Approve the Compensation of the Named Executives
✔ The Board recommends a FOR vote for this proposal
In accordance with the requirements of Section 14A of the Exchange Act, we are asking stockholders to approve, on an advisory basis, the compensation of our named executive officers as described in the Compensation Discussion and Analysis, compensation tables, and related narrative discussion of such compensation included in this Proxy Statement.
As discussed in the Compensation Discussion and Analysis, the Compensation Committee of the Board is committed to an executive compensation program that is aligned with our business goals, culture, and stockholder interests. We believe a competitive compensation program that is highly performance-based is key to delivering long-term stockholder returns.
|Our executive compensation program is designed to:
- align compensation with our business objectives, performance and stockholder interests;
- motivate executive officers to enhance short-term results and long-term stockholder value;
- position us competitively among the companies against which we recruit and compete for talent; and
- enable us to attract, reward and retain executive officers and other key employees who contribute to our long-term success.
To achieve these objectives, our executive compensation program has three principal components: long- term equity compensation, an annual cash incentive, and base salary. The Compensation Committee seeks to have our named executive officers’ total compensation heavily weighted to variable, performance-based compensation by delivering a majority of compensation in the form of performance-based restricted stock units and annual cash incentives. Performance-based restricted stock units are granted based on our achievement of financial performance goals over a two-year performance period. Under our annual cash incentive plan, 75% of each named executive officer’s target bonus for 2017 was based on Company financial performance with the remaining 25% based on individual performance; there is no payout for individual performance unless thresholds for Company performance are met. We also granted time-based restricted stock units, the value of which depends on the performance of the Company’s stock.
The Compensation Committee believes that the goals of our executive compensation program are appropriate and that the program is properly structured to achieve those goals. We have engaged in ongoing discussions with our investors, who generally support those goals and the program, and we believe our stockholders as a whole should support them as well.
We are asking our stockholders to indicate their support for the compensation of our named executive officers as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on the compensation of our named executive officers. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies, and practices described in this Proxy Statement. Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation of the named executive officers, as disclosed in the Company’s Proxy Statement for the 2018 Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the 2017 Summary Compensation Table, and the other related tables and disclosures.”
While the say-on-pay vote is advisory, and therefore not binding on the Company, the Board and the Compensation Committee value the opinions of our stockholders and will take into account the outcome of this vote in considering future compensation arrangements. It is expected that the next say-on-pay vote will occur at the 2019 annual meeting.
Proposal 3 — Ratification of Appointment of Independent Auditors
|Ratification of Appointment of Independent Auditors
✔ The Board and the Audit Committee recommend a FOR vote for this proposal
The Audit Committee is responsible for the appointment, compensation, retention, and oversight of the independent auditors retained to audit our consolidated financial statements. We have appointed PricewaterhouseCoopers LLP (“PwC”) as our independent auditors for the fiscal year ending December 31, 2018. PwC has served as our auditors since 1997. In order to assure continuing auditor independence, the Audit Committee periodically considers whether there should be a regular rotation of the independent audit firm. Further, in conjunction with the mandated rotation of the independent audit firm’s lead engagement partner, the Audit Committee will continue to be directly involved in the selection and evaluation of PwC’s lead engagement partner. The Board and the Audit Committee believe that the continued retention of PwC to serve as our independent auditors is in the best interests of eBay and our stockholders. We expect that representatives of PwC will be present at the Annual Meeting, will have an opportunity to make a statement if they wish, and will be available to respond to appropriate questions.
Our Bylaws do not require the stockholders to ratify the appointment of PwC as our independent auditors. However, we are submitting the appointment of PwC to our stockholders for ratification as a matter of good corporate practice. If the stockholders do not ratify the appointment, the Audit Committee will reconsider whether or not to retain PwC. Even if the appointment is ratified, the Audit Committee, in its discretion, may change the appointment at any time during the year if it determines that such a change would be in the best interests of eBay and our stockholders.
Audit and Other Professional Fees
During the fiscal years ended December 31, 2016 and December 31, 2017, fees for services provided by PwC were as follows (in thousands):
(1) For 2016 and 2017, includes approximately $0.4 million for each year, of lease payments to PwC Russia for office space in Russia pursuant to a sublease arrangement negotiated on an arm’s-length basis.
“Audit Fees” consist of fees incurred for services rendered for the audit of eBay’s annual financial statements, review of financial statements included in eBay’s quarterly reports on Form 10-Q, other services normally provided in connection with statutory and regulatory filings, for attestation services related to compliance with the Sarbanes-Oxley Act of 2002, and services rendered in connection with securities offerings. “Audit-Related Fees” consist of fees incurred for due diligence procedures in connection with acquisitions and divestitures and consultation regarding financial accounting and reporting matters. “Tax Fees” consist of fees incurred for transfer pricing consulting services, tax planning and advisory services, and tax compliance services. “All Other Fees” consist of fees incurred for permitted services not included in the category descriptions provided above with respect to “Audit Fees,” “Audit-Related Fees,” and “Tax Fees,” and include fees for consulting services, compliance-related services, and software licenses, as well as the lease payments described above.
The Audit Committee has determined that the non-audit services rendered by PwC were compatible with maintaining its independence. All such non-audit services were pre-approved by the Audit Committee pursuant to the pre-approval policy set forth below.
Audit Committee Pre-Approval Policy
The Audit Committee has adopted a policy requiring the pre-approval of any non-audit engagement of PwC. In the event that we wish to engage PwC to perform accounting, technical, diligence, or other permitted services not related to the services performed by PwC as our independent registered public accounting firm, our internal finance personnel will prepare a summary of the proposed engagement, detailing the nature of the engagement, the reasons why PwC is the preferred provider of such services, and the estimated duration and cost of the engagement. This information will be provided to our Audit Committee or a designated Audit Committee member, who will evaluate whether the proposed engagement will interfere with the independence of PwC in the performance of its auditing services and decide whether the engagement will be permitted.
On an interim basis, any non-audit engagement may be presented to the Chair of the Audit Committee for approval and to the full Audit Committee at its next regularly scheduled meeting.
Audit Committee Report
We constitute the Audit Committee of the Board. The Audit Committee’s responsibility is to provide assistance and guidance to the Board in fulfilling its oversight responsibilities to eBay’s stockholders with respect to:
- eBay’s corporate accounting and reporting practices;
- eBay’s compliance with legal and regulatory requirements;
- The independent auditors’ qualifications and independence;
- The performance of eBay’s internal audit function and independent auditors;
- The quality and integrity of eBay’s financial statements and reports;
- Reviewing and approving all audit engagement fees and terms, as well as all non-audit engagements with the independent auditors; and
- Producing this report.
The Audit Committee members are not professional accountants or auditors, and these functions are not intended to replace or duplicate the activities of management or the independent auditors. Management has primary responsibility for preparing the financial statements and designing and assessing the effectiveness of internal control over financial reporting. Management and the internal audit function are responsible for maintaining appropriate accounting and financial reporting principles and policies and internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations.
PwC, eBay’s independent auditors, is responsible for planning and carrying out an audit of eBay’s financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”) and eBay’s internal control over financial reporting, expressing an opinion on the conformity of eBay’s audited financial statements with generally accepted accounting principles (“GAAP”) as well as the effectiveness of eBay’s internal control over financial reporting, reviewing eBay’s quarterly financial statements prior to the filing of each quarterly report on Form 10-Q, and other procedures.
During 2017 and in early 2018, in connection with the preparation of eBay’s Annual Report on Form 10-K for the year ended December 31, 2017, and in fulfillment of our oversight responsibilities, we did the following, among other things:
- Discussed with PwC the overall scope of and plans for their audit;
- Reviewed, upon completion of the audit, the financial statements to be included in the Form 10-K and management’s report on internal control over financial reporting and discussed the audited financial statements and eBay’s internal control over financial reporting with senior management;
- Conferred with PwC and senior management of eBay regarding the scope, adequacy, and effectiveness of internal accounting and financial reporting controls (including eBay’s internal control over financial reporting) in effect;
- Instructed PwC that the independent auditors are ultimately accountable to the Board and the Audit Committee, as representatives of the stockholders;
- Discussed with PwC, both during and after completion of their audit processes, the results of their audit, including PwC’s assessment of the quality and appropriateness, not just acceptability, of the accounting principles applied by eBay, the reasonableness of significant judgments, the nature of significant risks and exposures, the adequacy of the disclosures in the financial statements, as well as other matters required to be communicated under generally accepted auditing standards, including the matters required by applicable accounting standards; and
- Obtained from PwC, in connection with the audit, a timely report relating to eBay’s annual audited financial statements describing all critical accounting policies and practices used, all alternative treatments of financial information within GAAP that were discussed with management, ramifications of the use of such alternative disclosures and treatments, the treatment preferred by PwC, and any material written communications between PwC and management.
Our Audit Committee held ten meetings in 2017. Throughout the year, we conferred with PwC, eBay’s internal audit function, and senior management in separate executive sessions to discuss any matters that the Audit Committee, PwC, the internal audit function, or senior management believed should be discussed privately with the Audit Committee. We have direct and private access to both the internal and external auditors of eBay.
We have discussed with PwC the matters required to be discussed by the statements on Auditing Standards No. 16 (Communication with Audit Committees). The Audit Committee received written disclosures and a letter from PwC required by the applicable PCAOB requirements for independent accountant communications with audit committees concerning auditor independence, and discussed the independence of PwC with that firm. We concluded that PwC’s provision to eBay and its affiliates of the non-audit services reflected under “Audit-Related Fees,” “Tax Fees,” and “All Other Fees” above is compatible with PwC’s obligation to remain independent.
We have also established procedures for the receipt, retention, and treatment of complaints received by eBay regarding accounting, internal accounting controls, or auditing matters and for the confidential anonymous submission by eBay employees of concerns regarding questionable accounting or auditing matters.
After reviewing the qualifications of the current members of the Audit Committee, and any relationships they may have with eBay that might affect their independence from eBay, the Board determined that each member of the Audit Committee meets the independence requirements of The NASDAQ Stock Market and of Section 10A of the Exchange Act, that each member is able to read and understand fundamental financial statements, and that Mr. Anderson qualifies as an “audit committee financial expert” under the applicable rules promulgated pursuant to the Exchange Act. The Audit Committee operates under a written charter adopted by the Board. The current Audit Committee charter is available on the corporate governance section of eBay’s investor relations website at https://investors.ebayinc.com/corporate-governance.cfm. Any future changes in the Audit Committee charter or key practices will also be reflected on the website.
Based on the reviews and discussions described above, we recommended to the Board, and the Board approved, the inclusion of the audited financial statements in eBay’s Annual Report on Form 10-K for the year ended December 31, 2017, which eBay filed with the SEC on February 5, 2018. We have also approved the appointment of PwC as our independent auditors for the fiscal year ending December 31, 2018.
Proposal 4 — Management Proposal Regarding Ratification of Special Meeting Provisions in the Company’s Certificate of Incorporation and Bylaws
|Management Proposal Regarding Ratification of Special Meeting Provisions in the Company’s Certificate of Incorporation and Bylaws
✔ The Board recommends a FOR vote for this proposal
The Board is seeking stockholder ratification of certain provisions of our Amended and Restated Certificate of Incorporation (the “Charter”) and Bylaws that grant stockholders who own at least 25% of the Company’s outstanding shares of capital stock and satisfy other requirements the ability to direct the Company to call a special meeting of stockholders (the “Special Meeting Threshold” and together with the related provisions the “Special Meeting Provisions”). The Company received a stockholder proposal in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, asking the Board to take the necessary steps to amend our governing documents to give holders of 10% of the Company’s outstanding shares of common stock the right to call a special meeting (the “Stockholder Proposal”). As allowed by the staff of the Division of Corporate Finance of the Securities and Exchange Commission, the Company omitted the Stockholder Proposal from this Proxy Statement based on the Company’s plans to submit this management proposal seeking ratification of the Company’s current Special Meeting Threshold and Special Meeting Provisions. The Company believes that this management proposal is an effective means to obtain stockholder viewpoints and engage with stockholders on the issue of an appropriate Special Meeting Threshold.
The Company believes that a vote in favor of ratifying the Company’s current Special Meeting Threshold and Special Meeting Provisions is tantamount to a vote against the Stockholder Proposal.
At the 2012 annual meeting of stockholders (“2012 Annual Meeting”), the Board recommended that the Company’s stockholders approve and adopt a management proposal relating to the Special Meeting Provisions. This management proposal was overwhelmingly approved by the Company’s stockholders at that annual meeting, with over 99% of stockholders present at the meeting (or represented by proxy) and entitled to vote on the proposal voting in favor of it. Following the meeting, the Company filed the Charter and Bylaws (as in effect at the time) including the Special Meeting Provisions as exhibits to the Company’s Current Report on Form 8-K on April 27, 2012.
The Board is hereby requesting that the Company’s stockholders ratify the Special Meeting Provisions that were adopted by the Company following stockholders’ approval in favor of such provisions at the Company’s 2012 Annual Meeting.
If stockholders do not ratify the Special Meeting Threshold and Special Meeting Provisions, the existing Special Meeting Threshold will remain in place. In addition, the Board will consider the results of the vote and engage with our stockholders to solicit feedback regarding the current Special Meeting Threshold.
Ratification of the Special Meeting Provisions
The Special Meeting Provisions, which are set forth in Article VI, Section E of the Charter and Article I, Section 1.3 of the Bylaws, and were described in the Company’s proxy statement for the 2012 Annual Meeting, may be summarized as follows:
- One or more stockholders of record that together have continuously held (for their own account or on behalf of others) beneficial ownership of at least 25% of the outstanding common stock of the Company for at least 30 days as of the date such request is delivered have the ability to require the Company to call a special meeting of its
- Stock ownership is determined under a “net long position” standard to provide assurance that stockholders seeking to call a special meeting possess both (i) full voting and investment rights pertaining to the shares and (ii) the full economic interest in (including the opportunity for profit and risk of loss on) such shares.
- Stockholders seeking to call a special meeting would be required to provide information similar to the information required for stockholder nominations at annual meetings under the Bylaws, in addition to eligibility information specific to the right of stockholders to call special Further, stockholders seeking to call a special meeting would be required to provide a statement regarding the specific purpose(s) of the meeting and the matters proposed to be acted on at it.
- The date of any special meeting requested must be not more than 90 days after the date on which the request is validly delivered to the
- The special meeting right is subject to certain limitations designed to prevent duplicative and unnecessary A special meeting request would not be valid if:
- the proposed meeting relates to an item of business that is the same or substantially similar to any item of business that is to be brought before a meeting of stockholders to be held within 60 days of receiving the request for a special meeting;
- an otherwise valid request for a special meeting is delivered within a period commencing 90 days prior to the first anniversary of the date of the immediately preceding annual meeting and ending on the earlier of (x) the date of the next annual meeting and (y) 30 days after the first anniversary of the date of the immediately preceding annual meeting;
- the proposed meeting relates to an item of business that is the same or substantially similar to an item of business that was presented at any meeting of stockholders held within 120 days prior to the delivery of a special meeting request;
- the proposed meeting relates to an item of business that is not a proper subject for action by the stockholders under applicable law; or
- the special meeting request was made in a manner that violates Regulation 14A under the Exchange Act or other applicable law, or otherwise does not comply with the Special Meeting Provisions.
The above summary is subject, in all respects, to the Special Meeting Provisions of our Charter and Bylaws, which are attached to this Proxy Statement as Appendix A and Appendix B, respectively.
Board Consideration of Appropriate Stockholder Special Meeting Rights
The Board evaluated a number of different factors in adopting the existing right of stockholders to call a special meeting, as further described in the Company’s proxy statement for the 2012 Annual Meeting. The Board continues to believe that a 25% ownership threshold to request a special meeting strikes a reasonable balance between enhancing stockholder rights and protecting against the risk that a small minority of stockholders, including stockholders with special interests, could call one or more special meetings that could result in unnecessary financial expense and disruption to our business. The Board believes that special meetings should only be called to consider extraordinary events that are of interest to a broad base of stockholders and that cannot be delayed until the next annual meeting. Additionally, preparing for a stockholder meeting requires significant attention of our directors, officers and employees, diverting their attention away from performing their primary function of operating the Company’s business in the best interests of our stockholders. Likewise, the Board believes that only stockholders with a true economic and non-transitory interest in the Company should be entitled to utilize the special meeting mechanism.
25% Special Meeting Ownership Threshold Consistent with Market Practice
The 25% ownership threshold is a common threshold for special meeting rights at public companies, among those companies that provide for this right. To put this in perspective, approximately 59% of S&P 500 companies give stockholders the right to call a special meeting. Of those companies, 67% have a special meeting ownership threshold that is equal to or higher than that of the Company. In short, the Company’s stockholders have a right that is equal to or more expansive than that of 80% of S&P 500 companies (when including those companies that do not provide such rights at all).
Corporate Governance Practices
The Board believes that the current Special Meeting Provisions should be considered in the context of the Company’s overall corporate governance practices, including the stockholder rights available under its Bylaws and Charter, applicable law, and the Company’s demonstrated commitment to stockholder engagement and responsiveness to stockholder concerns. Our corporate governance practices are highlighted on page 5 of this Proxy Statement.
In addition to the existing right of stockholders to call a special meeting at the 25% ownership threshold, stockholder approval is required for many key corporate actions before action may be taken. Under Delaware law and the NASDAQ Stock Market rules, the Company must submit certain important matters to a stockholder vote.
Additionally, our Bylaws provide stockholders with the ability to nominate candidates to the Board both through traditional processes and our proxy access procedures. Under existing law, stockholders may request the Company to include stockholder proposals in proxy materials to be considered by our full stockholder base. Directors are elected by majority vote on an annual basis, and stockholders have multiple avenues of communication to the Board.
Given the existing right of stockholders to call a special meeting, coupled with the Company’s strong corporate governance policies, the Board strongly recommends that stockholders ratify the existing Special Meeting Provisions.
The Board of Directors Recommends a Vote FOR Proposal 4.
Unless you specify otherwise, the Board intends the accompanying proxy to be voted FOR this item.