Meg Whitman

Meg Whitman’s fortunes entwined with Goldman Sachs

The GOP candidate for California governor steered the investment bank millions in eBay business while on its board

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Meg Whitman's fortunes entwined with Goldman SachsMeg Whitman, who is running for governor of California, attends a meeting at the Union Pacific railroad offices in Oakland, Calif., Tuesday, March 9, 2010. (AP Photo/Paul Sakuma)(Credit: AP)

(This article also appears in California Watch, a product of the Center for Investigative Reporting.)

Candidate Meg Whitman touts her experience at eBay, the online auction house that made her rich, but her career and personal fortune are entwined with another company: the Goldman Sachs investment bank, a major player in public finance in the state she wants to lead.

Whitman’s relationship with the giant Wall Street firm — as investor, corporate director and recipient of both insider stock deals and campaign donations — could pose conflicts of interest if the Republican front-runner is elected governor of California, critics say.

From 1998 to 2002, while she was CEO of eBay, Whitman helped steer millions of dollars of her company’s investment banking business to Goldman, court records show.

In 2001, Goldman put Whitman on its corporate board, paying her an estimated $475,000 for little more than a year of part-time service. The company also gave her insider access to the initial public offerings of hot stocks worth millions, according to the records.

Whitman left the board in 2002 after she was targeted in a congressional probe of bond underwriters and “spinning” — a financial maneuver, now banned, in which Goldman and other firms allegedly traded access to hot IPOs for bond business. Whitman later settled a shareholder lawsuit related to profits she and other execs made from buying the IPOs.

In recent years, Whitman has kept part of her fortune, estimated by Forbes magazine to be $1.2 billion, in investment funds managed by Goldman, her financial disclosure report indicates. For her campaign, she’s received $105,500 in donations from Goldman executives, state records show.

Meanwhile, Goldman is a major player in California state finance. It has been the underwriter of $78.9 billion in bonds issued by the state since 2006, records show, second only to Merrill Lynch, now a division of Bank of America, which was underwriter of $79.3 billion in the same period.

Goldman was underwriter of more than 2 percent of the bonds issued by the state in the past five years, the records show. State pension funds, meanwhile, have invested more than $1.3 billion with Goldman.

The firm has sought other state business as well. In 2007, Goldman and the now-defunct Lehman Brothers investment bank pitched Gov. Schwarzenegger on an ambitious plan to boost state revenues by privatizing the California Lottery, according to news reports.

Goldman also urged the governor to raise money by selling EdFund, the state agency that insures student loans. Schwarzenegger expressed interest, but the ideas weren’t carried out.

Conflicts could arise

With Goldman active on so many state issues, Whitman would face “a pile of potential conflicts of interest” if elected governor, said Doug Heller, spokesman for Consumer Watchdog of Santa Monica.

Whitman declined to be interviewed for this story, but her campaign lawyer said conflict concerns were overblown. If elected, Whitman will sell her Goldman stock and put the rest of her portfolio, including her Goldman-managed investments, into a blind trust, the lawyer, Tom Hiltachk said in a written statement.

That will “put further distance between Meg’s assets and her duties as governor,” he wrote. Meanwhile, Whitman will “scrupulously” follow state law to avoid conflicts, he wrote.

Eric Jackson, founder of the Ironfire Capital hedge fund in Florida and an advocate of corporate reform, said concerns could arise even after Whitman sold her Goldman holdings. Given its long relationship with Whitman, Goldman would likely enjoy “access, and being able to make their case in terms of lobbying or certain outcomes that benefit them,” he said.

Whitman’s association with Goldman also raises questions about her values and judgment, some Wall Street reformers say.

While Whitman was on Goldman’s board, she served on the compensation committee, which approved multi-million dollar bonus packages for then-CEO Henry Paulson and his top aides.

Also during Whitman’s service, Goldman invested $140 billion into mortgage-backed securities. Years after she left, the firm sold off $135 billion in bonds tied to risky home loans, according to published accounts, essentially unloading the assets before the market plunged and sent the nation into economic crisis.

Goldman’s dealings in the ramp-up to world recession have made the firm a lightning rod for criticism, especially as it has rebounded with record profits while the national unemployment rate hovers around 10 percent.

Wall Street woes

Whitman’s campaign attorney said it was “plainly ridiculous” to hold Whitman responsible for the problems of Wall Street because she spent 15 months on Goldman’s board.

“Making Meg culpable for the culture of Wall Street … is a stretch too far,” Hiltachk wrote. He didn’t respond to questions about decisions she made on the Goldman board.

In recent years, Whitman has only occasionally referred to her time at Goldman Sachs.

During the 2002 IPO “spinning” controversy, Whitman denied wrongdoing, telling eBay employees in a memo that Goldman had offered her stock deals because she was a private client of the firm, not in exchange for eBay’s bond business.

In her autobiography, “The Power of Many,” Whitman said she quit Goldman’s board because CEO Paulson wanted directors only to “rubber stamp” decisions he had already made.

Bill Whalen, a fellow at Stanford University’s Hoover Institution and a former adviser to Gov. Pete Wilson, warned that Democrats would face blowback if they attempted “to use Goldman as a bludgeon” against Whitman in the governor’s race.

“There’s a long list of Democrats who have ties to Goldman,” Whalen said, starting with former state treasurer Kathleen Brown, who is a Goldman executive in Los Angeles.

Her brother, Democrat Jerry Brown, is the former California governor who is expected to face Whitman in November if she wins the June 8 primary election. He has no Goldman investments, campaign manager Steve Glazer said.

State insurance commissioner Steve Poizner, Whitman’s rival for the GOP gubernatorial nomination, in 2003 borrowed $500,000 from Goldman for an unsuccessful campaign for the state assembly, records show.

A global firm

Based on Wall Street but with offices around the world, Goldman Sachs underwrites stocks and bonds, provides financing for business mergers and manages the money of high-wealth individuals, corporations, and even governments.

In 1998, shortly after she became CEO at eBay, Whitman and the eBay board hired Goldman Sachs to underwrite a $72.5 million IPO. The following year, Goldman was hired again, this time for an additional sale of $1.25 billion worth of stock.

Also in 1999, Whitman and her husband began investing their personal wealth with Goldman, her lawyer said. In July, 2002, eBay hired Goldman again, this time to handle eBay’s $1.5 billion acquisition of the online payment business PayPal.

Goldman was paid more than $8 million for its work at eBay, wrote Delaware Judge William Chandler, who later presided over a shareholders’ lawsuit concerning the IPOs.

More importantly, Goldman also was able to buy 1.2 million shares of eBay stock at the IPO price of $18, the judge wrote in an opinion on the case. A year later, the stock was trading at $175 – a bump of $188.4 million.

While seeking eBay’s underwriting business, Goldman repeatedly gave Whitman and three other eBay officials the chance to buy IPO stock of other firms Goldman was taking public. Whitman bought more than 100 offerings, according to the judge’s account.

The executives “were able to flip these investments into instant profit,” the judge wrote. “… Whitman sold these equities in the open market and reaped millions of dollars in profit.”

Joining the board

By the time of the PayPal deal, Whitman was also a Goldman director. Appointed in October 2001, she was paid a package of cash and stock options for attending board and committee meetings. An expert who reviewed the pay package for this report said Whitman received the equivalent of $475,000 for attending perhaps a dozen meetings over the 15 months she was on the board.

When she was on the board’s compensation committee it twice signed off on big bonus packages for Paulson and four other top executives, including then-vice chairman Lloyd Blankfein, now CEO.

Paulson’s 2001 bonus package was $11.5 million, more than 19 times his salary, records show. The company earned $2.3 billion that year. In her two years on the committee, the five men were paid $79 million in bonuses.

The trend continued as Goldman’s profits soared in the intervening years. In January, under pressure from shareholders’ lawsuits, Goldman agreed to slash its bonus pool and cut back on pay by about 15 percent.

Whitman left the board soon after the IPO “spinning” controversy became public. In October, 2002, Rep. Michael Oxley, R-Ohio, chair of the House Financial Services Committee, identified 21 business executives who he said had obtained IPOs from Goldman and two other firms in exchange for bond business. Oxley called the transactions “corrupt.”

The Executives he named included William Clay Ford of Ford Motor Co., Enron CEO Kenneth Lay, Yahoo founder Jerry Yang – and Whitman.

Goldman denied wrongdoing, but months later, paid $110 million to settle its part of a Securities and Exchange Commission complaint that accused 10 Wall Street firms of misleading customers with biased stock research. As part of that settlement, “spinning” of IPOs was banned, records show.

For her part, Whitman insisted she had done nothing illegal or unethical, saying she was the victim of “the climate of finger pointing and scandal,” that accompanied the bursting of the dot-com bubble. She made a profit of $1.78 million on the IPOs, she told eBay employees. It was “a very small fraction of my investment portfolio,” she wrote in her book.

Nevertheless, two shareholders’ groups sued Whitman and the other eBay insiders, contending that money from flipping the IPOs should have gone to eBay. Eventually, Whitman and the other officials paid about $3 million to eBay to settle the suits. Goldman paid $395,000 of the settlement, she wrote in her book.

Goldman declined to comment for this story.

Whitman’s investments

Today, Whitman’s connection to Goldman endures through her investments. The financial report she filed as a candidate requires her only to give a general estimate of the value of her investments. Her lawyer declined to disclose the total value of her Goldman portfolio.

Still, the documents show she has a multi-million dollar stake in 21 different investment funds managed by Goldman. Most are private equity funds only open to investors who can put millions into a single fund.

She has more than $1 million in the firm’s Whitehall Street real estate funds, owner of the famed La Costa Resort in Carlsbad; $2 million in mezzanine funds, which provide high-cost financing, often for corporate leveraged buyouts; and more than $3 million in a telecom-related fund.

She has more than $1 million each in two Goldman “distressed opportunity” funds, which target companies facing possible bankruptcy.

Meanwhile, retirement funds for state workers, teachers and employees of the University of California have more than $1.3 billion in Goldman stock or equity funds. CALSTRS, the state teachers’ fund, has $299 million in a single Goldman investment.

Goldman a big player

Last fall, Goldman was underwriter of $8.8 billion in revenue anticipation notes when the cash-strapped state had to borrow to pay its bills.

More state borrowing — and thus, more bond issues — will be required before California gets its budget mess straightened out, experts say. If voters approve the $11 billion state water bond on the November ballot, “it’s a certainty” that Goldman will be among the underwriters, said Tom Dresslar, spokesman for state treasurer Bill Lockyer.

The treasurer’s office, not the governor, selects bond underwriters, and state retirement boards sign off on investments. But the governor has appointment authority at the retirement boards, and the power to propose and promote bond issues.

The issue of global warming will likely bring California’s next governor into contact with Goldman. With the passage of AB32, California is on the verge of creating a “market based program to cap carbon emissions,” the governor has said. Goldman has expressed interest in entering the cap-and-trade market. Schwarzenegger, a proponent of the new law, has met with Goldman on global warming issues, he said in a press release.

Whitman’s other continuing connection with Goldman involves campaign cash. Of the money she’s received from Goldman employees, $94,300 came from eight California-based executives of the firm.

If she is elected, Whitman will have to “disclose decisions that are being made by Goldman – and her part in them that relate to California,” said Robert A.G. Monks, a former federal pension trustee and corporate governance expert. “Frankly, I don’t know how she’s going to do that, because there’s a lot of it.”

Will the real Meg Whitman please stand up?

Jerry Brown needs to announce his candidacy while the Republican hopeful remains mired in ugly rumors

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Will the real Meg Whitman please stand up?Former eBay chief executive Meg Whitman, Republican gubernatorial hopeful, left, smiles during a town hall meeting Friday May 29, 2009 at The Marconi Automotive Museum in Tustin, Calif. (AP Photo/Damian Dovarganes)(Credit: Damian Dovarganes)

Jerry Brown has not gotten around to announcing that he is actually running for governor. Hands down, he would win, even if he announces his intention at the very last moment. He is that popular in California.

Brown seems to be letting the Republican candidates duke it out in the forum we all have grown to love (like speed bumps), the ever-present media — the good, the bad and the very naughty.

The very naughty media (that is, Gawker) is running a trio of news blips about Republican hopeful Meg Whitman’s sons, Griff and Will, and their alleged racist behavior at Princeton.  One or both seem to have been suspended at various times and allegedly use the billionaire entitlement card as often as possible. This information is supposedly reported by those anonymous people in the know. Does the unsubstantiated behavior of a candidate’s adult (sort of) children matter?

Her husband, Griff Harsh IV, a neurosurgeon at Stanford, follows in his father’s footsteps.  Griff Harsh III was also a neurosurgeon in Alabama, and his bio reads like that of a true, religion-driven conservative. Nothing wrong with that, except religion usually doesn’t merit a mention in a professional bio. How far do apples Harsh IV and V fall from that tree?  And does it matter?

Whitman is well known for her support of Proposition 8 and her disinclination to support gay marriage. Only recently did she disavow any relationship with a former supporter, Santa Clarita Councilman and confirmed racist Bob Kellar. That intersection between disavowed and former supporter may be harder to travel than she thinks. If her Web site comments are any indication, Whitman is attracting the same kind of supremacist type followers that support Kellar. 

Whitman’s new book, “The Power of Many,” ghosted by guest co-author Joan O’C Hamilton, is apparently a folksy read. Some say it is similar in style to another Republican we all know and adore, Sarah Palin. Though it just dropped last week, it languishes at No. 2,800 on Amazon.  The book is full of all kinds of reminders about why Meg is great and others are not.  We could call these Whit-icisms. She critiques Craigslist CEO Jim Buckmaster, going as far as to say that “the Craigslist Killer” is how this wildly popular alternative to eBay will be known in the future.

Moving on to Google, she chastises the founders for setting up a company with wildly attractive employee perks because it is doomed to disappoint when the perks are off the table in lean times. Perhaps no one has invited Meg to a lean-time lunch at Google lately? The perks live long. She sticks to these kinds of great insights throughout the tome.

Whitman recently mentioned her very introspective and reproving disappointment in Citizen Whitman. No. Not her errant children. Her own voting record. Until 2002 she wasn’t even a registered voter.   And until 2007 she was registered without claiming a party. Her voting record is spotty. She blames it on her busy life as a wife and mother and moving so frequently.  Somehow the only thing that kind of excuse will elicit is a raised eyebrow from the millions of other moms who manage to vote and take care of their kids and homes. Sorry, Meg. That sucks for you.

As the candidates beat a path to the final stages of the primaries, the dirt is flying in their wake. Are Whitman’s allegedly racist children an issue for the voters? Should her lack of civic duty before 2002 matter? Is her inability to firm up a date to debate her Republican primary opponents meaningful?  

And where did the severance contracts for both Whitman (eBay) and Carly Fiorina (Hewlett Packard) say that they should take some of their parachute-millions and run for high office because they were once CEOs? Is there an MBA syllabus that instructs former CEOs to use those millions to run for office even if they’ve never seen the inside of a voting booth?

Jerry Brown is no Martha Coakley, but if he doesn’t come out and show his intentions soon, some of us may be relocating to a planet other than California.

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Meg Whitman

The CEO of eBay presides over a company worth more than four times as much as Kmart. Maybe there's something to this e-commerce thing after all.

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Meg Whitman

When Meg Whitman took over as chief executive of eBay some three years ago, she set about her work with her usual mixture of know-how and curiosity. She knew she had to build the eBay brand. But she also listened to the auction site’s founders and conferred closely with them. Her style — collaborative yet decisive, serious but loose — set the tone for the company.

Sure, Amazon.com founder Jeff Bezos was Time magazine’s man of the year, and Tim Koogle was the new-media savant who made Yahoo the top Web portal, but Whitman was the old-fashioned, low-key manager. And the tortoise has beaten the hares. Yahoo has slipped from profitable to unprofitable, and Wall Street wonders if the never-profitable Amazon.com will survive. But eBay is doing fine; Wall Street complains that its stock is too expensive, but the company is worth more than four times as much as Kmart, and Whitman is leading it into its sixth very profitable year in a row.

Now, the down-to-earth Whitman is starting to get her due. Worth magazine named her No. 5 on its list of “best” CEOs. Fortune magazine ranked her the second most powerful woman in business, behind Hewlett-Packard chief Carly Fiorina and right ahead of Oprah Winfrey. All this, without the star-quality charisma of Fiorina or the electric energy of Amazon.com founder Jeff Bezos. Instead, Whitman still works in what amounts to a large cubicle, dresses casually and sometimes responds personally to customer e-mails. That’s despite owning more than $600 million worth of eBay stock.

While dot-com bubbles are bursting all over, Whitman runs an international e-commerce giant whose customers used eBay’s person-to-person auctions to sell $2.36 billion worth of Beanie Babies, baseball cards and other merchandise in the three months ended Sept. 30 (which means the eBay economy is larger than that of Iceland). Meg Whitman stands as the most successful Internet executive of all.

Although Whitman didn’t invent eBay, she did usher it from a start-up to a powerhouse. Since taking over as CEO in May 1998, she kept eBay focused on its core competencies. Any expansion was gradual and auction-related, from acquiring similar online-auction companies overseas to buying Half.com, a marketplace for selling used goods at set prices. She kept the company concentrated on what users would want, either as a permanent enhancement or a one-day special offering. From the start, she understood what makes the company tick. “What is really interesting about eBay,” she told one interviewer, “is that we provide the marketplace, but it is the users who build the company. They bring the product to the site, they merchandise the product and they distribute it once sold.”

Indeed, Wall Street observers claim that eBay runs so smoothly, it’s difficult to point to what management has done. Whitman’s contribution is, to some extent, taken for granted. Her lack of dot-com flamboyance shouldn’t obscure the fact that she’s always been driven — even in college she had the Wall Street Journal delivered to her Princeton dorm room. Her low-voltage but efficient style is precisely what makes Whitman a business executive worth praising.

Margaret C. Whitman took an offline route to her online triumph. Born in 1957, the Long Island native graduated from Princeton University in 1977, then got her MBA at Harvard in 1979. She started her career in brand management at Procter & Gamble, a sort of school for brands and a great breeding ground for future Internet executives, including America Online co-founder Steve Case. Whitman then worked for eight years at consulting firm Bain & Co. From 1989 to 1992, she was an executive at Walt Disney, where she opened the first Disney stores in Japan and learned the basics of how to make a business run smoothly. She then moved to shoemaker Stride Rite, where, among other accomplishments, she helped revive the Keds brand.

Whitman got her first real taste of the spotlight in 1995, when she joined Florists’ Transworld Delivery (FTD), initially as president and then as CEO. Whitman oversaw FTD’s conversion from a money-losing, florist-owned cooperative to a profitable private company, and she rejuvenated the FTD brand. But infighting at FTD frustrated her, and she left to head Hasbro’s Playskool division. About a year later, a headhunter approached her about a top job at eBay.

In an origin that’s worthy of its Web lore, eBay started in 1995 as a vehicle for founder Pierre Omidyar to help his then-girlfriend collect Pez dispensers. Omidyar’s site grew quickly. Its listings now include automobiles, antiques, real estate and computers, and some users even make their living selling on eBay. But in early 1998, the company was known as Auction Web and had about 20 employees.

And Whitman didn’t need the job. She was overseeing 600 Playskool employees, she had two sons and her husband, Griffith Harsh, was head of neurosurgery at Massachusetts General Hospital. As she told Business Week, she wasn’t interested — “I’m not thinking about living 3,000 miles across the country, uprooting my neurosurgeon husband, and taking my two boys out of school, to go to the West Coast for this no-name Internet company.”

The headhunter persisted, however, and Whitman agreed to meet Omidyar. Whitman is all about brands, and as she got to know the company, she realized that it had the makings of a great brand. And Whitman knew she was interested in the Internet — Amazon.com was already a well-known phenomenon, for example. So she joined and helped eBay go public four months later.

Whitman also set about making eBay more corporate. She created the company’s first national advertising strategy. She recruited executives from places such as PepsiCo. She pushed for stores and companies to sell on eBay, so now corporations such as Sun Microsystems sell millions of dollars worth of products a year via the site. She encouraged eBay to offer various specialty sites under the eBay umbrella — much the way FTD’s global Web site, under her watch, included individual florists’ shops under the FTD banner. Whitman also installed a trust and safety program, which offered insurance for buyers. In making the place more corporate, she made it more professional.

It’s true that much of the credit for eBay’s success must go to its business model. It’s an ingenious blend of yard sale, classified ad and auction. Have an old sailboat you want to get rid of? List it on eBay, accept bids for three or maybe five days, then sell it to the high bidder. eBay gets a small fee for listing the boat, then a tiny commission from the sale. The appeal extends beyond the guy down the street. None other than Warner Brothers used eBay to auction off an old sailboat, only in this case it was the boat featured in the film “The Perfect Storm,” and the price was $145,000.

The beauty of eBay’s model is that the company just facilitates the listings and the sales; it doesn’t have to make or transport any goods or carry any inventory. The users build the company, as Whitman said. As a result, eBay may collect as little as 6 percent on each sale, but most of that is profit. It’s truly the sort of business that couldn’t exist offline.

As wonderful as eBay’s business model may be, that didn’t guarantee a viable business. Whitman made the model work. She paid attention to that eBay community, allowing it to help guide the site and develop innovations like customized online storefronts. As Web traffic soared, eBay suffered several outages, including one that lasted more than 20 hours; Whitman’s staff responded by e-mailing and calling customers and refunding millions in fees. The eBay brand kept customers loyal.

That loyalty is crucial — the site’s newsletter boasts of how eBay brought people together and saved small businesses. “eBay is an outstanding example of loyalty,” said Bain & Co. consultant Frederick Reichheld, author of “Loyalty Rules!” He notes, for example, that eBay built a costly system to respond to customer e-mails within 24 hours. And thanks to this attention to building loyalty, more than half of eBay’s customers come by referrals from other customers. Whitman managed to expand the company without destroying its community, maintaining what she calls “the small-town feel on a global scale.”

Whitman’s moves haven’t always pleased all customers; she drew some flak, for instance, when she scaled back opportunities for users to post complaints on the site and when eBay held a charity auction that some called self-serving following the World Trade Center attacks. But Whitman kept most users in the fold as she moved the company forward. That allowed her to go after more big-ticket items. For example, in 1999, eBay acquired Butterfield & Butterfield, a traditional auction house that ranked a distant third behind Sotheby’s and Christies. The purchase threatened to turn off the little guys who had built eBay. However, it helped eBay later develop online auctions of fine art and rare collectibles.

Among Whitman’s key achievements was fending off the competition. As authors David Yoffie and Mary Kwak point out in their book “Judo Strategy,” Whitman was mindful of America Online, Amazon.com and Yahoo, because any one of these might have plunged into online auctions and crushed eBay early on. So when Whitman’s team deepened the company’s relationship with AOL to eventually make eBay AOL’s exclusive auction provider, it wasn’t just a great way to connect to AOL users — it also forestalled AOL from becoming a rival.

That bought eBay time, which was crucial because the site was building critical mass. The large customer base meant eBay was the place to sell; more sellers attracted more buyers; that attracted more sellers; and so on. eBay achieved what business pundits call “The Network Effect”: the network becomes more valuable to its users simply by adding more users. The Internet is the perfect example of this, but eBay may be a close second.

Yahoo threatened the company in late 1998 by offering free auctions. But eBay didn’t drop its costs. Whitman and her team discovered that eBay’s small fees discouraged people from listing any old junk, so it provided a measure of quality control that Yahoo didn’t have. By the time Amazon.com tried auctions in 1999, eBay already had a solid lead. To Whitman, Amazon.com’s only advantage was its prodigious credit-card processing capabilities. So later that year, Whitman decided to buy Billpoint, an online system that allows payments by e-mail.

Although eBay has been under the gun for years, Whitman remains a steady presence. Colleagues describe her as consistently upbeat. It seems she draws strength from her other passion, her family. Fortunately, her husband now works at nearby Stanford University Medical Center. She likes to escape to his family farm in Sweetwater, Tenn. She goes fly-fishing a few times a year — and yes, she’s bought fly-fishing equipment on eBay. That’s in addition to the Beanie Babies, Pokemon cards and even a car that she purchased there.

Whitman may be calm, but she’s ambitious. So even as she moves quickly to defend her company’s turf, she’s also looking to broaden it. For example, she wants to expand eBay overseas; just this year she bought iBazar (which has online auction sites in eight European countries) and made moves in New Zealand, Korea and other countries.

Still, she eschews top-down command tactics that assume she knows everything. Instead, she remains open to opportunities. For example, customers gravitated toward the fixed-price sales of Half.com, as opposed to auction sales. So Whitman championed fixed-price sales on the site, and those may one day put eBay on top of Amazon as the Web’s biggest retailer.

Even eBay isn’t immune to hubris. Whitman says eBay aims to more than triple its annual revenue to $3 billion by 2005, and Wall Street considers that implausible. Yet in her professional hands, that claim isn’t so much a dot-com boast but a CEO setting the bar high for her team. So let others try to revolutionize media or make bookstores obsolete, while Whitman keeps her eye on the bottom line. Because in the long run, Meg Whitman’s success reminds people that this e-commerce thing may just work after all.

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Loren Fox is a freelance writer based in New York.

Memo to an insta-millionaire

Congratulations! As Webvan's new CEO you're a winner at stock-option Monopoly: Just pass "Go" and collect millions!

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From:
E.Z. Money
President
Internet Economics Inc.

To:
George Shaheen
Incoming Chief Executive Officer

Webvan Group

Dear Mr. Shaheen,

Welcome to your new office. As you know, you are a lucky man. You are entering the grocery business, and are about to take over as CEO of Webvan, just in time for its initial public offering. Here at Internet Economics Inc., we’ve taken care of everything. We’ve already got seven (count ‘em, seven) investment banks working for you. Sure, you used to have to get through the hard part — leading a company to the point where it could go public — before you could cash in; but you don’t have to worry about most of that. The boys at Goldman Sachs say all we need to do now is print up the prospectuses, and we’re ready to hit the Nasdaq. Just sit back and enjoy the ride.

We’ve taken the liberty of granting you 1.25 million shares of common stock. We’re planning to go public at $11 to $13 a share, so that’s probably about $15 million for you. (We know you’re already a millionaire, but as you know from 30 years at Andersen Consulting, a million here and a million there can really add up.) There will be vesting periods and such, but we’re sure your people have already taken care of that — accelerated vesting in case of a sale, severance agreements, all that other stuff.

Think of this as a little like Monopoly: You get a stack of bills to start. You don’t need to do anything for it. You’ll also have options to buy another 15 million shares at $8 a share. We hope you recognize that as an extra-special token of our esteem. With options priced at $8 a share, you can make money even if Webvan’s investors don’t. As long as the stock stays above $8, you’re making money. To stay with our Monopoly analogy, you can think of this as your annual reward for passing “Go.”

Naturally — just between us — in today’s economy we don’t really need to talk about stocks priced at $12 a share, do we? Webvan is an Internet company, after all. We know you’ll be moving from leading Andersen, a huge multinational corporation, to leading a fleet of delivery trucks and a warehouse in Oakland, Calif. — but it’s already a $4 billion warehouse. If investors bid up your stock, who knows how much you can be worth? At $40 a share, your 1.25 million shares would be worth $50 million. And your options could be worth another $480 million.

Yes, there have been other CEOs who’ve come in just in time to choose investment bankers (although, admittedly, coming into the top position after the company has filed to go public is still a bit unusual). You might be unsure of your footing at first: After all, a consulting company and an online supermarket don’t seem to have much in common, do they? But don’t worry. The important thing for a new Internet super-corporation is to get itself someone with Fortune 500 credentials. It can’t let investors think that the head of the company is just a nobody who’s been mucking around with the Internet for the past four years.

That’s why eBay hired Meg Whitman away from Hasbro four months before going public. And remember how much publicity Priceline got for hiring Richard Braddock, a “former president of Citibank,” as the press release said. (Hardly anyone noticed that he’d lasted all of two years in that lofty job, and lost it back in 1992.) Remember, in the days before Bud Selig, how baseball commissioners used to be former college presidents with lots of degrees? Getting a Fortune 500 name is just like getting the dean of the Yale Law School to serve as baseball commissioner. It gives us just that last little bit of extra credibility.

Remember Mr. Sheehan, your next few weeks will be exhausting. In fact, you probably will barely have time to choose your office wallpaper before you go out on the road show, flogging your new company to big investors. You’ll be talking to institutional investors from places like Fidelity, and they’ll want a CEO who’s really committed to the company, someone with a proven track record on the Net. So whatever you do, please, please don’t say Andersen when you mean Webvan.

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Mark Gimein is a staff writer for Salon Technology.

Hitting the gold ceiling

Why aren't young female entrepreneurs making it into the upper echelons of Silicon Valley wealth?

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When Carly Fiorina was fingered in July as the new CEO of Hewlett-Packard, she blithely blew off the reporters that called her appointment a victory for women. “I hope that we are at a point that everyone has figured out that there is not a glass ceiling,” Fiorina explained at the time. “My gender is interesting, but really not the subject of the story here.”

Perhaps Fiorina, 44, should take a look at some of the latest statistics to come out of Silicon Valley, like America’s Richest 40 Under 40, a chart accompanying “The Young and the Loaded,” the latest Fortune cover story about technology wealth. Despite Fiorina’s belief that gender is irrelevant and the frequently heard assertion that the Internet evens out the playing field for female entrepreneurs, the list of the wealthiest young executives in America includes not a single woman.

The list, which is primarily made up of technology executives (although it includes a smattering of other richies, like sports star Michael Jordan and Master P of No Limit Records), begins with Gregory Reyes, the 37-year-old CEO of Brocade Communications, whose net worth hovers around $243 million, and tops out with Michael Dell, the 34-year-old CEO of Dell Computer, who is worth a cool $21.49 billion. The youngest on the list is Paul Gauthier, CTO of Inktomi, who has accumulated $418 million at the tender age of 26; the oldest executives are 39.

Clearly, the wealthiest young executives are riding on their stock market valuations, rather than actual cash in the bank. But it still bodes badly for the role of women in the industry. Despite the fact that increasing numbers of young women are starting up their own companies and landing the title of CEO, those companies are not the ones valued by the stock market and the venture capitalists who bankroll those start-ups into the moneyed limelight.

In fact, the wealthiest women in the technology industry — women like Meg Whitman, who was granted a fortune in eBay stock as its CEO, and Carly Fiorina herself — are over 40, and have spent years working their way up the executive ladders. And even they aren’t nearly as well compensated as their male counterparts, according to a recent San Jose Mercury News report.

“It’s another indication that women are just not making it to the top — and they’re not only not making it to the top in terms of title, but in terms of top-dollar packages,” says Carolyn Leighton, chairwoman and founder of Women in Technology International, a nonprofit whose aim is to promote female entrepreneurship. “I hope this makes enough of us angry that we say we aren’t going to take a lesser package anymore, we’re going to negotiate what we deserve.”

Wealth isn’t everything, of course, but it’s certainly an indicator of who’s being taken seriously by the business world — and who’s not. The ceiling Fiorina has dismissed is, perhaps, not made of glass at all, but of crisp green bills.

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Janelle Brown is a contributing writer for Salon.

The Barbie fixation

What do eBay's Meg Whitman and Apple's iBook have in common? Could it be sexist journalism?

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Pubescent boys have long known that “girly” and “sissy” are among the worst epithets that you could pin on a growing guy. Call it sandbox sexism: a demeaning insult that teaches young boys that manly is always superior to feminine. Adults, of course, should know better — but this week, not one but two technology magazines have been reduced to disturbing Barbie doll metaphors and “girly” name-calling. Just when Hewlett Packard’s new CEO, Carly Fiorina, thought women in computing were getting some respect, the technology press turns around and slaps women with that sexist “Barbie” label.

First, we get John Dvorak dismissing the iBook in his latest PC Magazine column for being too “girly,” too “effeminate,” something no frat boy would ever want to use. “The only thing missing from the new Apple iBook is the Barbie logo,” he writes. “You expect to see lipstick, rouge, and a tray of eye shadow inside when you open it up. You don’t expect to see a 12-inch LCD; you expect to see a 12-inch mirror. No male in his right mind will be seen in public with this notebook.”

Putting aside the general merits of the iBook’s design (which, I would argue, bears no resemblance whatsoever to a woman’s compact, and doesn’t even come in pink), Dvorak’s article is chock-full of sexist stereotypes. There’s the assumption that girls don’t really use computers, and that therefore all computers should be designed to appeal to men first and foremost. Then there’s the notion that “girl” equals makeup — and Barbie. And finally, we’re reminded that no man would want to be associated with anything “girly” — just to carry around an object that some might find effeminate is an “embarrassment.” (Someone at the UK edition of PC Magazine must have realized that his column was a sexist gaffe: there, the “letters to the editor” link at the bottom of the column suggests that “Dvorak is dealing in sexist stereotypes and is biased because he writes for PC Magazine anyhow.”)

But Dvorak isn’t the only journalist to fall back on that old Barbie gag. Moving next door on the newsstand, the latest cover of Red Herring boasts an image of eBay CEO Meg Whitman’s head pasted on the body of, yes, a Barbie doll. The caption: “eBay: The Internet’s sexiest new business model.”

Playing up the sex appeal of female technology executives is an old game for business magazines looking for newsstand sales, and one that dismisses the real achievements of women in favor of their looks. After all, it’s not likely that the Herring would put a picture of Larry Ellison’s head slapped on top of a Ken doll, with the subtext that his business decisions are macho.

The Red Herring’s choice of the Barbie cover is ironic, considering that editor Jason Pontin recently told Salon Technology that technology magazines had a challenge to portray women as “effective executives,” not just as sexy babes. Never mind the fact that in their eagerness to play the Barbie card, the Red Herring got its facts wrong: Meg Whitman previously worked for Hasbro, the competitor to Barbie franchise-owning Mattel.

Now that nearly 50 percent of the online population is female, and women like Whitman and Fiorina are at the helm of powerful technology companies, perhaps it’s time for the industry to stop ogling women in technology as if they were misplaced novelties. Women use computers, women run computer companies; equating them with busty plastic dolls shows that no matter whether we’ve come a long way, baby, not everyone has kept up.

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Janelle Brown is a contributing writer for Salon.

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