A written war has been raging on between activist investor Carl Icahn and eBay. Icahn has been shredding eBay's board of directors, in particular Marc Andreessen, questioning his loyalty to the company and accusing him of not having eBay's best interests in mind, which has essentially cost shareholders money.
Andreessen has now released a response to those accusations.
In his letter, he denies that he has violated any of his duties to eBay shareholders and says that he adamantly removed himself from deliberations about any transactions that may have conflicted his interests.
Here's the full letter:
False and misleading accusations have been made against eBay and against me in my role as an eBay director. This post provides my perspective on those accusations and their surrounding context.
On the accusations:
I dispute all accusations that I have violated any of my duties to eBay shareholders.
Specifically:
* Throughout the eBay board’s process of divesting Skype, I fully disclosed my potential interest and recused myself from all deliberations on the transaction, including all discussions, negotiations, and decisions. I was uninvolved in eBay’s decision to spin off Skype and in eBay’s decision to choose to partner with the Silver Lake syndicate.
* eBay’s retained ownership in the Skype spinoff was 30% vs. Andreessen Horowitz’s approximately 3%. That much larger ownership gave eBay a far bigger role in decision making on Skype after the spinoff than Andreessen Horowitz, as well as a far bigger economic payoff on the sale to Microsoft.
* Subsequent to the Skype transaction, I was re-elected to the eBay board in 2012 with virtually unanimous support — 99.7% of votes — of eBay shareholders. The Skype transaction received a high degree of public scrutiny when it happened; all of the facts around my role in the Skype transaction were fully public at that time; eBay has a very sophisticated body of shareholders; and if any of them saw any problem with my conduct around the Skype transaction, I am confident that they would have brought it up by 2012.
* Andreessen Horowitz’s minority investment in Fanatics was made over a year after eBay divested that business as a part of eBay’s acquisition of GSI Commerce; there was no possible conflict at that point. Further, there was no contemplation of Andreessen Horowitz investing in Fanatics at any time during eBay’s negotiation and purchase of GSI Commerce or eBay’s divestiture of Fanatics.
* I do not serve on the board of any company with any significant competitive overlap with eBay.
* I disclose any situation where I believe I may have a potential conflict and recuse myself from any eBay board deliberation when I believe I may have a potential conflict due to an investment in another company.
On the context:
Directors of all companies owe shareholders several duties, including the duty of loyalty. This duty focuses on avoidance or appropriate handling of conflicts of interest, and requires fair dealing by directors involved in transactions that could result in personal gain or financial conflicts with the company. To strengthen this duty and to further protect public company shareholders from potential conflicts of interest, directors are restricted in several different ways. These restrictions include:
(1) Prohibitions on one director serving on multiple company boards when those companies have any significant competitive overlap.
(2) Requirements that a director of a company disclose potential conflicts and recuse him/herself from board discussions and decisions when that director has potential conflicts, such as but not limited to an investment stake in another company.
(3) Restrictions on use of company confidential information by any director for any purpose other than that company’s benefit.
These protections are enforced by several layers of oversight and accountability, including:
(a) Each company’s legal counsel and broader board of directors.
(b) Regulatory agencies such as the SEC, as well as stock exchange rules.
(c) Shareholder votes, in which shareholders can vote directors in whom they lose confidence off the board.
(d) Shareholder litigation, which is very common and which is omnipresent on directors’ minds during board meetings.
All of these protections apply to directors of public companies in every industry and every field, including directors who are venture capitalists, hedge fund activists, private equity investors, operating executives, and independent board members.
Some people have floated a theory that today’s technology industry is more prone to potential conflicts because of the rapidly shifting nature of software. I don’t think that’s true. For example, in prior decades the conglomerate business model, in which companies would choose to acquire and operate in many unrelated industries, was more common — a dynamic that would easily lead to unpredictable potential conflicts among boards and directors.
Some people have also floated a theory that venture capitalists are more prone to potential conflicts than other kinds of directors due to their investments in multiple companies at once. I also don’t think that’s true. For example, activist hedge fund managers also tend to hold equity stakes in many companies at the same time, creating the exact same kind of potential conflict.