Today Carl C. Icahn released the following article: A Watershed Moment for Stockholder Participation

  Today Carl C. Icahn released the following article: A Watershed Moment for
                          Stockholder Participation

PR Newswire

NEW YORK, March 26, 2014

NEW YORK, March 26, 2014 /PRNewswire/ -- For many years I have been a
proponent of active participation by stockholders in public companies.
Stockholders are like any other business owners – those who pay attention,
carefully weigh decisions and present important ideas to be considered by
their partners (who in public companies are their fellow stockholders) are
more likely to own valuable, dynamic businesses. Obviously, a business that
operates solely through employee control and without owner influence would be
missing a critical element for success – decision-makers with real skin in the
game who can provide the necessary checks and balances to otherwise
uncontrolled power. Simply put: How much candy would be left in the candy
store if employees reported only to themselves?

As was noted long ago by Sir John Dalberg: "Power tends to corrupt, and
absolute power corrupts absolutely." The corrupting power embedded in the
simple mechanics of the system through which directors at public companies are
elected is sufficient to cause all stockholders to be concerned. Imagine if
the U.S. Senate was itself, as a body, entitled to pick and endorse those who
would run for the Senate in each election and, on top of that, had unlimited
access to funds at the U.S. treasury to support those campaigns – would anyone
doubt that rampant corruption would result? Yet, that type of
self-perpetuating process is exactly what we have in corporate America under
the current system, wherein board members themselves nominate candidates for
election to the board and use the corporate coffers to fund their election.
The SEC sought to eliminate this crucial flaw in the corporate voting system
years ago through promulgation of a new rule that would have facilitated the
election of directors nominated directly by stockholders, thereby enabling
business owners to circumvent the self-perpetuating board nominating
committee. 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.

It is those same anti-stockholder interests that promote the alternative model
to active stockholder involvement, which entails corporate ownership residing
in passive, absentee stockholders and leaves bureaucratic managers and
directors controlling our public companies. Although there are exceptions, I
believe that 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. The
massive compensation and self-dealing that has occurred at many public
companies, even in the face of poor results and labor force reductions,
highlights the risks inherent in the passive stockholder model. To put it
simply, in business, as in all things, you cannot let the fox guard the
henhouse.

Sadly, in the case of eBay, it is abundantly clear that management favors the
passive stockholder model. In a recent interview with the Financial Times,
eBay CEO John Donahoe lamented the fact that he had stockholders to answer to,
saying that "business should be allowed to innovate without shareholder
distractions."^1 The article further quotes Mr. Donahoe as saying: "Every new
Silicon Valley company has a dual class of stock to prevent this issue,
because innovation has a long-term time horizon." In any rational world, dual
class stock, which is an outrageous scam, would be illegal for public
companies. But we thank Mr. Donahoe for honestly stating his view of the
proper role of stockholders, which we interpret as essentially "sit down and
shut up." Sir John Dalberg would, we think, have had no problem recognizing
the impact of power on Mr. Donahoe in this regard.

At the risk of being immodest, I believe my record proves that when you have
the farmer guard the henhouse, instead of the fox, better results occur. From
November 15, 2008 to November 15, 2013 (a five year period), my nominees
joined the boards of directors of 20 public companies. A person that invested
in each company on the date that my nominee joined the board and sold on the
date that my nominee left the board (or continued to hold through November 15,
2013, if my nominee did not leave the board) would have obtained an annualized
return of 28%. My success did not occur because my nominees micro-managed
these companies. Rather, it is simply a result of diligent oversight and
properly focused priorities.

There are a number of great dangers facing our country. 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. Nevertheless,
defenders of the corporate bureaucratic establishment continue to refine
entrenchment devices, such as the pernicious poison pill, with its
ever-decreasing ownership thresholds, that are designed to strip power from
away stockholders and insulate self-interested managers from having to be
accountable to their constituents. The dual class voting stock championed by
Mr. Donahoe is similarly designed to take money from investors while
restricting their ability to have a say in overseeing their investment. It is
entrenchment devices like these that hold back corporate democracy, thwart
efforts to have full, fair and transparent elections of directors and
ultimately imperil our most valuable assets, which are embedded in the public
companies that make-up the backbone of our economy.

Until recently, professional corporate managers and directors and their highly
paid advisors and defenders, all of whom can generally be considered the
bureaucratic establishment of corporate America, have criticized activist
stockholders, and those voices have had a disproportionate effect on the
dialogue regarding corporate governance. A recent news story, however, serves
as a clear reminder that stockholders who blindly trust managers, directors
and advisors are living in a fantasy world. In headline grabbing news, the
SEC charged the film and television distribution company Lions Gate
Entertainment Corp. (please indulge me if I refer to this affair as "Liar
Gate") with failing to fully and accurately disclose to investors key
information relating to management's participation in a set of extraordinary
corporate transactions that put over 16 million newly issued company shares in
the hands of a management-friendly director at a price of $6.20 per share (the
price of those shares was $33.26 per share at market close on March 12, 2013
(the day before announcement of the SEC's order), creating a total spread of
almost $440 million that could have inured to the benefit of all Lions Gate
shareholders had such transactions not occurred). In settling with the SEC,
Lions Gate admitted to violating federal securities law, agreed to pay a
financial penalty of $7.5 million and acquiesced to the SEC's demand to cease
and desist from future violations. The "Liar Gate" matter is notable not only
for the direct findings against management and the board but also for the
criticism that has been leveled against Wachtell, Lipton, Rosen & Katz, the
company's legal advisor (and, not surprisingly, the same law firm that has
been tapped to represent the not so "world-class" team at eBay). Bloomberg
View stated the following criticism:

  You'd have to give them points for creativity in arranging this transaction
  to keep Icahn out of power, and by the thinnest of margins. But you'd have
  to dock a lot of points for the disclosure. Roughly $7.5 million dollars
  worth of points. You're not supposed to lie about what you're doing in your
  disclosure!^2

Liar Gate drives home the lesson that if stockholders want the best from and
for the companies they own, they cannot just sit back and let self-interested
corporate bureaucrats make decisions based on the counsel of advisors who have
few incentives to look out for stockholders and cannot always be relied upon
to bring proper "adult supervision" to the board room. Fortunately, at long
last, due in part to a litany of management buyouts that deprived stockholders
of value – such as the leveraged buyouts of J. Crew^3 and Del Monte^4 (a list
to which, as we have stated before, we anticipate Dell will eventually be
added) – and lackadaisical oversight by slothful directors who sat around and
did little as their companies – such as Blackberry, Eastman Kodak and Polaroid
– became relics, institutional investors seem to be waking up to the fact that
increasing stockholder value and protecting stockholder rights, in many cases,
requires active involvement by stockholders. They are also learning that
there is a critical role that must be played by business owners if they wish
to avoid the negative effects that otherwise often result when they passively
defer to entrenched managers and directors. That role cannot be limited to
peripheral issues, such as say-on-pay and the division of the CEO and chairman
roles, that are, although important, not the most pivotal matters. Direct
involvement in the director nomination and election process is what really
matters in corporate governance. To that end, it is imperative that
stockholders be free to accumulate enough stock to provide sufficient economic
incentive to wage a costly, time-consuming proxy contest, and this freedom is
under constant assault due to the systematic lowering of thresholds in poison
pills by entrenched management and directors. These are the battlefields that
institutional stockholders must confront if they wish to enable the companies
they invest in to succeed at the highest levels.

The New York Times Deal Book recently reported that "[m]utual funds and other
big money managers, which now control a record share of public company stock,
are working with activist hedge funds behind the scenes, pressing for change
at underperforming companies in their portfolios and lending their support to
calls for management shake-ups." ^ 5 I believe mutual funds and other big
money managers owe it to their shareholders and clients to do much more than
merely work "behind the scenes" at underperforming companies. Nevertheless, I
am heartened by the awakening of institutional stockholders. For decades,
activists like myself have challenged the bureaucratic corporate
establishment, with their public relations machines and their cronies on The
Business Roundtable and the U.S. Chamber of Commerce, all of whom have used
disinformation to wage specious campaigns, using catchy labels such as
"raider" and "short-termer" (the substance of which has been widely
discredited by empirical studies) in order to obscure relevant issues about
corporate improprieties and conflicts of interest. But, it seems, these spin
campaigns are finally being seen by stockholders for what they actually are –
self-interested efforts by the entrenched, bureaucratic business establishment
to maintain their position feeding at the trough of our public corporations.

This brings me again to Mr. Donahoe, eBay and its not-so world-class board.
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 and signals
to me, particularly when considered together with eBay's historically high
tolerance for conflicts of interest that we believe disadvantage stockholders,
that change is needed on the eBay board. Fortune magazine recently described
these issues well, writing that:

  Icahn's problems with Andreessen are that he directly invested in and
  profited from two eBay subsidiaries -- Skype and GSI Commerce -- and is
  invested in and advises four companies that are in direct competition with
  PayPal. eBay has responded by saying that Andreessen recused himself from
  any discussions about the disposal of Skype, but his position as a director
  of eBay gives him access to large amounts of non-public information about
  strategic decisions being made about PayPal such as the board book and the
  five-year plan that provide a fairly substantial conflict of interests
  between his duties to eBay shareholders and his duties as investor and
  adviser of its competitors.

  Exactly the same types of conflict of interest lie at the base of
  accusations against Scott Cook, Intuit's (INTU) founder, former CEO, major
  shareholder, and current executive chairman, which also has a division,
  GoPayment, that is also a direct competitor of PayPal. These conflicts are
  even more black and white. We all know that the Valley is fairly incestuous,
  but, it might be added, so is Detroit, and you can't imagine Ford putting
  the General Motors CEO on its board.^6

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. The 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. 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"^7 – that blatant conflicts of interest and
self-dealing will be tolerated. To me, the situation at eBay is similar to
Hans Christian Andersen's famous tale "The Emperor's New Clothes" in that
everyone can see what is going on, but no one has said anything about it.
That is why eBay stockholders need a watchdog on the board of directors – a
true stockholder representative that would never sit idly by and tolerate the
conflicts and self-interested maneuvers that we believe are endemic to the
current eBay directors.

The need for a stockholder representation at eBay is especially crucial as
eBay wrestles with the optimal way to take full advantage of its crown jewel –
PayPal. This potential financial juggernaut lies buried inside eBay. Some may
say it must be spun off now to achieve its maximum value, which could come in
the form of an acquisition by another tech behemoth. Others may agree that an
IPO to create a stand-alone company with substantial contractual ties to eBay
will produce the best result for stockholders and allow PayPal to attract the
vital new talent necessary to achieve its maximum potential. Regardless of
the manner of separation, eBay stockholders should rightfully be concerned,
based on the advice of some of the best minds in Silicon Valley, that there is
a serious risk that PayPal will simply wither if it is not separated from eBay
now. I believe that PayPal presents a massive opportunity that should not be
left buried within eBay, and for the reasons I have previously annunciated, I
believe that an IPO approach is appropriate. But I see nothing but tremendous
unnecessary risk if we allow the same board that approved the Skype
transaction, which, if handled differently, could potentially have netted an
additional $4 billion of value for eBay stockholders, the opportunity to
mishandle PayPal. It has often been said that the definition of insanity is
to do the same thing over and over again and expect a different result. So
let's bring some sanity to the process by electing our nominees to the eBay
board.

We have nominated two highly-qualified individuals for election to the eBay
board. Given that these individuals are employees of a large stockholder, we
believe our fellow stockholders can trust that these individuals to put the
interests of stockholders first. Certainly other large stockholders could have
nominated directors to perform that same function, but, as is often the case,
we are the ones who have stepped forward, identified the problems, informed
our fellow stockholders of the issues and reached into our pocket to run a
proxy fight. I urge you to join me in electing our nominees to the eBay board
and supporting our precatory proposal for a PayPal IPO.

*****

I have made a great deal of money by understanding some simple facts. Very
often assets of significant value are mismanaged by highly-compensated, but
less than highly-competent, managers and boards of directors, all whom are
protected by highly-compensated lawyers and bankers – with stockholders not
only paying the fees of these advisors but also losing out on the returns that
they otherwise could be enjoying if they took on their proper role as business
owners.In such situations, if investors can install good managers and elect
directors that will hold those managers accountable, then the true value of
those assets can be realized. That is the simple insight that allowed a kid
from Queens who started with nothing to become one of the most successful
investors in America. Of course, it is no simple thing to identify the right
companies and achieve the change that is necessary. And, as you would expect,
sometimes I am wrong and sometimes change cannot be achieved despite all the
effort I put in. But I have been right far more often than not, and I
strongly believe that if my fellow stockholders join me to support our
precatory proposal and, most critically, to elect our director nominees, that
I will be proven right once again.

I call on all institutional investors to step up and face the challenges
before us. Do not give eBay's current management and board the unfettered
power to squander the critical first-mover advantage that PayPal has just as,
in my opinion, they squandered the value of Skype. In the near term, I will
continue to reach out to institutional investors in order to convince them to
support us in our proxy fight at eBay, and I look forward to engaging in those
conversations much as I have enjoyed those that have already taken place. In
the longer term, as I have already discussed with many of you in recent days,
I also hope to engage in an ongoing dialogue with institutional investors to
discuss the benefits that I believe we all will derive if institutional
stockholders more actively exercise their voting rights. I hope that we can
join together in a constructive conversation regarding our common interest in
creating the optimal environment for successful investment in, and growth of,
American public companies.

Follow me on twitter: @Carl_C_Icahn

#notworldclass #spinpaypalnow

If you have questions or need assistance in voting your shares, please call:

Georgeson

480 Washington Blvd, 26^th Floor

Jersey City, NJ 07310



(Toll Free) (888) 497-9677

E-mail: spinpaypalnow@georgeson.com



THIS LETTER INCLUDES INFORMATION BASED ON DATA FOUND IN FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION, INDEPENDENT INDUSTRY PUBLICATIONS AND
OTHER SOURCES. ALTHOUGH WE BELIEVE THAT THE DATA IS RELIABLE, WE HAVE NOT
SOUGHT, NOR HAVE WE RECEIVED, PERMISSION FROM ANY THIRD-PARTY TO INCLUDE THEIR
INFORMATION IN THIS PRESENTATION. MANY OF THE STATEMENTS IN THIS PRESENTATION
REFLECT OUR SUBJECTIVE BELIEF.

SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS
RELATED TO THE SOLICITATION OF PROXIES BY Carl C. Icahn AND HIS AFFILIATES
FROM THE STOCKHOLDERS OF EBAY INC. WHEN THEY BECOME AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION, INCLUDING INFORMATION RELATING TO THE
PARTICIPANTS IN SUCH PROXY SOLICITATION. WHEN COMPLETED, A DEFINITIVE PROXY
STATEMENT AND A FORM OF PROXY WILL BE MAILED TO STOCKHOLDERS OF EBAY INC. AND
WILL ALSO BE AVAILABLE AT NO CHARGE AT THE SECURITIES AND EXCHANGE
COMMISSION'S WEBSITE AT HTTP://WWW.SEC.GOV. INFORMATION RELATING TO THE
PARTICIPANTS IN SUCH PROXY SOLICITATION IS CONTAINED IN THE PRELIMINARY PROXY
STATEMENT ON SCHEDULE 14A FILED BY CARL C. ICAHN WITH THE SECURITIES AND
EXCHANGE COMMISSION ON MARCH 25, 2014 (THE "SCHEDULE 14A"). EXCEPT AS
OTHERWISE DISCLOSED IN THE SCHEDULE 14A, THE PARTICIPANTS HAVE NO INTEREST IN
EBAY INC. OTHER THAN THROUGH THE BENEFICIAL OWNERSHIP OF SHARES OF COMMON
STOCK OF EBAY INC. AS DISCLOSED IN THE SCHEDULE 14A.

^1 See Ed Hammond et al., eBay Chief Defends Keeping PayPal, The Financial
Times, March 6, 2014 [emphasis added].

^2 See Matt Levine, Carl Icahn Can Cause a Government Investigation, Too,
Bloomberg View, March 13, 2014.

^3See Ronald Barusch, The J. Crew Buyout: Doing Everything Wrong, The Wall
Street Journal, December 7, 2010.

^4 See Michael J. De La Merced, Del Monte and Barclays Settle Investor Lawsuit
for $89.4 Million, The New York Times, October 6, 2011.

^5 See David Gelles and Michael J. De La Merced, New Alliances in Battle for
Corporate Control, The New York Times, March 18, 2014.

^6 See Paul Hodgson, The Real Problem at eBay: Corporate Governance, Fortune,
March 21, 2014.

^7 See Erin Griffith, Silicon Valley's Single Degree of Separation, Fortune,
March 20, 2014.

SOURCE Carl C. Icahn

Contact: Susan Gordon: (212) 702-4309
 
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