Books@DailyFinance: eBay's Meg Whitman Looks Back in Wonder

Talk about stakeholder power. In 2001, a new eBay (EBAY) policy had regular sellers on the site storming the barricades and all but ready to lynch the CEO. Company executives had figured: Hey, maybe we could generate more action by steering the losers in one auction to other auctions, where similar products are on offer.

Wrong. The sellers went nuts. Furious that their bidders were being diverted, inflamed merchants jammed eBay's online discussion boards and pummeled the site with flaming e-mails. Whitman and company founder Pierre Omidyar felt compelled to jet to Salt Lake City to meet with one particularly obstreperous marketer – and eBay had to quickly ditch the strategy.

You don't hear so much nowadays about stakeholder capitalism – the idea that, in addition to stockholders, a number of others should have some say over how a corporation is run. Still, Meg Whitman's The Power of Many: Values for Success in Business and in Life (Crown, $26) may give you the sense that the idea lives on -- at least in such Internet Age companies as eBay, of which Whitman was CEO until 2008.

"In almost any other kind of company, users would never expect management to consult them before introducing a new product or making a change to an existing one," Whitman writes. "Our community demanded that we be accountable to them because in many cases their livelihood depended on us."

Damage Control

It's Whitman's thoughts on eBay that makes this volume stimulating, even if the prose could be a bit peppier. (Disclosure: co-author Joan O'C. Hamilton is a former colleague of mine at BusinessWeek.) Following the convention of CEO books, each chapter is organized a maxim. "Be authentic," Whitman instructs, and "Trust that people are basically good."

It's hard to believe anyone tries hard to apply such rules to his or her own work situation. But it's more instructive for readers to reflect on what eBay reveals about consumer and supplier expectations today. In that area, there's a lot to consider.

Along with a reprise of her career and personal background, Whitman offers a brief history of eBay. Those familiar with the company's past will recall many of the ups and downs she recounts: the 22-hour site meltdown in June 1999 that paralyzed all auctions, angered sellers, and threatened to destroy the company; the acquisitions of "white-glove" auction house Butterfield & Butterfield in 1999 (which eBay soon sold), PayPal in 2002, and voice-over-Internet provider Skype in 2005; and the dawning realization that the company must abandon a hands-off policy and begin policing just what gets bought and sold.

Each of these developments allows Whitman to muse on lessons learned and progress achieved. Readers will likely come to agree with her that the steps taken following the 1999 outage -- phone calls of apology to the site's irate top-sellers, plus refunds of all fees for affected auctions -- "strengthened our relationship with both our technology partners and our community." Still, Whitman's defense of her acquisitions may not persuade critics who feel that these represented a distraction from e-commerce and the tech advances that eBay should have been making.

Nazi Gear and Porn

Like the 1999 outage, the 2001 auction-policy flip-flop reinforced one all-important moral: The People Must Decide. At the same time, a persistent dilemma seemed to suggest a very different lesson. Exactly how much should an Internet intermediary like eBay involve itself in the details of what's being bought and sold? If vendors want to peddle porn or Nazi paraphernalia -- or even Jarts, the giant and potentially hazardous lawn darts -- and consumers want to buy the stuff, who is eBay to interfere?

Reviewing the Digital Millennium Copyright Act, eBay's lawyers argued that neutrality was the best policy: As long as the company did not selectively police its site, it couldn't be held liable for selling any particular product, be that alcohol or counterfeit luxury goods. And there were some kinky offerings: "In one memorable case, a man listed his own kidney for sale; in another, a sixteen-year-old boy put his virginity on the block." There were even auctions of used and unlaundered (a.k.a., "custom") undergarments. Whoa.

That hands-off policy couldn't last. Starbucks honcho Howard Schultz, a board member, objected to the sale of Nazi gear, and video-game makers objected to auctions of bootleg programs. Shortly, eBay set up a well-staffed department to screen what got sold. The issues remain thorny: It's O.K. to sell stuff associated with Jack the Ripper, says eBay – those are historical artifacts. But Jeffrey Dahmer's refrigerator? Unh-unh. In other words, The People Must Decide – But Somebody Better Watch Them.

Voice of the People?

By the time of Whitman's 2008 retirement, the company had 15,000 employees and more than a million people making a living off eBay. Whitman is now the frontrunner for the GOP nomination in the race to succeed California Gov. Arnold Schwarzenegger. In The Power of Many, Whitman's political philosophy seems little more than a collection of Republican slogans: We must cut taxes and "waste," reduce government spending but also improve public education, and rely on citizen volunteerism to get things done.

Recently, Whitman has made headlines by saying that upon election, she'd immediately suspend the state law aimed at reducing greenhouse-gas emissions -- legislation that's popular with perhaps a majority of California voters. What happened to the visionary who built a company by paying heed to the masses? Maybe Citizen Meg needs to revisit the lessons drawn from her time as the People's CEO.
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