Meg Whitman took the online shopping site from upstart to giant. But can her business skills help heal California’s woes?

By Stuart Pfeifer, Los Angeles Times
October 23, 2010

Meg Whitman might have seemed an unlikely candidate to oversee EBay when she was tapped as its chief executive in 1998.

She was a veteran of corporate America, a Harvard MBA who powered her way to executive jobs at Procter & Gamble, Walt Disney Co. and consulting firm Bain & Co. EBay was a small tech startup with 30 employees, derided by skeptics as “FleaBay.”

It didn’t seem to matter. During a decade as its chief executive, Whitman guided EBay Inc. to explosive growth and profitability. Its stock price soared 1,200% during her tenure; its workforce grew even more.

Whitman also succeeded in guiding EBay through a minefield of potential disasters: early concern about fraudulent sellers, competition from Yahoo and Amazon, and technology problems that once shut down the site for 22 hours.

EBay’s revenue grew from $47million in 1998, Whitman’s first year with the company, to $7.67billion in 2007, her last as CEO. The Harvard Business Review recently lauded her as the eighth-best-performing chief executive in the world.

“How many CEOs can you find who have steered a company from less than 1,000 employees to more than 15,000 in a span of eight years?” asks Sandeep Aggarwal, a technology analyst with Caris & Co. in San Francisco. He hails Whitman as “one of the finest CEOs of her time.”

Now, nearly three years removed from San Jose-based EBay, Whitman is once again aiming to take over an alien culture. The Republican wants to be governor of financially crippled California, overseeing a $125-billion budget and more than 200,000 employees. She has vowed to manage California more like a business, cutting $15billion in spending and reducing taxes to spark entrepreneurship and job growth.

But a young, fast-growing online company in the midst of the Internet boom is almost the antithesis of what she’d inherit in Sacramento: a state saddled with a deeply divided Legislature and a massive budget deficit coming off the worst recession in decades.

Some former employees and Silicon Valley observers question whether a forceful corporate executive used to getting her way would be capable of the compromise needed in government.

“You certainly have many more freedoms as a CEO than you do as an elected official,” said Larry Gerston, a political science professor at San Jose State. “We don’t elect kings.”

In a brief interview Friday night, Whitman said her experience at EBay would be “highly relevant” to the work she would do as California’s chief executive.

For example, she said, an ability to hire capable employees was an ingredient of her success at EBay and would serve her well in Sacramento.

“The governor makes 3,000 appointments and the top 300 are essential,” Whitman said. “I know how to hire people. I know how to evaluate people. A lot can be done with just your staff.”

At EBay, Whitman was known as a demanding boss. She gave plum jobs to outsiders with pedigreed backgrounds, could be dismissive of dissent and was known to have a temper, several former EBay staffers said.

Whitman shoved a subordinate, and the company paid a $200,000 settlement, the New York Times reported this year, citing unnamed sources. The Whitman campaign acknowledged a dust-up but did not readily admit it had become physical.

“EBay was not a democracy,” said Reed Maltzman, who worked in strategy and product management at EBay from 1998 to 2002. “There are certain people who make you feel even though they have a position of power that they value your input and it’s OK to disagree with them. Meg is not that person.”

Maltzman said Whitman forged ahead with the disappointing 1999 acquisition of high-end auction house Butterfield & Butterfield, despite objections from many that it was not a good fit. EBay sold the company three years later.

Brad Handler, the first corporate lawyer employed by EBay, put it this way: “Meg doesn’t believe in compromise; she believes it shows weakness. She thinks you need to wear people down. That is hard to do in a Legislature controlled by Democrats.”

Maltzman and Handler both support Atty. Gen. Jerry Brown in the governor’s race, and their concerns are echoed by some political and business observers.

“She did a very good job for the shareholders … but she was not loved at the company,” said Paul Saffo, a longtime Silicon Valley technology analyst and author. “Somebody who doesn’t get along with people and play well with others is going to end up being a lame-duck governor pretty fast.”

Gov. Arnold Schwarzenegger campaigned with a similar outsider’s bravado. He promised to “blow up the boxes” of government, pointing out, as Whitman does, that he was beholden to nobody. But the reality of governing California has proved to be not so simple.

Whitman says she was actually an inclusive leader at EBay.

“What many people think is when you’re the CEO you say, ‘Jump’ and people say, ‘How high?'” she said Friday night. “That’s absolutely not true. The fastest way to run the company into the ground is to not build consensus … and not listen to people.”

Whitman has worked to separate herself from Schwarzenegger. She said she would move to Sacramento full time — which Schwarzenegger didn’t do — and would make a point of getting to know every legislator by name.

On the campaign trail, Whitman rarely misses an opportunity to flaunt EBay’s success. But some critics have said that the company founded by software engineer Pierre Omidyar was so innovative and superior to competitors that any competent chief executive could have guided it to success.

“What she did was she found a huge wave and sat on a surfboard and rode it in,” former EBay employee Maltzman said.

Technology analysts who covered EBay during Whitman’s decade of leadership said that view doesn’t do Whitman justice. They said she saw early on how important it would be for the company to expand internationally. They praised her 2002 acquisition of payment company PayPal as a major strategic and financial success for EBay. And they said she shrewdly invested millions of dollars to strengthen fraud prevention and upgrade technology.

“She was pretty creative in thinking EBay was … a global e-commerce platform,” said Standard & Poor’s analyst Scott Kessler.

Whitman also had to deal with her share of crises, including the time in 1999 when the EBay website crashed for 22 hours, halting more than 2 million live auctions.

“It could have been the end of EBay. She dove in in a way where she pulled up her sleeves, no detail too small,” said former EBay executive Rajiv Dutta. “She was understanding everything, bringing the right people together, getting angry with the vendors who were not responsive enough.”

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