The Motley Fool's readers have spoken, and I have heeded your cries. After months of pointing out CEO gaffes and faux pas, I've decided to make it a weekly tradition to also point out corporate leaders who are putting the interests of shareholders and the public first and are generally deserving of praise from investors. For reference, here's my previous selection.
This week, we'll turn our attention to the retail marketplace and I'll show you why eBay (NASDAQ:EBAY) CEO John Donahoe is truly at the head of the class among his peers.
Kudos to you, Mr. Donahoe
You might be under the impression that online marketplace providers like eBay have a free and clear path to success, but you'd be dead mistaken. Sure, the Internet offers consumers a convenient way to browse through merchandise on their own time and have it delivered to their front door, but that doesn't mean online retailing doesn't have its fair set of challenges.
To begin with, online retailers like Amazon.com (NASDAQ:AMZN) and eBay are under pressure from Congress to begin collecting sales tax from customers. The Marketplace Fairness Act, also known as the Internet tax bill, passed with flying colors in the Senate and could require these online retailers to collect tax from all customers -- not just the states in which it has offices or distribution centers. If it passes, these e-tailers could lose their primary competitive advantage over brick-and-mortar stores.
Call me crazy, but the ability to touch and feel a product before buying it is another major deterrent. There are quite a few personalized items that just fail to find the type of purchasing carryover online that e-tailers would like to see.
Then there's pricing, which has becoming an issue for traditional and online retailers because of higher payroll taxes and delayed tax refunds. Wal-Mart (NYSE:WMT), for instance, issued weak guidance for the upcoming quarter in February because of the effect of higher taxes and delayed refunds. Wal-Mart's income demographic is among the biggest beneficiaries of tax refunds, so it's pushed sales for the company out into the next quarter potentially.
Despite these concerns eBay and Donahoe have persevered; not only surviving but thriving. In eBay's first-quarter results last month we saw a double-digit increase in both revenue and profits as it gained an additional 2.8 million customers.
eBay's success has come about for a number of reasons. First, it's embracing a trend toward mobile shopping. By focusing its efforts on mobile usability, it's driving sustainable double-digit growth in active users. Second, eBay's payment-processing division PayPal is still looked upon as the industry standard in electronic payments, tacking on 5 million new customers and processing 21% more net total payment volume than in the year-ago period. Not to mention that eBay's PayPal also struck a mobile partnership with Discover Financial Services last summer, giving both companies global payment solutions growth potential and one-upping its rival Square, which had struck a deal with Starbucks just weeks earlier. Finally, improvements in eBay's marketplace architecture are making it easier for consumers to navigate the site and faster for businesses to pay and get paid.
A step above his peers
However, eBay's success and the scope of its incredible CEO extends far beyond just the steady growth of its underlying business. eBay has rewarded shareholders with impressive gains, its employees with excellent benefits, and the communities it operates in with much-welcomed grants.
Shareholders have certainly had an impressive ride since the recession ended, with shares up more than 400% from their March 2009 lows. Although eBay isn't paying a dividend -- which is understandable as it wants to reinvest operating cash flow into improving its infrastructure and expanding mobile payment solution opportunities -- it does have a hefty share repurchase program that it added $2 billion to last July.
If you think that's fantastic, wait until you get a load of some of the employee benefits. eBay employees, on top of standard health and wellness and financial security packages, are privy to on-site oil changes and free dry cleaning pickup where applicable. Employees in its two San Jose, Calif., offices can relax in meditation and prayer rooms designed to relieve stress.
eBay also believes in giving back to the communities in which it operates. This is why it developed the Grantmaking and Inspiring Volunteerism Everywhere, or GIVE, team to help support nonprofit organizations throughout the world. Employees recommend a charity or nonprofit organization in a local community that could use assistance, and the GIVE team (also made up of eBay employees) decides whether or not to make the grant. It's a good way of getting employees involved in their local community and a great way of helping out those who are less fortunate.
Two thumbs up
It appears pretty undeniable that John Donahoe has eBay on the right path for continued success. eBay's ongoing development of its PayPal business should be able to fuel double-digit growth for the foreseeable future while its marketplace business utilizes mobile's ease-of-use to expand its customer base. eBay's employee benefits, volunteerism, and big shareholder buybacks are merely the icing on the cake that make Donahoe a great leader worthy of two thumbs up.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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