eBay Inc (EBAY) Needs to Grow Up

As an investor in eBay Inc (NASDAQ:EBAY), I’m not pleased with this. Here are my three recommendations for eBay’s management team:

1. Stop acting like a tech start-up. You’ve got over $11 billion of cash on your balance sheet. Pay people what they deserve in cash and let them purchase stock on the open market alongside the rest of us who decide to put our capital at risk.
2. Treat stock repurchases like any other investment. Be strategic with your share repurchases, and you’ll actually create value. I found a copy of The Outsiders by William Thorndike listed on eBay Inc (NASDAQ:EBAY) for only $17.18. This would make an excellent gift for the management team and board of directors. Buying back stock at regular intervals regardless of the price is a recipe for value destruction. Your stock hit a low during 2009 and there were zero repurchases. As the stock climbed from $10 to over $50 per share, repurchases have increased dramatically.
3. Align the interests of owners and employees. This is quite simple at companies like Berkshire Hathaway, where the largest owner is also the operator of the business. Real owners put their hard-earned capital at risk when they purchase stock on the open market. eBay Inc (NASDAQ:EBAY) investors, for example, suffered in 2009 when the stock dropped to around $10 per share. Eligible employees, on the other hand, benefited from a stock option exchange program where underwater options could be exchanged for restricted stock.

Truly great businesses have management teams that are able to balance the needs of employees with those of outside investors. Issuing stock to employees at low prices, and then using shareholder capital to repurchase those same shares at higher rates isn’t a recipe for outstanding returns over the long term. Surely, eBay Inc (NASDAQ:EBAY) can do better.

The article eBay Needs to Grow Up originally appeared on Fool.com.

Buck Hartzell owns shares of Berkshire Hathaway, eBay, Loews, and White Mountains Insurance Group (NYSE:WTM). The Motley Fool recommends Berkshire Hathaway, eBay, and Loews. The Motley Fool owns shares of Berkshire Hathaway, eBay, and Loews.

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