By Ken McLaughlin and Pete Carey
Mercury News
Just a couple of weeks ago, Meg Whitman's handlers had a tidy political narrative to present to Californians:
An amiable, ethical businesswoman almost single-handedly builds one of Silicon Valley's most storied Internet companies, making her a billionaire and thousands of average folks successful business people. She retires from San Jose-based eBay and decides that this dysfunctional state needs her business acumen in the governor's office.
But in recent days, the Republican hopeful and her team have been forced to play defense amid revelations that the 53-year-old former CEO supported liberal Democratic U.S. Sen. Barbara Boxer's re-election in 2004 and didn't register to vote until she was 46. She offered no excuses for her poor voting record, but later explained: "I was focused on raising a family, on my husband's career, and we moved many, many times."
With Whitman's glow tarnished, the scrutiny will only increase, political analysts say. And the likeliest target is her 10-year tenure at eBay, the online auction house she turned into a global brand name.
"For voters to buy her argument, they're going to have to believe that her record in the private sector was exemplary," said Dan Schnur, director of the Jesse M. Unruh Institute of Politics at the University of Southern California. "A candidate's biography is a three-legged stool: personal, professional and political experience. So if you take one leg away from the stool, voters
will pay more attention to the other two legs.''
In recent weeks, the Mercury News interviewed numerous current and former eBay employees, buyers and sellers, investors and stock analysts, asking them to judge her performance and predict how it might translate to running the state. The consensus: Whitman was a hands-on and savvy CEO whose reign was somewhat blemished by poor decisions and a series of ethically dubious stock deals. The first seven years of her leadership were generally brilliant, the last few years relatively lackluster.
While her corporate track record suggests that Whitman would bring a new brand of leadership to state government, it also makes clear she has never faced anything quite like the political dysfunction that grips the Golden State.
From Hasbro to eBay
The numbers are hard for even her severest critics to argue with: When she was hired as eBay's president and chief executive in February 1998, the company had about 30 workers, 500,000 users in the U.S. and revenues of $4.7 million. When she turned over the reins of the company to John Donahoe in March 2008, eBay had mushroomed worldwide, registered hundreds of millions of users and employed more than 15,000 people. Revenues in her last full year as CEO were $7.7 billion.
Whitman was lured to the startup from a middle-level management job at Hasbro, where among other things she was in charge of marketing Mr. Potato Head. At the time, eBay was operating out of a modest San Jose industrial building.
The black-and-white Web site, originally called AuctionWeb, had been designed by Pierre Omidyar, a 28-year-old software engineer, over a holiday weekend. One part of the site featured a tongue-in-cheek tribute to the Ebola virus.
But Whitman was quick to see the scruffy site's potential to connect buyers and sellers of Beanie Babies, baseball cards and just plain junk.
Job One was to become the company's grown-up. She replaced the lawn chairs with corporate cubicles.
"She was focused and a very strategic thinker,'' said Stephanie Tilenius, senior vice president for eBay North America. "She hires the best talent, people who fix things. I think she'll also do that in government.''
Rajiv Dutta of Saratoga worked closely with Whitman for more than a decade. He was president of the online payment service PayPal, bought by eBay in 2002, and later president of Internet phone service Skype, purchased in 2005.
"I probably spent more time with Meg on a daily basis than with members of my family,'' said Dutta, who retired from eBay last year. "I got to see her very up close.''
Whitman, he said, has some important attributes California needs desperately: "Meg never gives up believing in the future. Most people who are believers are dreamers, but Meg combines that with the nuts and bolts.''
The Great eBay Meltdown of 1999, when the overloaded site went offline repeatedly — at one point for 22 straight hours — showed Whitman at her best, Dutta said.
"She literally camped out, sleeping bag and toothbrush, for a couple of weeks,'' he said. "She said if nobody else is going to go home, I'm not going to go home either. I'll stay here until we figure this out.''
After the crisis was over, eBay executives debated whether sellers were owed money for their lost business while the site was dark. Doling out the extra millions meant the young company would miss its financial targets.
"But Meg walked into the room and said, 'What's the right thing to do?' She said, 'We have to issue this refund, guys; get over it.' And she walked out.''
Whitman certainly has her detractors, including many sellers who, ironically, complain that eBay during her reign erected a thicket of rules that were every bit as burdensome as the government regulations she now assails. Sellers also complain that, under pressure to meet Wall Street expectations, eBay under Whitman repeatedly jacked up fees, driving off many sellers and making the site far less profitable for others.
The annual eBay Live! conferences — once an almost-evangelical gathering of buyers and sellers — became "bitch fests,'' said Andrew Bergman, operations manager of Alpha & Omega Antiques, which does about $120,000 worth of business on eBay each year. "eBay just got too big for its britches,'' he said.
In 2005, longtime seller Randy Smythe of Orange County decided to quit selling CDs on eBay after finding he was paying a half-million dollars annual to the company and grossing only $400,000 for himself.
Other Whitman critics say she was simply lucky, having hopped on a bandwagon that was rolling down a road paved in gold.
"eBay could have been run by a Labrador retriever,'' said Rosalinda Baldwin of the Auction Guild, a 10-year-old watchdog group that monitors complaints at online auction businesses.
Nonsense, Dutta said. "The odds of success of creating a business like eBay are incredibly long,'' he said.
Stocks may be an issue
On a personal note, some fault Whitman for her ready acceptance of "friends and family'' stock from Wall Street giant Goldman Sachs during the superheated dot-com era. Until the practice was banned in 2003, brokerage houses routinely allocated shares of hot stock offerings to top executives as a reward for giving the investment firms corporate business.
Whitman had hired Goldman to take eBay public in 1998. For the next four years, the investment bank allocated to her shares in more than 100 initial public offerings. All told, Whitman made a $1.78 million profit when she sold the stocks.
After being singled out in a congressional report that called the IPO system rigged and corrupt, Whitman issued an internal memo to eBay employees saying she got the shares because she was a personal client of Goldman Sachs. "There is nothing worse than having your integrity questioned under circumstances where you know that you did nothing wrong," she wrote.
Yet two professors who focus on business ethics — David Shapiro at the City University of New York and William Black at the University of Missouri-Kansas City — predict the issue might prove troublesome for her on the campaign trail.
''The fact that she could say she could learn no ethical lesson is illustrative of moral blindness,'' Black said.
What's not in dispute is that as the traditional online business began slipping in 2005, Whitman began acquiring companies to boost growth. While PayPal — which currently contributes almost a third of eBay's revenue — was a grand slam, other acquisitions didn't work out so well. Clearly the worst decision was buying Skype for $3.1 billion, on the questionable theory that eBay buyers and sellers would flock to the service to talk to each other to close their deals. Whitman eventually admitted she paid too much for Skype, and the company took a $1.4 billion write-down.
"Meg was trying to paper over the cracks with acquisitions, and Skype was an unmitigated disaster,'' said Jeff Lindsay, an analyst with Sanford C. Bernstein. "I think she did a good job of keeping the growth going for the first five to seven years. But when the growth started to slow down, her record is a lot more mixed."
California's next governor will inherit a state that in many ways more closely resembles a midlife company struggling with financial challenges and a splintering culture than the promising startup Whitman brought to greatness.
Though she has pledged to create 2 million private-sector jobs while slashing the state's payroll and fixing its "business model," there's no opportunity to rethink California with a clean white board: Entrenched employee unions, a fractious Legislature and a crumbling infrastructure help ensure that.
Still, some political analysts say that if Whitman can convince Californians that she was able to keep the tens of thousands of independent sellers on whom eBay depends for its revenue relatively happy, there may be hope she can deal with the fractious legislators and the many powerful constituencies she'd face in Sacramento.
"The real trick for her is to show that the skill sets she picked up at eBay will apply in another setting,'' said Larry Gerston, a political science professor at San Jose State University.
Her stellar years at eBay occurred during a period of extraordinary growth. Her less successful years occurred when eBay growth slowed — a situation similar to the one California now faces. So, Gerston said, "she needs to convince voters that she can translate her executive skills to an ever-shrinking environment.''
Contact Ken McLaughlin at 408-920-5552.
Born: Aug. 4, 1956, Long Island, N.Y.
Education: B.A., economics, Princeton, 1977; MBA, Harvard, 1979
Personal: Lives in Atherton. Married to Griffith R. Harsh IV, neurosurgeon; two grown sons
Career: Procter & Gamble, 1979-1981, brand assistant, brand manager; Bain & Co., 1981-1989, consultant; Walt Disney Co., 1989-1992, senior vice president of marketing; Stride Rite Co., 1992-1995, division president; Florists" Transworld Delivery (FTD), 1995-1997, president and chief executive officer; Hasbro, 1997, general manager; eBay, 1998-2008, president and chief executive officer
Politics: Announces her intention to run for California governor, February 2009 
