E-Commerce Times Talkback
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This is the story of a man who fell to earth and
landed in a field of cash -- soft, comforting,
His name is George T. Shaheen, and in case I forgot
to mention it, he fell with the aid of a parachute.
Some might say the parachute was golden.
VCs demand very often that if they consider a business plan/proposal that you need a 'strong' management team. I blame a lot of the Sheehan situation on the stupidity of Vulture Capitalists, they don't understand the difference of a 'strong entrepreneurial' team and one of 'high affluent' nature. Names, education and experience from the 'corporate world' don't drive start-ups....common sense front-line business experience and the founding teams made of those people do. I don't give a damn if you have a double masters and PHD...what have you done on or for the front lines lately. My question would be is your masters and PHD in common sense and street smarts! It is interesting, as should many of the suits be, that most if not all dot-coms with those highly educated 'high affluent' CEOs and management teams are down for the count and the common sense entrepreneurs are the ones rising to the topÖ Gee go figure!
I say he deserves the golden parachute. He left a $4 million/year salary to work with WebVan.
I don't think he'll have to worry if WebVan goes completely out of business either. As part of their contracts most execs require the company to purchase them an annuity which guarantees the $375k. It will be coming if WebVan is around or not.
While the compensation might seem outrageous to you and I (personally, I only made $60k last year), Webvan was only paying a market rate for Shaheen.
The fact that Shaheen could not deliver will be detrimental to Shaheen as well (I won't say "Just as detrimental as it is to Webvan," because Shaheen will never be faced with bankruptcy). He had a relatively secure position at Andersen, took a gamble on being a dot-com superstar, and lost his credibility in the process. It is entirely likely that he is now on the downward slope in his career, salary-wise.
Does the "retirement pay" seem silly and outrageous? In retrospect, absolutely. But it was the only way to lure a guy with a multi-million dollar salary to take a position paying a measly $500k.
Look on the bright side, though...because Shaheen left Webvan teetering on the edge of the cliff, he probably won't be collecting it very long. In that regard, you could consider his compensation to be performance-based.
I cannot tell you how many VCís demanded that if they were even going to consider our plan/proposal that we needed to hire a proven CEO. Thank God, we didnít consider them and our company is still going strong. I find it interesting, as should many of the Suits we talked to that most if not all dot-coms with those proven CEOís are down for the count and the entrepreneurs are the ones rising to the topÖ
I agree with John Rizzo. VCs must surely heed the inevitable wake-up call by this
all too common scenario. Shaheen it seems came from an environment which was
well ordered, stable and predictable. Webvan was in an infant, non-predictable,
new industry space which required nimble ability to learn, react and grow. Things
that Shaheen was apparently unable to do. It is these very qualities that many
entrepreneurs possess and admirably fit them for the purpose of growing their own
business. VCs should think a lot harder about why they think top CEOs from established
companies would do a better job in an infant industry than the entrepreneurs
who founded them.
You have been too polite to Shaheen. He is 100% responsible for the state of affairs Webvan is in today. He has run away like a coward from a battlefield. And the strangest part is that Webvan is rewarding him for this.
Two things should happen to this company's Board of Directors. (1) they should have a class-action lawsuit filed against them by the company's shareholders for gross violations of their fiduciary responsibilities on their behalf, and (2) they should be indicted by the SEC for fraud and larceny and incarcerated in federal prison for lengthy terms, and their personal fortunes confiscated.
Investors have no obligation to tolerate such blatantly irresponsible behavior by the individuals assigned to provide proper corporate governance.
This golden-parachute story has me going in two directions.
On the one hand, I agree that Webvan probably wouldn't have been able to convince Shaheen to leave a $4 million a year post to join a startup dot-com without the sort of security ($375,000 for life) offered him. But on the other hand, I wonder why they thought they needed him so badly ... the other user who posted this message:
"I cannot tell you how many VCís demanded that if they were even going to consider our plan/proposal that we needed to hire a proven CEO. Thank God, we didnít consider them ... most if not all dot-coms with those proven CEOís are down for the count and the entrepreneurs are the ones rising to the top"
had a really good point as well. Ultimately, Shaheen was responsible for bringing Webvan to profitability or a least on the path to profitability, which he clearly did not do. Instead the company embarked on a really fun expansion plan, lots of deals and contracts to sign, followed by layoffs and closures. In a word mismanagement. So, the right conclusion here is that Shaheen might have seemed worth it when Webvan hired him, but he proved himself a failure.
Webvan made a mistake, no one person makes that kind of a difference in a business.
In truth the investors in the company paid the price for following the gold rush, too bad they found "fools gold."
The notion that CEO's or any executive officer is not held to the same standard as any other worker should be (i.e. accountability) is ludicrous and insulting. But hey, most average "joe's" these days aren't held accountable either.
Big dollars often are paid to top executives without any evidence of the executive's value (before or after the deal is made). So this viewpoint is more than a little naive... We live in a society divided into several classes. Glimpses into the upper classes are often surprising to us regular folk. However, it is time to wake up and move on. This story has been beaten to death!
I have to disagree that the story has been beaten to death. If anything it's a story that needs to be emphasized. I'm an investor, and without going into the details of what I'm invested in, I just want to say that I do not approve of these sweet deals that are being made with new CEOs. Companies trying to compete in the world of e-commerce need strong TEAMS. They don't need one single savior (e.g. Shaheen) to come in and play white knight. I could name a few other potential white knights who did a hit-and-run cameo CEO appearance and then disappeared with inordinately high compensation packages. I don't like it.
Wall Street knew from the moment Shaheen was hired that a consultant without any consumer marketing experience would preside over a train wreck. WBVN stock price really started to slip when another non-consumer marketing operating type was brought aboard as VP of Marketing (Pepsi Strategic Planning is neither a consumer marketing nor operating background). Stock really tanked when WBVN withdrew from a cashflow positive/growing location - Dallas/Ft. Worth.
"New Age" marketing help sink the online grocers. Online grocers should have been selling packaged fresh prepared meals and pizza as an alternative to restaurants and takeout, but even the few that had fresh prepared products never really pushed them on their websites.