Emerging Payments

Groupon Chief Mason Tested as Board Meets to Debate His Fate

Print
Email
Reprints
Twitter
LinkedIn
Facebook
Google+

Andrew Mason's role as chief executive officer of Groupon Inc. is on the line as board members meeting today in Chicago discuss whether to seek new leadership at the top of the troubled provider of daily coupons.

Some directors plan to voice frustration with Mason's efforts to find new areas of growth amid ebbing demand for online coupons, and they will urge the board to weigh the advantages of seeking a new CEO, a person with knowledge of the matter said this week. The person asked not to be identified because the meeting isn't public.

Groupon's recent efforts to diversify its offerings include the introduction of a mobile card reader. The Square-like device allows Groupon merchants to accept swiped card payments from their smartphones.

The company appointed two new directors -- Daniel Henry, the finance chief of American Express Co., and Robert Bass, a vice chairman of Deloitte LLP -- earlier this year. They join a board that includes Mason; Lefkofsky; Keywell; venture capitalist Peter Barris; Mellody Hobson, president of Ariel Investments LLC; and Washington investor Ted Leonsis.

Directors will have to consider whether Mason, a 32-year- old college music major with little prior business experience, has matured into an effective manager -- or become a hindrance to growth at the company he helped create. It may be time for Groupon to take a cue from Google Inc., which flourished after its co-founders Larry Page and Sergey Brin made way for a more seasoned executive in Eric Schmidt, said Erik Gordon, who teaches at the University of Michigan.

"It's an oft-told, oft-expected story that the genius entrepreneur steps aside when he or she succeeds at building a company big enough to need an experienced CEO," said Gordon, clinical assistant professor at the Stephen M. Ross School of Business. "The Google guys did it, and the results were spectacular."

Replacing Mason would require his resignation or a majority vote from Groupon's eight-person board, according to the company's bylaws. Though Groupon's dual-class stock structure grants Mason, along with co-founders Eric Lefkofsky and Brad Keywell, more than one-half of the voting power in decisions put before shareholders, each director has the same amount of sway when voting for the removal of an officer.

Today's meeting may not result in such a vote or leadership changes, the person with knowledge of the matter said.

Questions around Mason's role have accumulated over the year since the company held an initial public offering. Growth has slowed and Groupon's stock has plummeted as demand for daily deals dwindled. Mason has struggled to shore up the core business and push the company into new areas to generate added sources of revenue.

Mason's inexperience and quirkiness -- he's dedicated office space to a fictitious character and hired a performance artist to walk around the headquarters in a tutu -- has added to the scrutiny shown by analysts, investors and the media.

Besides bringing more business acumen, a new leader could energize employees at Groupon in much the same way that the appointment of Marissa Mayer as CEO of Yahoo! Inc. in July helped motivate workers at the flagging Web portal, said Sameet Sinha, an analyst at B. Riley & Co. in San Francisco.

"If you get somebody like that at Groupon who can attract talent, that could get people excited," said Sinha, who's based in San Francisco.

Mason responded to reports on the planned discussions by saying that he'd fire himself if he weren't suited to the task.

"It would be weird if the board wasn't discussing whether I'm the right guy to do the job, and it's their chief responsibility to ask that question," Mason said yesterday at a conference in New York organized by Business Insider.

Groupon shares lost 1.4 percent to $4.36 at 9:35 a.m. in New York. They had plunged 78 percent since the IPO.

Paul Taaffe, a spokesman for Chicago-based Groupon, declined to comment, as did representatives of Groupon's board.

While the shares remain under pressure, they have pared part of their descent since Nov. 19, when Tiger Global Management LLC said it acquired a 9.9 percent stake in the coupon website. The backing of Tiger Global, a New York hedge fund, is one of the first encouraging signs for the company amid a tumultuous year, said Edward Woo, analyst at Ascendiant Capital Markets LLC in Irvine, California.

Groupon makes money by selling discounts from businesses such as restaurants and nail salons. It then splits the revenue with the businesses. It has also sought to diversify by introducing Groupon Goods, an e-commerce site for marked-down products.

Management has taken steps to bolster international sales, which fell during the most recent quarter. These include promoting e-commerce veteran Kal Raman to chief operating officer earlier this month.

Mason should be given more time to address weakness in the business, especially in markets outside the U.S. where he has said he plans to focus, said Tom Forte, an analyst at New York- based Telsey Advisory Group.

"I would give him another year to see if he could get the international operations on track," Forte said in an interview. "Mason can still be an effective CEO for Groupon and I would be surprised if the company replaced him at this juncture."

SEE MORE IN

Email Newsletters

Get the Payments Update and the Morning Scan when you sign up for a free trial.

This feature displays payments industry news and analysis from PaymentsSource sibling brand American Banker. Registration is required; for more information contact customer service.

TWITTER
FACEBOOK
LINKEDIN
Already a subscriber? Log in here
Please note you must now log in with your email address and password.