Original URL: http://www.theregister.co.uk/2008/10/09/ellison_say_on_pay/

Oracle shareholders choke on Ellison's package

Size an issue

By Gavin Clarke

Posted in Financial News, 9th October 2008 03:49 GMT

Larry Ellison's days as one of the tech-sector's best-remunerated chief executives could be numbered if a group of activist Oracle shareholders get their way this week.

Investors attending Oracle's annual general meeting in California Friday are being asked to support a "say-on-pay" plan that could see them approve the pay and stock allocations granted to Ellison and other senior Oracle executives going forward.

Awards are currently left to an Oracle compensation committee of elected members, a standard procedure in corporate America.

Ellison consistently rates as Silicon Valley's best-paid chief executives, and one of the world's richest individuals.

His 2008 cash and stock package weighed in at $83m last year, 372 per cent above what Ellison's peers in other chief executive positions receive. Successive stock allocations, meanwhile, have transformed Ellison into possibly Oracle's single biggest individual stockholder - he holds 22.6 per cent of common Oracle stock.

The "say-on-pay" motion has been bought by Oracle investor the Marianists Province of the United States and is supported by proxy consultant Proxy Governance Inc. Both seem alarmed by the concentration of wealth and power at the top of Oracle, and the implications over Ellison's responsiveness to shareholders.

The motion also asks that Oracle shareholders withhold their votes from the members on Oracle's current compensation committee.

The "say-on-pay" plan strikes at the heart of a corporate culture that has always seen Oracle's senior management well rewarded and could seem justified in light of recent performance. Oracle saw revenue up 29 per cent and income grow 25 per cent to $5.5bn and $22.4bn respectively for fiscal 2008 - blowing through Ellison's goal of 20 per cent annual growth.

Proxy Governance managing director of policy Shirley Westcott told The Reg her organization supports performance-related rewards for management. It's just that Oracle has gone too far, she said. Proxy Governance called Oracle's options awards "excessive, particularly with regards to Ellison" in its report (warning - PDF) to investors ahead of Friday.

"This is shareholders money, is this is a good use?" Westcott said about Ellison's pay. "You'd expect them to be better paid, but not that much better paid."

Westcott's organization is also uncomfortable with the power conferred on Ellison over the direction of the company by holding so much stock. "You'd think his interests are [already] aligned with shareholders... is it appropriate to keep giving him big stock options year after year?"

The "say on pay" resolution is non-binding, so there's no guarantee Oracle's management will accept it. The motion does, though, reflect a growing trend in the US among shareholders to try and reign in senior management compensation. So far in 2008, 80 similar proposals have come up at US public companies' AGMs - up from 52 last year. Among the few corporations to actually adopt them: cell phone giant Verizon.

A number of bills, meanwhile, have been put through the US Congress that would make "say on pay" mandatory for US public companies. US presidential hopeful Barack Obama has sponsored one, as has onetime presidential hopeful Hillary Clinton, and US Congressman and chairman of the House Financial Services Committee Barney Frank.

"Excessive executive compensation has been a long-standing issue among many shareholders." Westcott said. "Some shareholders activists are trying to come up with ways to get pay under controls and have more say over it."

Bootnote

The Oracle "say on pay" goes before shareholders as it emerged Microsoft is changing the way it rewards executives such as CEO Steve Ballmer.

Microsoft's compensation committee has said that in fiscal 2009, it's replacing the old annual cash bonus and equity award with a percentage from a cash pool. The pool will be equal to 0.35 per cent of Microsoft's fiscal year operating income. Based on fiscal 2008, that works out at $80.3 million, or $83.4 million including investment income. Payouts are capped at a $20m per individual. ®