Aug. 28 (Bloomberg) --
Oracle Corp. founder
Larry Ellison, the fourth-richest man in America, is drawing
criticism from some shareholders for a $72 million pay package
that's 12 times bigger than the median pay of CEOs in the
proposed the 38 percent raise and won approval from a
board members, is now the second best-paid chief executive
officer of a U.S. public company. He received about $1.7 million
less than Merrill Lynch & Co. CEO
John Thain in 2007. Oracle's market value is three times
Shareholders are pressing for a say on compensation at Oracle,
the second-largest computer
software maker, whose 29 percent profit growth last fiscal
year trailed Ellison's pay increase. The proposal, by the
religious group Marianist Province of the U.S., is winning support
from activist holders such as the American Federation of State,
County and Municipal Employees and the California Public
Employees' Retirement System.
``Ellison's compensation was already sky high and didn't need
to go higher,'' said
Scott Adams, the AFSCME union's pension and investment analyst
in Oakland, California. ``The company is hiding behind the fact
that they did well in the past year.''
The ``say on pay'' plan, which goes before investors at an Oct.
10 meeting, may get at least a third of the votes, Adams said.
While falling short of the majority needed to pass, that would
show shareholder concern over Ellison's pay, he said. AFSCME's
fund held 73,000 shares of Oracle as of May 15.
Groups filed similar proposals at 92 companies this year, up
from 54 in 2007, Adams said. The insurance provider
Aflac Inc. and phone carrier
Verizon Communications Inc. are among businesses adding such
advisory votes now.
The pay for Ellison, 64, doesn't include the $544 million he
made last year exercising stock-option grants. His package was
examined and ranked in a study by compensation specialist
Graef Crystal, a
consultant to Bloomberg News who's based in Santa Rosa,
Crystal included Ellison's $1 million salary and $10.8 million
bonus, plus $1.45 million to cover such items as his home security
system and air travel. The study valued the CEO's options granted
during the year at $58.8 million, a more conservative estimate
than Oracle's figure, $71.4 million.
Deborah Hellinger didn't respond to phone calls and e-mails
seeking comment. In the Aug. 20 filing outlining his compensation,
Redwood City, California-based Oracle said Ellison requested the
pay increase, which was approved by compensation committee members
Hector Garcia-Molina and
Naomi Seligman. They cited an ``objective of providing
incentives for superior performance.''
Forbes magazine estimated Ellison's worth at $26 billion in
September, putting him behind U.S. billionaires
Warren Buffett, and
Sheldon Adelson, CEO of Las Vegas Sands Corp. Ellison's stake
in the company he co-founded in 1977 accounted for most of that
wealth. Gates is chairman of Microsoft Corp., the world's biggest
Ellison held 1.15 billion Oracle shares as of Feb. 15, more
than 22 percent of the stock outstanding, according to data
compiled by Bloomberg. Oracle awarded Ellison an additional 7
million options in fiscal 2008, filings show.
``That kind of package becomes a red flag for investors,'' said
Charles Elson, director of the John Weinberg Center for
Corporate Governance at the University of Delaware in Newark.
``Would he leave if they didn't give him that much? Would he work
In most performance measures, Oracle tops its main competitors:
SAP AG, which leads in applications that run tasks such as
inventory management, and International Business Machines Corp.,
the company Oracle
surpassed to become No. 2 in the overall software market last
Oracle rose 5 cents to $22.39 at 9:54 a.m. New York time on the
Nasdaq Stock Market. Before today, the shares had climbed 12
percent in the past year. Walldorf, Germany-based SAP dropped 1.3
percent, and IBM added 8.8 percent.
Sales advanced 25 percent at Oracle, while SAP's rose 9 percent
and Armonk, New York-based
IBM's grew 8.1 percent. Oracle's net income rose 29 percent.
IBM gained 9.8 percent. SAP rose 2.6 percent.
Oracle posted a 27.6 percent return on common equity in its
last fiscal year, a measure of how well a company is using
reinvested earnings to generate additional profit. That trailed
IBM's 36.6 percent and SAP's 30.4 percent.
Still, Ellison's pay was five times that of SAP co-CEO
Henning Kagermann, who was awarded about $14.5 million in
2007, Crystal said. IBM's
Sam Palmisano received $24.2 million, according to Crystal.
The Marianist group, a St. Louis-based religious order that had
90,000 Oracle shares in its pension fund as of May 15, predicts
its proposal will win significant backing.
Send a Message
``These kinds of shareholder votes do send messages to the
board about the feelings of investors,'' said Myles McCabe,
director of peace and justice for the group. ``That money can be
used in other ways.''
The California Public Employees' fund, the largest U.S. public
pension investor, said it will probably support the Marianists.
``We want to weigh in on what these people are getting,'' said
Clark McKinley, spokesman for Calpers in Sacramento,
California. The fund owned 18.9 million Oracle shares as of June
30. ``We don't want to support pay that's hugely out of line with
the rest of the industry.''
In fiscal 2001, Ellison made $706 million after exercising
options, the record annual amount for a CEO, Crystal said. The
size of his latest pay package may be enough to draw shareholder
support for the advisory vote, said Elson, of the Weinberg Center.
``The question for shareholders is: Would you really want to
support a board that would agree to something like this?'' Elson
said. ``You have to wonder what this board is doing, or not
To contact the reporter on this story:
Rochelle Garner in San Francisco at
Last Updated: August 28, 2008 09:57 EDT