The Shareholder ForumTM


"Say on Pay" Proposals

Forum Home Page

"Say on Pay" Home Page

Program Reference


Bloomberg, August 28, 2008 article


Oracle's Ellison Earns Scrutiny With 38% Pay Raise (Update1)  

By Rochelle Garner


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 technology industry.

Ellison, who proposed the 38 percent raise and won approval from a committee of 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 Merrill's.

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.

$544 Million

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, California.

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.

Oracle spokeswoman 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 Jeffrey Berg, Hector Garcia-Molina and Naomi Seligman. They cited an ``objective of providing incentives for superior performance.''

`Red Flag'

Forbes magazine estimated Ellison's worth at $26 billion in September, putting him behind U.S. billionaires Bill Gates, 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 software producer.

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 less hard?''

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 fiscal year.

Shares Climb

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 doing.''

To contact the reporter on this story: Rochelle Garner in San Francisco at

Last Updated: August 28, 2008 09:57 EDT





This Forum program is open, free of charge, to anyone concerned with investor interests relating to shareholder advisory voting on executive compensation, referred to by activists as "Say on Pay." As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The organization of this Forum program was supported by Sibson Consulting to address issues relevant to broad public interests in marketplace practices, rather than investor decisions relating to only a single company. The Forum may therefore invite program support of several companies that can provide both expertise and examples of performance leadership relating to the issues being addressed.

Inquiries about this Forum program and requests to be included in its distribution list may be addressed to

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.