Oracle: Fourth time’s a charm?

Last year, 54% of shareholders voted against Oracle’s say on pay proposal.  This is a slight improvement from the opposition Oracle received in 2012 and 2013, but only by a few percentage points. On November 18 of this year, shareholders will have a fourth opportunity to vote against Oracle’s pay policy. In preparation, let us examine some of the changes that have been made this year to Oracle’s executive remuneration.

Larry Ellison, Oracle’s former CEO, stepped down in September 2014 to become Oracle’s Chairman and Chief Technology Officer. He handed the reins to co-CEOs Safra Catz and Mark Hurd. As a result, Catz and Hurd received certain one-time equity awards during the year to account to for their change in position, in addition to routine equity awards.

The following table discloses the three main executives’ compensation over the past three years:

Executive Fiscal Year Salary Stock Awards Option Awards Cash Incentive Other Total*
Ellison 2015 1 22,764,375 23,804,550 0 1,547,635 48,116,561
2014 1 0 64,979,600 741,384 1,540,266 67,261,251
2013 1 0 76,893,600 1,165,502 1,547,056 79,606,159
Catz 2015 950,000 27,625,625 24,647,250 0 20,795 53,243,670
2014 950,000 0 36,240,500 456,236 20,014 37,666,750
2013 950,000 0 42,620,500 717,232 20,105 44,307,837
Hurd 2015 950,000 27,625,625 24,647,250 0 22,253 53,245,128
2014 950,000 0 36,240,500 456,236 21,942 37,668,678
2013 950,000 0 42,620,500 717,232 22,074 44,309,806

Note that none of the three executives earned a bonus since performance conditions were not met. Had bonus targets been achieved, this would have bumped their compensation by over $4 million each.

Yes, both Catz and Hurd make less in 2015 than Ellison made in 2014 when he was CEO. But now there are two of them, sharing Ellison’s former job title. Combined, they made over $100,000,000 or $100 million. For a job one person was paid $67 million to do the year before. Oracle stated in its Annual Report that the compensation committee’s goal was to reduce executives’ overall remuneration. However, it does not count to reduce the remuneration paid for one job slightly and then to split that job into two positions. This effectively doubles the amount being paid out.

Additionally, it has been reported that nothing has actually changed in how Oracle is run. A Business Insider article reports that the three executives are essentially doing the same jobs they were before the change in title, with Catz stating that there were to be no significant changes in how Oracle was run. Thus, what we really have is the former CEO taking a pay cut while the two people who are CEO in name only receive a significant pay raise. Shareholders, take note. This does not count as Oracle meeting its goal of reducing executive remuneration.

*note that Ellison’s stock and option award values are calculated after removing certain awards that were cancelled as a result in his change of position. The amounts are therefore different than those reported in the annual report.

 

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