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 per cent raise and won approval from a committee of board members, is now the second best-paid chief executive officer of a US 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 per cent profit growth last fiscal year trailed Ellison's pay increase. The proposal, by the religious group Marianist Province of the US, 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 October 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, 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 February 15, more than 22 per cent 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 am 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 per cent, and IBM added 8.8 per cent.
