Oracle investors reject CEO Ellison's pay

Shareholds followed the recommendation of a proxy adviser that said their compensation is out of sync with the company's performance.

By MSN Money Partner Nov 1, 2013 1:30PM

Co-founder & Chief Executive of Oracle Corporation, Larry Ellison © Stephen Lam/ReutersBloombergBy Aaron Ricadela


Oracle (ORCL) shareholders rejected the pay packages of Chief Executive Officer Larry Ellison and other top managers for a second year, hewing to the recommendation of a proxy adviser that said their compensation is out of sync with the company's performance.


At Oracle's annual meeting today in Redwood City, California, the company said shareholders also voted to re-elect all of its directors, contrary to the guidance of Institutional Shareholder Services. ISS had said votes should be withheld from Chairman Jeff Henley and seven independent board members, including Bruce Chizen, George Conrades and Naomi Seligman of the compensation committee.


While the vote on pay is nonbinding, it underscored the growing unrest among shareholders. In recent months, Oracle has tussled with labor group Change to Win, which criticized the software maker's pay policies. Michael Pryce-Jones, an analyst at Change to Win's CtW Investment Group, stood at the meeting after votes were announced to argue for Chizen's resignation as head of the compensation panel, drawing a rebuke from Ellison to refrain from "editorial comments."


Drawing consecutive defeats on this kind of vote, known as a say-on-pay measure, is rare -- just 12 companies in the Russell 3000 Index of large U.S. companies have lost more than one such vote, including Abercrombie & Fitch Co., Gentiva Health Services Inc. and oil driller Nabors Industries Ltd., said Patrick McGurn, an executive director at ISS.


Little response

"It's not common at all," said Barbara Pomfret, an analyst at Bloomberg Industries. Most companies don't adjust compensation in future years in response to say-on-pay votes, she said. Occidental Petroleum Corp. was one company that did change its 2010 awards based on a no vote, she said.


Ellison, 69, is worth $38.8 billion and ranks eighth on the Bloomberg Billionaires Index. He was the highest-paid CEO in the U.S. this year, data compiled by Bloomberg show. His pay package declined 18 percent to $78.4 million for fiscal 2013 after he gave up an annual bonus and the company missed some of its profit targets. Last month, Oracle gave a weaker-than-projected profit forecast for the current quarter.


About 57 percent of shareholders voted against Oracle's pay plan, compared with 59 percent last year, according to CtW, which issued a statement after the vote calling for Oracle to "reform Larry Ellison's exorbitant compensation package."


Investor voices

CtW wasn't the only investor voicing dissatisfaction. On Oct. 28, the California State Teachers' Retirement System, the U.K.'s Railway Pension Investments Ltd. and Dutch pension-fund manager PGGM NV sent a letter to Oracle shareholders, saying they have "severe concerns about executive compensation and proper board accountability at Oracle."


The California Public Employees' Retirement System also said it was voting against Oracle's pay plan and Chizen.


"We're constantly evaluating information and we will continue to do so," Michael Boskin, an Oracle director, said at the meeting. "But we think we have a good process that is good corporate governance."


Oracle, which supplies databases, business applications and computer servers, has seen sales growth slow as companies move to newer programs delivered over the Internet. Revenue this year is projected to rise 3 percent, according to data compiled by Bloomberg. Oracle's stock has increased 7.8 percent in the past year, compared with a 24 percent gain in the Standard & Poor's 500 Index ($INX).


CtW wants Oracle to appoint a new director to oversee pay, and opposes the use of stock options to pay Ellison and other executives. Ellison owned 24.4 percent of Oracle shares as of Oct. 3, making any vote against directors and the pay plan more challenging.


Deborah Hellinger, a spokeswoman at Oracle, declined to comment on investors' statements about the company's proxy election.


Oracle shares were little changed at $33.50 at the close in New York.


More from Bloomberg

Nov 1, 2013 1:44PM
Ha, ha Larry wins and can buy another South Pacific island.
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