Ellison under Fire for Pay Package at Oracle (NYSE:ORCL)
NEW YORK – On Monday, investor groups led by several union pension funds turned up their pressure against Oracle’s executive pay practices, especially for the company’s founder Larry Ellison. According to a New York Times (NASDAQ:NYT) report, CtW Investment Group as representatives for the unions, sent a letter to shareholders on Tuesday urging them to vote against the proposed executive compensation package that will be tabled at the company’s annual general meeting on October 31.
In his announcement to shareholders, Dieter Waizenegger, the executive director of CtW Investment, noted a lack of significant changes to Oracle’s compensation policy by saying that ‘shareholders have no option but to oppose the re-election of the compensation committee directors.’
Disputes over executive pay have been simmering for years as many shareholders have questioned the pay package that the company’s founder receives. According to the Times, Ellison received $78.4 million for the 2013 fiscal year, which ended in May. In 2012, Ellison received more than $ 96 million while the Cisco’s (NASDAQ:CSCO) CEO, John Chambers, received only $ 11.7 million in 2012.
CtW claims that the average Oracle director is paid close to $ 700,000 while the average that CtW independently calculated for the entire Standard & Poor’s 500-stock index is approximately $ 251,000.
Up to this point, Oracle has resisted motions to change its executive pay package. On the subject issued the following statement:
‘In setting Mr. Ellison’s bonus opportunity and stock option award, the compensation committee determined that the compensation paid to Mr. Ellison should be greater than that paid to our other named executive officers because he is not only our C.E.O. with overall responsibility for our business strategy, operations and corporate vision, he is also our founder, who has guided Oracle for more than 30 years and who the compensation committee believes is vital to our success going forward.’
The company also noted that Ellison turned down a $ 1.2 million bonus earlier this year after the company missed performance targets. However, many investors are not moved, and last year, 50 percent of shareholders rejected the company’s ‘say on pay’ proposal in a nonbinding vote. The ‘No’ vote included several of Oracle’s biggest investors including Vanguard (NYSE:BLK), and Capital Research & Management. All told, four of the company’s 10 largest shareholders rejected the proposal last year.
Given Oracle’s rough performance this year is it expected that shareholders will again reject the ‘say on pay.’ However, it is also just as likely that Oracle will ignore shareholders wishes. If that happens, expect some short-term volatility and large investors shuffle their holding to voice their displeasure.
Shares in Oracle closed down 1.43 percent at $ 32.37 on Tuesday.