Oracle is facing a potential shareholder revolt against a compensation formula that has consistently made its billionaire co-founder, Larry Ellison, one of the best-paid CEOs in the world.
The business software maker staunchly defended Ellison's pay in a letter sent to shareholder activist firm CtW Investment Group in an effort to rally support for its board of directors before the 11 members stand for re-election at Oracle's annual meeting on Oct. 31.
The letter released in a Wednesday regulatory filing came in response to a scathing attack that CtW launched last week against the compensation that Ellison has been receiving from the Redwood Shores, Calif., company for years.
CtW doesn't own any Oracle shares directly, but the Washington D.C. group is paid to fight for shareholder causes. It is vowing to organize the pension funds of labor groups that are stockholders unless the company changes its ways. Oracle's letter gave no indication that the company is going to relent, setting the stage for an attempt to oust at least three of Oracle's directors at the annual meeting.
"It seems pretty clear that they aren't willing to listen to the concerns of shareholders," said Rich Clayton, a research director at CtW. A truce could still be reached during a meeting with an Oracle representative that Clayton said is scheduled for Thursday morning in Washington.
Shareholders expressed their displeasure with Oracle's compensation practices at the company's annual meeting last year. About 59 percent of the shareholders voted against a "say-on-pay" proposal seeking an endorsement of the board's compensation policies. That vote was non-binding, and Oracle's compensation committee decided that no significant changes to its practices were needed, according to the company's proxy statement for the upcoming annual meeting.
Oracle Corp. awarded Ellison a pay package valued at $78.4 million in its last fiscal year ending in May, down from $96.2 million in the previous year.
Ellison, 69, could have made even more last year if he hadn't turned down a $1.2 million bonus. He also limited his salary to $1 annually, a symbolic measure that has been embraced by several other Silicon Valley CEOs who are already billionaires, including Google Inc.'s Larry Page and Hewlett Packard Co.'s Meg Whitman.
Oracle has primarily paid Ellison through stock options and other long-term incentives designed to prompt him to boost the company's market value and enrich shareholders. Ellison's pay packages have included an award of 7 million stock options in each of the last six years. Those awards are the main reason Ellison has ranked among the top-paid CEOs in each of those years. (continued...)
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