Ellison gives up the one part of his comp that almost made sense

Posted by Marc Hodak on August 23, 2009 under Collectivist instinct, Executive compensation | Read the First Comment

Previously, I was wondering out loud what possible retention or alignment benefit Oracle’s shareholders received from awarding their CEO another 0.007 billion shares on top of the 1.173 billion he already owns.  The cost, in the many tens of millions of dollars worth of dilution is impossible to justify.  The one part of this compensation I didn’t criticize was his $1 million salary, which amounted to about 1.2 percent of his total compensation.  So, guess which part of this compensation his toothless board chose to cut?

The compensation committee recognizes that Mr. Ellison has a significant equity interest in Oracle, but believes he should still receive annual compensation because Mr. Ellison plays an active and vital role in our operations, strategy and growth.  Nevertheless, during fiscal 2010, Mr. Ellison agreed to decrease his annual salary to $1.

At least the disclosure was honest about who was agreeing to what, here.

By the way, Jeffrey Berg, chairman of the compensation committee that once again awarded Mr. Ellison his 7 million options owns a talent agency whose actors have been used in Oracle advertisements.  Anyone who watches Entourage can imagine how arms-length that transaction had to be.  I wouldn’t impugn the integrity of the other two comp committee members, Hector Garcia-Molina and Naomi Seligman, but the former is a computer science professor and the latter runs networking organization for CIOs.  Not exactly the types who would stand up to Mr. Ellison for the little people who share ownership in his firm.

This composition belies the rebuttal offered by Oracle to the Say on Pay proposal in their current proxy:

Our Compensation Committee, which consists entirely of well-informed, experienced and independent directors, meets regularly to review and set executive compensation…The Committee also retains an outside compensation consulting firm and regularly seeks its advice and assistance as part of the Committee’s review and approval process.

And how did the compensation committee use its outside consultant?

The Compensation Committee selected and directly engaged Compensia, Inc. as its outside advisor for fiscal 2009 to provide the Compensation Committee with insights and market data on executive and director compensation matters, both generally and within our industry. Compensia also assisted the Compensation Committee with a peer company executive compensation comparison. Compensia did not determine or recommend any amounts or levels of our executive compensation for fiscal 2009. [Emphasis mine]

Translation:  They got peer data from their consultant, then asked Larry how much more he wanted than his peers.

If any firm deserved an affirmative Say on Pay vote, it would be Oracle, at least for as long as Ellison is in charge.  Unfortunately, the shareholders are depending on the Marianist Province and The Vermont Community Foundation to lead that effort instead of a credible institutional investor.  It’s managerial power exceptions like this that make the jobs of the traffickers in outrage so easy.

Update:  I continue to underestimate the gullibility of the common, headline-reading citizen.  Mr. Ellison has bought his PR coup very cheaply indeed.  Well played, sir.