Oracle's $130M-plus payday still looms on horizon for Larry and Safra

Some Oracle investors remain unhappy with the way that company executives' compensation is structured, despite concessions made to address the disquiet.

The latest pay awards were outlined by Big Red in a 2023 Notice of Annual Meeting of Stockholders [PDF], filed with the SEC prior to the weekend. And contained within is a list of the bumper pay day for the C-suite.

Larry Ellison, Oracle founder, chairman and CTO, again drew a $1 salary – the same as it has been for the past decade – but got a total pay award of $7.3 million, comprised non-equity incentive plan compensation and all other compensation (security and expenses).

CEO Safra Catz received a total package of $5.25 million, including a salary of $950,000, as well as the non-equity incentive plan compensation and all other compensation.

Oracle was at pains to point out that no new equity awards were made for 2023, as was demanded by shareholders a year ago.

2023 was a good fiscal year for Oracle's business: the company reported revenue of $50 billion, up 18 percent year-on-year, operating income of $13.1 billion, up by a fifth, and earnings per share of $3.07, up 27 percent.

As for shareholders? Big Red returned $5 billion to shareholders, including $3 billion in dividends paid and $1.3 million in the repurchase of common stock. Ellison is Oracle's biggest shareholder with a 42.1 percent stake so presumably he wasn't among the voices of dissent among investors.

And that $138M payday? Execs given more time to hit target. Goalposts haven't changed...

A year ago it emerged that just 60 percent of shareholders were in favor of the 2022 pay awards, which included a nominal award of $138.6 million for Ellison and $138.2 for Catz. The award was off the back of performance-based stock options that were granted in May 2018 and had been due to vest in May 2022 at the earliest (but more likely in 2023.)

Oracle said in September last year that it didn't hit its operational performance goals, and so the vesting of Performance Stock Options (PSOs) was pushed back to May 2025. Without that extension, the options would have expired. As such, neither Ellison or Catz grabbed hold of that bumper award, but they still could.

Shareholders were upset because the PSO goal deadline was extended with no change to the performance metrics that execs were judged by, and because investors do not generally support mid-cycle changes to equity compensation.

Fast-forward to this year and just 67 percent of shareholders voted for the compensation of named executive officers.

"While this result represents an incremental improvement," said Oracle, "our Board remains committed to understanding stockholder views and looks forward to increasing levels of support in the future. As described above, all members of the Compensation Committee have met with and continue to engage with stockholders in order to actively understand what actions the Compensation Committee may take to address stockholder concerns."

Feedback from investors was that Ellison and Catz should not receive new equity awards, Oracle should review if the PSO goals are appropriate, exec compensation should be linked to stockholder value, the PSO should pay out only if operational criteria are met, and a new PSO should be drafted after 2025.

Oracle said six operational PSOs metrics that ran from 2018 included: Oracle becoming the biggest SaaS player in the market; generating $20 billion in non-GAAP cloud revenue per year; $10 billion non-GAAP total SaaS revenue; $10 billion per fiscal in PaaS and IaaS; annual group margin of 80 percent; and PaaS/ IaaS gross margin of 30 percent for three of the eight fiscal years (2018 to 2025) before the PSO vests.

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Six "market capitalization" goals have now been achieved, and the non-GAAP $10 billion SaaS revenue metric was also secured in fiscal '23 with respect to "operational" goals.

Oracle pointed out that stockholders have benefited from the more than $100 billion increase in market cap since the PSOs were established and Big Red's stock price grew 47 percent in fiscal 2023.

"The Compensation Committee has not determined the structure of the next performance-based equity program that will be put in place for Mr Ellison and Ms Catz in 2025, but the directors intend to take stockholder feedback into account when making decisions regarding the new program."

Pay for the remaining senior execs saw vice chairman Jeffrey Henley awarded $9.68 million, and Stuart Levey, chief legal officer, awarded $12.75 million. Neither were executive named officers in the prior year. Chief corporate architect Edward Screven was awarded $20.2 million, including stock awards of $17.2 million.

The average pay for an Oracle employee was $85,991 in fiscal 2023, meaning the CEO pay ratio was 61-to-1. ®