U.S. Securities and Exchange Commission
Washington, DC 20549
NOTICE OF EXEMPT SOLICITATION
1. Name of the Registrant:
ORACLE CORPORATION
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2. Name of the person relying on exemption:
CTW INVESTMENT GROUP
___________________________________________________________________________
3. Address of the person relying on exemption:
1900 L STREET, NW, SUITE 900 WASHINGTON, DC 20036
___________________________________________________________________________
4. Written materials. Attach written materials required to be submitted
pursuant to Rule 14a6(g)(1):
[CTW INVESTMENT GROUP HAS POSTED THE FOLLOWING TWEETS WITH LINKS TO
ARTICLES THAT ARE REPRINTED AFTER EACH TWEET.]
CtW Investment Group ?@CtWInvGrp
Motley Fool on #CEOpay at Oracle: Ellison's Pay Isn't the Problem With His
Compensation Package - http://ow.ly/pEyKo #corpgov #execpay
Larry Ellison's Pay Isn't the Problem With His Compensation Package
By Paul Hodgson |
October 9, 2013 |
As you may have noticed, there's been a bit of a kerfuffle about Larry
Ellison's pay lately. And it's not his $1 salary they are complaining about.
When you regularly earn over $100 million a year, and people think that
$78.4 million is a pay cut, you tend to get in the news relatively frequently.
In fact, Ellison has earned well over $1 billion in the last 10 years, mostly
in option profits. So as far as targets of shareholder ire about CEO excess
go, he seems like a good one, despite a solid return on his company's
investment during that period. The question is: could investors have got
that return for less?
Investment firm Change to Win (or CtW) has been a little critical of the CEO
and founder of Oracle's (NYSE: ORCL ) compensation package, and are
planning to protest his pay, and the compensation committee that awarded it,
at the annual meeting on Oct. 31.
To take the spat even further into the public domain - if that were possible,
I've received nothing but stories about Ellison's pay in my CEO compensation
news alerts for five days now - Dorian Dailey, Oracle's general counsel, in
an extremely patronizing letter replying to CtW, says that its objections
seem to be based on the fact that Oracle lost its Say on Pay vote, the vote
when shareholders get to approve or disapprove the CEO's pay.
But, he claims, this was not a definitive vote (more on this later). He also
notes that since the vote is an advisory one, the board can choose to take no
action. And that's precisely what happened here, a rarity in failed Say on
Pay votes.
Two takes on 'definitive'
But this was a definitive vote. Yes, only 59% of shareholders voted against
the company's executive pay policies. But given an average of 98% support
for companies' Say on Pay votes in the rest of the economy and the fact that
Ellison directly owns 25% of the company's stock (and presumably supported
his own compensation package), that sounds pretty definitive to me.
Actually 59% of 75% (the non-Ellison shares) is actually 78%, almost four-
fifths of publicly owned shares. And that's not even excluding the 18% of
equity reserved for share awards, which is also not available for public
ownership or voting.
Ellison paid primarily in stock options
Dailey adds: "Mr. Ellison's compensation consists primarily of at-the-market
unvested stock options that put his compensation in direct alignment with
Oracle's shareholders..."
You can't argue with that. This is precisely what the proxy says and has
been saying since the basic structure of Ellison's pay was established in
2000. Stock options are awarded "to further incentivize and retain him and
align his interests with those of Oracle's other stockholders."
Since he's the founder of the firm and inextricably linked with it, I
don't see the need to use option awards to retain Ellison, but maybe I'm
wrong.
However, the fact is that Ellison, as the principal shareholder of the
company and already owns 25% of the outstanding shares. Annually awarding
him 7 million or 8 million additional shares as options would appear to be
a complete waste of shareholder resources. How could he be more aligned
with shareholders than he already is?
Founder CEOs who are major owners should not receive stock awards
Wiser heads have considered such a situation at other tech companies and
decided not to make any kind of stock awards to founder executives with
substantial ownership. Neither Bill Gates nor Steven Ballmer ever received
any kind of stock award from Microsoft (NASDAQ: MSFT ) , and neither
certainly ever received a $1,000,000 base salary, which was the case for
Ellison during the mid-2000s. Most of the founder executives at Google
(NASDAQ: GOOG ) also have never received any stock awards.
At each of these companies, ownership is what drives the CEOs to better
performance, not stock options. It is likely that ownership also drove the
long-term gains at Oracle, with the stock options being the icing on the
cake. It's just that the icing at Oracle is thicker than most CEOs' cakes.
Larry Page and Eric Schmidt at Google don't really receive any compensation
at all, certainly no additional equity, but this does not seem to have
harmed their desire to have the company thrive. Huge ownership levels
appear to have had a significant effect on the company's returns.
Microsoft'' recent woes have nothing to do with Ballmer's and Gates' lack
of stock options. Indeed, Ballmer's drop in bonus level in 2013 is a clear
reflection of the drop in operating income at the company. But again, the
company's steady blue chip performance over the long-term has everything
to do with the founders' existing investment.
Not the best use of capital
At Oracle, although the latest quarterly profits are down, return on
equity is down, operating margin is down, and stock price is down in the
short term, long-term investors can hardly complain about their returns.
But that is hardly the point.
It would seem obvious that with a 25% ownership level, Ellison could be
expected to have provided this level of performance regardless of the stock
options, and shareholders would have saved a considerable amount of money.
That's what's wrong with Oracle's compensation policy. It's not that he's
paid too much (although realized pay of well over $1 billion over the
last 10 years is quite a lot), but that they are paying him in stock at all.
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CtW Investment Group ?@CtWInvGrp9 Oct
Another investor calls time Ellison's #CEOpay at #Oracle - see NY Post
http://ow.ly/pDMUa #corpgov
City Pensions Go of the Offensive Against Oracle Boss
By Josh Kosman
The city's public pension funds are stepping up the pressure on Oracle CEO
Larry Ellison.
New York City Comptroller John Liu is part of the drive by activist
shareholders to rein in Ellison's pay package and unseat directors who
oversee executive compensaiton.
Ellison, the billionaire co-founder of the business software maker, made
$78.4 million in the fiscal year ended May even as performance lagged.
"The city's pension funds are among the many share owners that have
repeatedly sought to rein in Oracle's persistently outrageous CEO pay and
to hold accountable those directors most responsible," Liu told The Post.
"Faced with an unresponsive board, we have no choice but to once again vote
against pay, against the three directors on the board's compensation
committee, and for our shareowner proposal to require the board to adopt
and disclose multiple performance metrics for incentive compensation."
The city's pensions own 10.3 million shares of Oracle, worth $330 million.
Although shareholders rejected the company's pay practices in a non-
binding "say-on-pay" vote last year, Oracle blew off their concerns.
This year, shareholders are hoping to increase the heat on Oracle despite
Ellison's 34 percent stake in the company.
The organization Change To Win, which labor unions pay to represent their
causes, is leading the charge against the tech company ahead of its Oct.
31 shareholder meeting.
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CtW Investment Group ?@CtWInvGrp8 Oct
#Oracle Shareholders Urged to Vote Down #CEOPay http://bloom.bg/1ffhnGf
via @BloombergNews - see our letter http://ow.ly/pBMPM #corpgov
Oracle Shareholders Urged to Vote Against CEO Pay Package
By Aaron Ricadela - 2013-10-08T02:00:00Z
Oracle Corp. (ORCL) shareholders should vote against pay packages for
executives and withhold support for directors on the board's compensation
committee, CtW Investment Group said.
Chief Executive Officer Larry Ellison and other top managers are
overcompensated relative to peers, given Oracle's inferior returns,
CtW wrote in a letter addressed to shareholders today.
CtW, part of labor-group Change to Win, has been pushing for the world's
largest database-software maker to adopt industry benchmarks for
compensation. While Ellison took a pay cut of 18 percent in the latest
fiscal year after Oracle missed some of its profit targets, the company
said that his package is "appropriate" and rejected CtW's arguments in a
letter addressed to the group and filed with the U.S. Securities and
Exchange Commission last week.
"While the company insists that Ellison's high pay is justified by his
founder-CEO status, we note the stark contrast to other technology
founder-CEOs," CtW said in its latest letter to Oracle's board, citing
compensation practices at Amazon.com Inc. (AMZN), Google Inc. (GOOG)
and Apple Inc. (AAPL)
CtW, which says it holds 6 million Oracle shares, is also urging
shareholders to vote against the re-election of Bruce Chizen, George
Conrades and Naomi Seligman, who are on the software maker's
compensation committee. Oracle plans to hold its annual shareholder
meeting Oct. 31. CtW sent a letter to Chizen, the committee's chairman,
on Sept. 25 outlining its argument against Oracle's pay practices.
Pay Package
Ellison's compensation package shrank to $78.4 million for the fiscal
year ending in May, from $96.2 in the previous period, after he gave
up an annual bonus and the company missed some of its profit targets.
He's an "extremely valuable asset," Dorian Daley, Oracle's general
counsel, wrote in the letter to the SEC last week. There was also
no record of CtW owning a stake in Oracle, Daley wrote.
Deborah Hellinger, a spokeswoman for Oracle, declined to comment on
CtW's latest note to shareholders.
Shares of Redwood City, California-based Oracle declined 1.1 percent
to $32.84 at the close in New York, leaving the stock down 1.4
percent this year, compared with an 18 percent gain in the Standard
& Poor's 500 Index.
To contact the reporter on this story: Aaron Ricadela in San
Francisco at aricadela@bloomberg.net
To contact the editor responsible for this story: Pui-Wing Tam at
ptam13@bloomberg.net
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CtW Investment Group ?@CtWInvGrp8 Oct
RT @dealbook:Shareholder Adviser PlanstoEscalate Fight Over #Oracle
Pay http://nyti.ms/GJRv6d seeour letter http://ow.ly/pBMe8 #corpgov
Shareholder Adviser Plans to Escalate Fight Over Oracle Chief's Pay
By MICHAEL J. DE LA MERCED
A group that advises several union pension funds plans to ratchet up
the fight against Oracle Corporation's pay practices, especially for
its founder, Lawrence J. Ellison.
The CtW Investment Group is expected to send a letter to shareholders on
Tuesday, urging them to again vote against the executive compensation by
the enterprise software giant at the annual meeting on Oct. 31.
But it is also planning to ask investors to vote against re-electing the
three members of the board's compensation committee - Bruce R. Chizen,
George H. Conrades and Naomi O. Seligman - as well.
Given a lack of significant changes to Oracle's compensation policy,
"Shareholders have no option but to oppose the re-election of compensation
committee directors," Dieter Waizenegger, the executive director of CtW
Investment, wrote in a letter to shareholders.
The move steps up a battle over Oracle's pay practices, one that has been
percolating in recent years. At the heart of the dispute is the pay of
Oracle executives, and Mr. Ellison's in particular.
The technology mogul received $78.4 million for the 2013 fiscal year,
which ended in May, according to Oracle's proxy statement. While that's
down from the $96.2 million that he received in the prior year, it far
outstrips the $11.7 million that Cisco's chief executive, John Chambers,
earned in 2012.
CtW Investment has also noted that the average Oracle director is paid
about $670,000. It calculates the average director pay for companies in
the Standard & Poor's 500-stock index at about $251,000.
Still, Oracle has argued that Mr. Ellison is worth every penny. In its
proxy, the company reused language from 2012, writing:
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 noted in its proxy that Mr. Ellison turned down a $1.2 million
bonus this year after the company missed internal performance expectations.
But a number of investors aren't moved by the company's arguments. Leading the
charge is CtW Investment, which claims to represent holders of 6 million shares.
Last year, 59 percent of shareholders rejected the company's "say on pay"
proposal in a nonbinding vote. That marked a huge jump from the 33 percent who
opposed the same proposal in 2011.
Among those who voted against the compensation plan were several of Oracle's
biggest investors, including Vanguard, BlackRock and Capital Research &
Management. Four of the top 10 shareholders also voted against the compensation
committee directors.
Last month, CtW Investment wrote an open letter to Mr. Chizen, of the Oracle
board, calling for changes to the company's policies. Among them were adding
a new independent member of the compensation committee and tying option grants
to an industry benchmark and to a metric like return on equity.
So far, Oracle has rebuffed the requests, calling Mr. Ellison's pay
"appropriate" in a letter to CtW Investment last week.
"While we fully understand and respect the Change to Win agenda, we nonetheless
urge those you claim to represent to support our recommendations at the
upcoming shareholder meeting," Dorian Daley, Oracle's general counsel, wrote
in the letter.
"We believe those recommendations are the best path to ensuring continued
success for all of Oracle's shareholders."
Michael Pryce-Jones, an analyst at CtW Investment, responded that the group has
been forthright in what it wants. While it isn't calling for Mr. Ellison's
ouster, it is asking for more discussion about how much he is paid.
"To say that it's unclear what shareholders want is absurd," Mr. Pryce-Jones
said in an interview.