- For the second year in a row, Oracle's board has told investors that its trio of top execs - CEO Safra Catz, fellow CEO Mark Hurd, and CTO Larry Ellison - won't be getting their all of their bonuses.
- The company says they didn't meet the business objectives, including specific cloud computing revenue targets.
- And for the second year in a row, this loss of bonuses is a bit of a red herring.
- All three execs, who have been called among the most overpaid CEOs in 2019, will still earn handsome compensation.
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For the second year in a row, Oracle's board has told investors that its trio of top execs - CEO Safra Catz, fellow CEO Mark Hurd, and CTO Larry Ellison - won't be getting their all of their 2019 bonuses, according to an SEC filing released this week.
This is because they failed to meet the big, hairy business objectives, including certain cloud computing revenue goals, to which their bonuses were tied.
And for the second year in a row, that loss of bonuses, including stock grants, is a bit misleading, as all three execs will still be handsomely paid, awarded plenty of stock and options from grants made to them under earlier compensation plans.
The full details of their compensation will be revealed in about a month or so, when the company releases its annual proxy statement ahead of its shareholders meeting.
Still, on Thursday, the board released an investor presentation ahead of the proxy that showcased the lack of bonuses for their top execs.
Oracle's board made this same, unusual disclosure last year. At that time we talked to Rosanna Landis-Weaver, the compensation expert at shareholder advocacy group As You Sow. She said that the board was likely trying to explain in advance the enormous compensation numbers it was about to disclose in the proxy statement.
Sure enough, a few weeks later, Oracle's proxy showed that the company paid each of its two CEOs over $108 million in total compenation (meaning $216 million in total towards its CEOs) - plus it paid its founder, CTO and executive chairman Larry Ellison about $109 million. That's a whopping $325 million for just three executives.
That compensation, however, was largely in the form of a mega-grant, made last year, worth $103.7 million apiece that was divided into seven sections, payable in equal chunks, called tranches, over five years.
In order to be granted each such tranche, executives had to hit certain company valuations while simultaneously hitting certain revenue milestones for the cloud business.
For example, the company's market cap has to grow to at least $224 billion, with additional milestones up to about $323 billion, and, at the same time, its cloud operations - which the company no longer separately reports - had to hit various revenue goals of $10 billion to $20 billion. If the company hit both sets of goals, around market cap and cloud revenue, the executives would unlock a tranche.
Oracle's board has said that executives have not hit any of these market cap or cloud revenue goals yet, and so they have not yet unlocked any tranches of that mega-grant.
But Ellison, Catz and Hurd still have three more years to achieve those goals, and earn all of that stock under the plan.
In some ways, that 2018 grant was just optics because the executives are still earning the tranches of stock grants set aside for them in earlier years, like 2016 and 2017. Those earlier grants and options were based on easier goals, like comparing Oracle's growth to the weighted growth of a group of other IT vendors including Cisco, Hewlett Packard
Finding out their pay
We won't know exactly how much pay Oracle's executives have earned in its fiscal 2019 until Oracle releases its proxy in another month or so.
But we do know that their pay has been a topic of controversy for years. Investors got a chance to vote on this 2018 mega grant pay package in 2017 - and voted it down, just like that had voted down other pay packages in previous years. Investors are not thrilled with paying three people large, CEO-level compensation when most other companies with $40 billion in revenues limp along with just one highly paid CEO.
In fact, As You Sow named Oracle's CEOs the second-most overpaid CEOs of 2019, out of 100.
So it's no surprise that the board has been on this unusual crusade to show off when its company didn't hit performance goals and executives didn't get some of their pay.
On top of that, as we reported last year, while the board says it doesn't plan on giving more grants until the five-year period of the 2018 grant is over, Landis-Weaver points out that this promise "is not legally binding." The board can alter course.
Meanwhile, fiscal 2019 was a rough one for Oracle's workforce, with employees reporting that the company spent months laying off thousands of workers worldwide. So it makes sense that this might not be a year to lavish those at the top with bonuses. On the other hand, some of the older stock grants are dependent on things like non-GAAP pre-tax profits, which encourages the company to keep a tighter lid on expenses such as payroll.
The goal of these lavish five-year compensation plans is to reward execs for genuine growth. But Oracle isn't above a bit of financial maneuvering, either. The company has spent $39 billion this year buying its own shares back, it says, and has, over the past five years, reduced the number of shares in circulation by 25%, the board said.
Hence, with fewer shares outstanding, share prices have gone up, even if the company's market capitalization hasn't climbed as much.