Oracle is trying an 'unusual' tactic to calm investors, according to an executive compensation expert (ORCL)

larry ellison

A compensation expert calls a presentation Oracle made to its investors last month "unusual."
In the presentation, the company explains to investors why it issued a mega-grant of stock options to its top four executives.
The odd thing is, this is old news. Investors got a chance to vote on the pay package in question in 2017 — and voted it down.
Oracle appears to be trying to head off investor angst before it publicly reveals that it went ahead with a pay package that investors didn't like and didn't vote for.

Oracle made an unusual disclosure earlier this week when it revealed a presentation it had given to investors last month.

The presentation covered the details of a five-year, mega-grant of stock options the board is paying its four top executives: co-CEOs Mark Hurd and Safra Catz; executive chairman Larry Ellison; and top cloud exec Thomas Kurian.

The presentation was odd because this grant is old news. Oracle first revealed it to investors in the September of 2017, when the company filed last year's shareholder proxy statement. But while investors may know it's coming, Oracle may still be trying to soften the sticker shock when it's spelled out in this year's proxy statement, coming soon — or at least, that's what an executive compensation expert we spoke to believes.

The one bit of new info in the presentation was that, with the first year of the grant window over, none of the Oracle execs had met any of the performance objectives given to them as part of the plan, and so they had not yet been paid any of this new stash of options.

Still, the execs will be paid plenty of options from the grants made in previous years. And they haven't forfeited any of the options in this new grant. They have the whole five years to meet the performance objectives tied to them, so they shouldn't be worrying just yet.

So why is Oracle on a roadshow with investors in July to explain an executive-pay situation that it revealed 10 months ago? One possible reason: in another month or so, Oracle will be sending out this year's proxy statement where it will be disclosing executive pay.

And, depending on how it accounts for this grant, those might be "eye-popping numbers," says executive compensation watchdog Rosanna Landis-Weaver, of shareholder advocacy group As You Sow.

Specifically, Hurd, Catz, Ellison, were each allocated $103.7 million worth of options, payable in seven equal chunks over five years as various metrics are achieved. The fourth exec, Thomas Kurian, got a similar up-front, five-year grant of $69.38 million.

"They are clearly trying to get in front of it," says Landis-Weaver. "It is unusual. But there are a number of things about Oracle that is unusual."

For one thing, she said, Oracle has two CEOs and "it is paying them significant amounts." She's not a fan of the duak- CEO situation, but if a company does opt for that structure, "then they both should be paid below rate, not above. But CEO pay at Oracle has always been an interesting question," she said.

She's referencing Ellison, who for decades landed on lists of the top-paid CEOs, before stepping out of that role a few years back. Investors have bristled at that for years. And this presentation acknowledges it, by continually pointing out that his compensation is reduced under this current plan.

The bigger point is, not only does this plan pay its two CEOs well, it's still paying Ellison well, even if his pay is reduced.

And investors still aren't thrilled. They get to cast non-binding votes on executive pay each year at their annual shareholders meetings and they tend to vote it down, which Landis-Weaver calls "extraordinary." Most shareholders tend to vote in support of their boards on everything from pay to proposals.

Last year, when this mega-grant plan was revealed, it received far more "no" votes than "yes" votes. And then, the board clearly went with that plan anyway.

The key, going forward, will be if the board keeps its word to investors and doesn't pay these top execs any new stock options if they don't meet the business goals.

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