Investors are growing more dissatisfied with Oracle Corp.'s years of high pay for Chief Executive Larry Ellison—discontent that may produce a showdown at the technology company's Oct. 31 annual meeting.
Some shareholders complain that Mr. Ellison, who founded the software giant and beneficially owns a quarter of the company's shares, continues to receive tens of millions of dollars of stock options every year, even when Oracle's performance has been mixed.
Mr. Ellison received compensation valued at $76.9 million in the fiscal year that ended in May. Oracle's stock rose nearly 28% in those 12 months, but it plunged 9% on June 21 after the company reported flat sales for a second straight quarter.
Even with Mr. Ellison's large stake in the company, Oracle only narrowly won investor support for its executive-pay practices in 2011 and suffered a defeat in 2012. Opponents included Vanguard Group Inc. and BlackRock Inc., Oracle's largest and third-largest institutional shareholders, regulatory filings show. BlackRock also voted against the reelection of five Oracle directors, including those serving on the pay panel.
Investors concerned that the company hasn't been more responsive to their complaints may step up the pressure this year.
In a letter sent Wednesday to Bruce R. Chizen, chairman of the Oracle board's compensation committee, CtW Investment Group said it would vote against the company's compensation practices and possibly seek to unseat directors on the compensation committee if Oracle doesn't put limits on its options awards and bring in a new, independent director to help oversee pay.
Oracle declined to comment Wednesday. In a proxy filed last week, Oracle directors expressed disappointment that investors rejected its pay practices in a nonbinding "say-on-pay" vote last year. But the board decided "that significant changes to our executive compensation program were not warranted,'' the proxy said.
Mr. Ellison turned down a bonus of $1.2 million for the past year because Oracle's growth missed expectations, the proxy said.
The CtW letter came the same day Mr. Ellison was basking in the come-from-behind victory of his America's Cup sailing team. The day before he disappointed a conference center packed with fans and Oracle customers when he skipped his keynote speech to keep tabs on Oracle Team USA.
CtW is the investment arm for labor federation Change to Win, whose union pension funds own about six million shares in Oracle. The company had about 4.7 billion shares outstanding at the end of May. CtW is a frequent critic of what it sees as excessive CEO pay, but it has been finding traction with investors like mutual funds in some recent showdowns.
A major drive by activists over Oracle's executive-pay levels will get considerable support from institutional investors this fall, an official at one large mainstream money manager said.
The investor disquiet is evident in the results of Oracle's annual say-on-pay votes, a nonbinding referendum mandated by the Dodd-Frank financial overhaul. Shareholders rejected the company's pay practices at the last annual meeting, in November, with 59.1% of the vote opposed.
Mr. Chizen received the least support of any Oracle board member last year, winning re-election with 61.4% of the vote. Fellow committee members George H. Conrades and Naomi Seligman were re-elected with about 66% support.
Major Oracle shareholders who only opposed its pay practices last year are more likely to oppose compensation committee members this year, an official at another mainstream investor said.
It is unusual for companies with say-on-pay defeats to dodge substantive fixes in their executive-pay practices. While the votes aren't binding, they can be embarrassing, and companies from Hewlett-Packard Co. to Walt Disney Co. and General Electric Co. have made adjustments to pay in the wake of a loss or in order to head one off.
Among other things, CtW wants Oracle to index its options awards to an industry-specific benchmark and tie them to a metric like return on equity. The Oracle board "has stubbornly refused to take shareholder criticisms to heart," CtW said in its letter.
Last week, the company reported modest growth for its fiscal first quarter after flat revenue for the previous two periods. Profit rose by 8% to $2.19 billion, as revenue ticked up 2% to $8.37 billion.
Oracle's shares are up less than 2% this year, compared with more than 18% for the S&P 500 stock index, in part because of some disappointing earnings results.
Two board members at Hewlett-Packard resigned this year after nearly losing their seats amid pressure from CtW. Investors had been dissatisfied over a botched acquisition of U.K. software firm Autonomy Corp., which H-P bought for $11 billion in 2011 then wrote down by $8.8 billion about a year later.
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