Pension fund heavyweights urge Oracle shareholders to veto the board over pay at today’s AGM

Investors up in arms as they say company ignored 2012 remuneration revolt

Three of the world’s largest pension fund managers have taken the rare step of writing an open letter to other shareholders in Oracle Corporation, the US computer technology company, to tell them they will vote today against the re-election of all board members – and urging them to do the same – in protest at what they say is the firm’s intransigence over executive pay. CalSTRS Investments, the $166bn US pension fund manager, PGGM Investments, the €140bn Dutch pension fund manager, and RPMI Railpen Investments, the £20bn UK pensions manager, wrote to other shareholders ahead of Oracle’s October 31 Annual General Meeting (AGM) at its headquarters in Redwood City, California. In a filing with the SEC, they said they were addressing fellow stockholders over “severe concerns” about executive compensation and proper board accountability after a majority of investors failed to back the company on its pay policies at last year’s AGM. The investors said that at the 2012 shareholders’ meeting, the advisory vote on pay not only failed to receive a majority vote, but, that by their calculations, 86% of independent shareholders voted against the resolution. Larry Ellison, the founder and CEO of Oracle, whose total compensation package is one of the main issues of investor ire, owns 25% of Oracle’s stock. Ellison has earned over $1bn in the last 10 years, much of it in option profits, although his basic salary is just $1. The investor letter adds: “This is not a situation that any Board should ignore, even taking into account the advisory nature of the pay resolution, as it is clearly a request for change by shareholders. Subsequent to the vote from last year, we would have expected the Board to have addressed issues such as excessive compensation and the lack of performance hurdles in the vesting of long term incentives.”The investors said that because the Board had ignored the pay revolt in 2012, it was “failing in its duties to shareholders” by continuing to endorse a pay structure that the majority do not support. CtW Investment Group, which works with union sponsored pension funds with $250bn in assets, has also been corralling shareholders to get them to vote against the pay packages at Oracle. Shareholders including Domini Social Investments, the American Federation of State, County and Municipal Employees (AFSCME) and Christian Brothers Investment Services (CBIS), have already voted against named executive officers’ compensation ahead of the AGM, according to the Proxy Democracy site, which tallies investor voting.
But in a letter to CtW Investment Group, Dorian Daley, General Counsel at Oracle, said the company had taken the 2012 advisory vote “extremely seriously”. She added: “As you are aware, it is advisory only. Congress had the ability to make that provision of Dodd-Frank binding (and there were proposals to do that), but ultimately chose to make it advisory and leave the ultimate responsibility for compensation matters to the judgment of the Board. Although the advisory vote was not definitive, we certainly did not ignore the vote, as you assert. Our Board of Directors and our management took into account the views of our shareholders – including but certainly not limited to the advisory vote – and then the Board exercised its business judgment and made its decision based on full information.”