One example is Salesforce.com Inc., whose billionaire founder Marc Benioff is a former Oracle employee. The San Francisco-based company lost about $500 million of net income during its last two fiscal years even as revenue grew about 75 percent. It has a negative economic profit, according to data compiled by Bloomberg. The company awarded Benioff $41.4 million, mostly in stock options, for fiscal 2014.
Security Personnel
Awarded pay measures what a compensation committee intended to pay an executive, not what was reported by the company in the summary compensation table. It includes salary, cash bonuses, and stock awards received during the fiscal year that are valued as of that year end’s stock price. It accounts for changes in the value of pensions, and includes perks such as club dues and personal use of corporate jets.
Ellison’s options grant was valued at $65 million when it was awarded in July 2013. It increased to about $100 million at the end of the company’s fiscal year in May 2014. He also received a $741,384 cash bonus and $1.54 million in other compensation, including security personnel at his home.
The billionaire’s pay, as a percentage of his company’s economic profit, may be even smaller in September, when Oracle is scheduled to file its proxy statement. The company reduced his awards in July, and cut them again two months later when it announced he would step down as CEO to serve as the company’s chief technology officer. He was awarded 2.25 million options and a target of 562,500 performance-based stock units that will pay out depending on how Oracle’s revenue and operating cash flow growth compares to its competitors.
‘Long Overdue’
“Reducing the reliance on stock options was long overdue, but the structure of the new performance stock units is puzzling,” said Michael Pryce-Jones, director of corporate governance at CtW Investment Group, which advocates for pension funds that collectively manage $200 billion. “A single metric, such as economic profit, would provide a far clearer line of sight for executives as they seek to maximize value in a very dynamic environment.”
After shareholders voted against its pay plan for the first time in 2012, Oracle wrote in its proxy statement that significant changes to the executive compensation program weren’t warranted, and it “clearly” linked pay to performance. Last year, the company modified its wording, telling investors that executive pay is “primarily contingent on their ability to achieve our primary business objectives.”