Larry Ellison has a new challenger to contend with. No, it's not Team New Zealand, which Ellison dispatched in the latest America's Cup. Instead, the billionaire's newest foe is California's teachers. And, in an exclusive interview, one of the Oracle's largest shareholders discusses why they're fighting for a change in the way Ellison gets paid.
The California State Teachers' Retirement System (CalSTRS) – the world's largest teachers-only pension fund – manages $171.9 billion for its 862,192 members. As one of Oracle biggest shareholders, they're not happy with the way CEO Larry Ellison and other executives are being compensated at the company, the tech giant company Ellison founded in 1977. CalSTRS has been his most vocal challenger, winning a two-to-one on a non-binding vote against the company's executive compensation at Oracle's annual shareholders' meeting last week.
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Ellison is the highest paid CEO in the world, taking home $96 million last year alone, $18 million more than number two Elon Musk of Tesla. Ellison still owns nearly a quarter of Oracle. His 1.11 billion shares are worth $37.2 billion and he is granted millions of options annually. His shares are nearly 100 times CalSTRS' stake of 11.5 million shares, valued at $385 million.
One issue for CalSTRS has been that Oracle's management continues to get large pay packages despite the stock's lower performance relative to its peers. As measured using the NASDAQ Composite index, investors would have gotten four times the return investing in the NASDAQ than in just Oracle alone in the last twelve months.
Ahead of the shareholder meeting, CalSTRS, along with two European pension funds, wrote Oracle's shareholders saying:
"….We have severe concerns about executive compensation and proper board accountability at Oracle. At the 2012 annual shareholders' meeting, the advisory vote on pay not only failed to receive a majority vote in support, but, by our calculations, 86% of independent shareholders voted against the resolution. 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."
Aeisha Mastagni, Investment Officer at CalSTRS, is the fund's point person on corporate governance and executive compensation. In an exclusive interview with Talking Numbers, she says there's more to this fight than just compensation.
"I think it's a multiple of issues here," says Mastagni. "It's the way the compensation's structure, it's the magnitude of pay, and, quite frankly, it's the fact that Oracle's performance really hasn't justified the outsized pay that they've given Mr. Ellison."
To get the rest of Mastagni's must-see exclusive interview as she discusses why CalSTRS is taking on Ellison and what they would like to see done, watch the video above.
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