$1 Salary Still Adds up to Millions for Ellison at Oracle
Despite voluntarily slashing his own salary to $1 last year, Oracle’s founder and CEO Larry Ellison remains one of the highest paid executives in corporate America. Based on estimates from ProxyGovernance Inc (PGI), Ellison’s fiscal 2010 compensation topped $66 million, with all but $8 million delivered through stock option grants – the perennial driver of a lucrative compensation arrangement that has led the Wall Street Journal to dub Ellison the “Pay King” in its survey of the best-paid executives of the past decade. In fact, at $73 million Ellison’s three-year average compensation is sufficient to assemble an IT dream team – one combing the CEO talents of Cisco Systems, IBM and Intel, with still enough salary space to hire David Beckham to be the public face.
Oracle’s compensation philosophy – of continuing to throw equity awards at its largest shareholder – stands in marked contrast to the approaches at Apple and Microsoft, which, like Oracle, are both led by a CEO with a substantial equity stake. Having compensated the executives through generous equity awards early in their tenure, the two computer rivals have each taken the view that additional awards are unnecessary to align the CEO’s interests with shareholders. Perhaps some good may come of this; Ellison recently joined Bill Gates and Warren Buffet, and three dozen other wealthy individuals, in pledging to leave at least half his fortune to charity.
When Oracle shareholders meet on October 6, they will have the rare opportunity to vote on the equity compensation plan underwriting Ellison’s pay. However, investors tempted to reign in Ellison’s pay by voting down the plan – which requires additional shares and a term extension – may consider that despite Ellison’s large awards more than 70% of last year’s grants went to employees outside of the ranks of the named executive officers.
In a new perceived era of austerity and following the politicization of executive pay ushered in by the bailouts of the last few years, a handful of executives gained prominence for having either voluntarily given up their salaries or having traditionally not taken base pay. But as Ellison’s salary at Oracle shows, the $1 headline can turn out to be a largely symbolic.
Based on PGI’s compensation data for 2010 through September, CEO’s at 12 S&P 500 companies worked for a base salary of no more than $1. Of those, however, only five – Steve Jobs of Apple, Kosta Kartsotis of Fossil, Vikram Pandit of Citigroup, John Mackey of Whole Foods Market, and Eric Schmit of Google – fit a strict definition of the $1 CEO, which extends to cover cash and equity incentive programs, although even here certain allowances have to be made for, among other things, the potentially large “All Other Compensation” category. With the exception of Pandit, who is scheduled to return to a competitive salary next year having pledged to take $1 only for as long as the bank remained under the Troubled Asset Relief Program, this elite group of true $1 CEOs is made up of founders, initial investors or otherwise major shareholders.
Investors searching for low-priced CEOs would do well to look beyond the $1 salary. Berkshire Hathaway’s Warren Buffet has kept his compensation at $100,000 for more than a quarter of a century, Amazon founder Jeffrey Bezos takes home $81,000 each year, and Erick Schiffer of 99 Cents Only Stores receives $120,000 in total compensation.
For more information contact:
Allie Monaco at ProxyGovernance +1 (703) 245-5800