Council of Institutional Investors

Frustrated Oracle Shareholders Send Letter Requesting Governance Reforms
Thursday, January 29, 2015
by: Rosemary Lally

Section: CII Governance Alert

Fed up with Oracle’s reluctance to engage with its shareholders and discuss their concerns, Railpen and PGGM sent the company a letter January 26 requesting governance reforms.

The letter points out that over the past four years, PGGM and Railpen have:

• sought private meetings with Oracle’s independent board members;
• published open letters with other shareholders including CalSTRS setting out their concerns;
• last year co-sponsored with the Nathan Cummings Foundation, CalPERS and the UAW Medical Benefits Trust a proxy access proposal; and
• attended the 2104 annual meeting to present the proposal and address the directors in person.

“In our opinion, there is an untenable barrier in the ability of shareholders to communicate directly with the board,” says the letter.

To turn the situation around, PGGM and Railpen ask Oracle to:

• Address board accountability by implementing proxy access, especially since 68 percent of outside shares supported a proxy access proposal that was considered at the 2014 annual meeting;
• Implement a compensation structure that shareholders can support; and
• Develop a policy to allow shareholders to communicate effectively and directly with the board.
The pension funds are encouraging other Oracle shareholders to read the letter and consider the information contained when conducting their own engagement efforts with the company.

At Oracle’s 2014 annual meeting just 46 percent of its shareholders voted for the say-on-pay proposal. That marked the third year in a row the company’s compensation plan received less than majority support.

In addition to the say-on-pay and proxy access proposals, Oracle shareholders voted on two other pay proposals:

• A proposal submitted by the New York City Comptroller asking the company’s compensation committee to include, when setting executives’ performance measures, weighted metrics that correctly reflect both individual and business accomplishments over an established multi-year period, received 27 percent of the votes cast.

• Another, filed by the AFL-CIO Equity Index Fund, asking Oracle’s compensation committee to adopt a policy that all equity compensation plans submitted for approval after the 2014 annual meeting specify that any awards will result from performance garnered 24 percent of the votes cast.

All of the vote tallies are skewed by the inside ownership of the company. Most notably, founder and former CEO Larry Ellison owns 26 percent of Oracle’s stock.
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