Crazy expensive bonuses in big companies like Oracle are as common as updates. But some Oracle executives are bucking that trend.
In the past, Oracle has been on the chopping block for executive compensation that rivals lottery wins year after year. However, a key group of leaders are taking a stand against frivolous compensation bonuses and have opted out of receiving their (very generous) lion's share.
The trio include Safra Catz, Larry Ellison, and Mark Hurd, each of whom were scheduled to receive a generous bonus check for the 2013 fiscal year. The CEO was set to receive a tidy $1.2 million, while the co-presidents had $717,000 coming to each of them.
The amounts would have been even higher if Oracle had achieved the company's expected growth, but even a "slow year" means a lot of zeroes for those at the top. What made these leaders change their tune?
What pay for performance?
At Oracle, there's a transparent "pay for performance" policy that's more philosophy than anything else. According to these three leaders, they (and the company) just didn't deliver in 2013.
In other words, they didn't deserve the bonuses -- a word which, by definition, refers to an add-on for achieving a certain goal. The official Oracle statement is that, "Reflecting Oracle's pay-for-performance philosophy, they all voluntarily declined their fiscal 2013 bonuses and therefore received no bonuses."
It was a dry and redundant official notice, but what it conveys is pretty sensational. With regard to Ellison, he owns the most Oracle shares with a 25-percent stake.
His annual salary is only one dollar, but with $39 billion in shares, he has a very impressive salary from stock options. Those declined by 18 percent this year, but there's no need to feel sorry for this slump, since he still took home more than $78 million for his annual salary in 2013.
When bonuses rival salaries
Compared to Ellison's 2012 earnings of $94.6 million, he took a hit this year, but it's unlikely he'll be forced to shop the clearance racks to make up for it. He was hailed by the Hay Group as the CEO with the biggest earnings in 2012, but he may not earn that title two years in a row.
As for Catz and Hurd, they have base salaries, which consist of $950,000 per year apiece. That's pretty close to the bonuses they had coming their way. Like Ellison, they also have stock options that total just above $43 million.
However, as is happening with other tech giants, there have been rallying calls to make the pay gap transparent between executives and employees. Shareholders have a "say on pay" vote when a fiscal year is disappointing, but it looks like these three leaders have made that option moot.
On the other hand, the bonus philosophy remains a hot topic at Oracle, and alternative approaches are being considered for the future.
No profit without leadership
Oracle has always stood by the principle that the connection between executive compensation and the company's financial performance is solid. According to Oracle's compensation committee, the existing structure is in everyone's best interest.
Long-term goals and a history of success with this method are difficult to argue with, but some tweaks may be necessary so that executives are compensated further to reflect the company's financials and performance.
Some of Oracle's stakeholders may disagree with the current approach, but you can't please everyone. Leaders in every industry, from signage to technology, get to their top spot via good leadership.
It's too soon to tell which direction the compensation committee will head in 2014, but with leaders at the helm who are willing to skip a bonus when they feel they didn't earn it, Oracle is already in a good position.