Oracle has once again failed its advisory vote on compensation with support from only 48.3% of votes cast for and against. This marks the fourth consecutive year that Oracle has failed the vote, setting a dubious record unmatched by any company currently in the S&P 500. The failure was announced, as bad news often is, in a late Friday afternoon filing (hat tip to Footnoted.com and Michele Leder whose perusal of the Friday night dump is relied on by many). Shareholders may have hoped that pay would decline when company founder Larry Ellison stepped down from his position as CEO. But he remained with the company as Chairman and Chief Technology Officer, and in this new role his total disclosed compensation for 2015 was over $63 million dollars. The two CEOs each had reported pay of over $50 million.

In its proxy statement the company heralded the introduction of performance share units. The value of awards is based on “Oracle’s annual revenue growth and operating cash flow growth as compared to the performance of a carefully selected group of comparator companies.”  However, with such comparisons, executives can be rewarded as stock price falls, as long as comparator companies are similarly affected. That’s exactly what happened this year, as noted in the proxy statement:

“Oracle’s operating cash flow growth was below the weighted average cash flow growth of the comparator companies, resulting in a payment below the target level, but was not among the two lowest of the comparator companies (if operating cash flow growth was at one of the two at the lowest levels among the comparator companies, none of the PSUs subject to the operating cash flow metric would have been earned”

The first tranche of the awards were paid out at 60.7% of target for Ellison and the two CEOs.

I expect the company spent a lot of money on consultants as it changed its compensation policies – it certainly tried to persuade its shareholders to accept its pay practices. In fact, according to a company filing, Oracle’s board met shareholders representing “one third of outstanding unaffiliated shares” and held additional meetings in fiscal year 2016, when “independent directors have met with eight of our largest institutional stockholders, representing approximately 21% of our outstanding unaffiliated shares.”

That filing, clearly designed to prevent the kind of vote that just took place at the November AGM, includes a table which lists shareholder feedback and actions taken. One of the things shareholders told the company: “we voted against say-on-pay, in part, because we want you to continue to reduce the quantum of pay.”

The take-away from this vote is that changes in practices, with a move toward more performance-based pay and a reduction in options, may be too little too late. Sometimes excessive is excessive, and no carefully considered language covers that up.

Votes at Oracle are calculated in two different ways – sometimes counting the millions of shares that ABSTAIN and other times not, usually so as to uniquely benefit management. In fact, As You Sow co-filed a proposal at Oracle that was sponsored by Newground Investor Voice, which called on the board to amend the Company’s governing documents so that all matters presented to shareholders, other than the director election, would be decided by a simple majority of the shares voted FOR and AGAINST. Though the proposal was supported by nearly 10% of the vote this year, the company has not given it serious consideration, despite a number it's S&P 500 peers having adopted this voting standard, and despite its being favored by the Council of Institutional Investors (CII), Institutional Shareholder Services (ISS), and the SEC. (See: www.investorvoice.net/vote-counting.)