To ward off raids, Oracle hikes executive pay
The database giant is the latest example of a Silicon Valley technology firm forking over big bucks to retain its top executives.
Lane's combined salary and bonus nearly tripled in fiscal 1999, a period when he was approached by both Compaq Computer and Hewlett-Packard to gauge his interest in their then-open chief executive positions.
In 1999, Lane received a salary of $1 million, a $25,000 increase, and a $2.25 million bonus, a tenfold increase from the previous year, a recent Securities Exchange Commission proxy filing shows. Lane was also granted options for 1.125 million shares of stock. He received no stock options in 1998.
His shares, when fully vested, could be worth anywhere from $11.8 million to about $30 million, based on annual appreciation between 5 and 10 percent over the vesting period.
Lane declined to accept Compaq and HP's overtures, choosing to retain his position as Oracle's No. 2 executive. He is often mentioned as a CEO candidate because of his work in helping the database giant become the second-largest software firm, trailing only Microsoft.
Oracle's Herculean efforts to retain its executives are part of an overall trend in the technology industry, where start-ups and established firms alike are competing for qualified executives. Recent machinations on the executive front include high-profile companies such as Amazon.com, Dell Computer, and Compaq.
Too many companies, too few executives
What is driving the explosion in compensation is a simple fact: Competition for talented executives is fierce, one headhunter said.
"It's become increasingly competitive for candidates," said Peter Gregory, senior partner with Confidential Global Search. "You're competing against three different kinds of companies: the true start-ups with some venture capital; the major companies, like the America Online's, Microsoft's, and Amazon.com's, who are sucking up as much talent as they can get; and the traditional companies moving to e-commerce.
"It's not easy to find people," he said.
Gregory said the best way to woo away or retain executives is to increase their salaries and bonuses and give them huge amounts of stock options.
Earlier this summer, for example, online retailing giant Amazon.com lured Joseph Galli away from Black & Decker to become its new president and chief operating officer by paying him a salary of $200,000 with stock options that are likely to be worth at least $20 million.
For fiscal year 1999, Dell Computer founder Michael Dell got options worth more than $105 million as compensation for turning the PC maker into the No. 1 direct seller of computers.
Compaq's new president and CEO Michael Capellas was granted a salary of $850,000 and stock optioins for 200,000 shares. He also received a $5 million loan to purchase shares in the company.
Money in your future
To combat the stiff competition, Oracle gave healthy packages to its other top executives. In explaining the increased compensation, Oracle board members wrote in the filing: "In fiscal year 1999... the Compensation Committee's purview was expanded, in part, to help the company attract, develop, and retain talented executive personnel in an extremely competitive market."
The filing also said the Oracle executives deserved the compensation for increasing the company's revenue growth and controlling expenses. The Compensation Committee consists of two Oracle board members--Michael Boskin and Donald Lucas--who do not work for Oracle.
Executive vice president Gary Bloom saw his combined salary and bonus increase sixfold, from $534,000 in 1998 to $3.2 million in 1999, the SEC filing said. He also received 1.8 million stock options.
Two other executives' yearly packages more than doubled. Executive vice president and chief financial officer Jeff Henley's combined salary and bonus rose from $758,000 to $2.06 million, while executive vice president Jay Nussbaum's salary and bonus increased from $732,500 to $1.68 million. Henley also received options for 600,000 shares of stock, while Nussbaum got 750,000 shares, according to the SEC document.
Oracle founder and chief executive Larry Ellison was also awarded a big compensation increase. His salary was $1 million, a $13 increase from the previous year. But the company's chief was also awarded a $2.75 million bonus and options for 1.5 million shares of stock. In the previous year, he received only a $530,000 bonus with no stock options.
When fully vested, Ellison's 1.5 million shares could be worth between $15.7 million to $39.9 million, if the stock prices rises between 5 to 10 percent annually through the life of the vesting period.