Director’s Compensation Project: Oracle

This post is part of an ongoing series that examines the way stock exchange independence rules influence director compensation.  We are including companies from 2011's Fortune 500 and using information found in their 2011 proxy statements.  In addition to state standards and the requirements of SOX, the stock exchanges each have their own standards for independence.  While substantially the same, there are some minor differences between NYSE and NASDAQ rules that are worth noting. 

NYSE Rule 303A.01, requires that each listed company’s board of directors be comprised of a majority of independent directors. A director is considered independent under NYSE Rule303A.02(b)(ii) if the director received less than $120,000 in direct compensation, other than director’s fees, in any one year period over the last three years. The NYSE “direct compensation” standard is less restrictive than the corresponding NASDAQ Rule, 5605(a)(2)(B), which includes "any compensation."  NYSE Rule 303A.06 requires a listed company’s audit committee members to comport with the requirements of Rule 10A-3 (C.F.R. §240.10A-3).

Independent directors are compensated for their service on the board.  The amount of compensation can be seen from examining the director compensation table from the Oracle (NYSE:ORCL) 2011 proxy statement.  According to the proxy statement, the company paid the directors the following amounts:

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation ($)	Total ($)
Jeffrey S. Berg	143,959	0	413,366	0	557,325
H. Raymond Bingham	222,500	0	688,943	0	911,443
Michael J. Boskin	186,500	0	688,943	0	875,443
Bruce R. Chizen	179,193	0	654,495	0	833,688
George H. Conrades	105,764	0	413,366	0	519,130
Hector Garcia-Molina	137,223	0	413,366	0	550,589
Donald L. Lucas	196,500	0	826,731	0	1,023,231
Naomi O. Seligman	120,500	0	413,366	0	533,866

Director Compensation.  During fiscal year 2011, Oracle held 6 Board of Directors meetings.  Each director attended at least 75% of the aggregate number of meetings of the Board of Directors and meetings of the Board Committees on which he or she served.  Each non-employee director was paid an annual retainer of $52,500 plus additional fees for meeting attendance, committee membership, and committee chair positions.  Each non-employee director was also granted a base of stock options for 60,000 shares plus additional stock options for committee chair positions.  Directors who were also executives of Oracle were not paid separately for performance of their duties as director.

Director Tenure.  Lawrence J. Ellison is a director and Chief Executive Officer for Oracle, he started at these positions in June 1977.  Mark V. Hurd is the newest member of the board, elected in September 2010.  Several directors also sit on other boards.  Mr. Bingham sits on the boards of General Atlantic LLC, Flextronics International, Spansion Inc., Dice Holdings, Inc., STMicroelectronics N.V., and Fusion-io, Inc.  Mr. Conrades sits on the boards of Harley-Davidson, Inc. and Ironwood Pharmaceuticals, Inc. 

CEO Compensation.  Mark V. Hurd, who currently serves as a director and president of Oracle earned $78,362,540 in total compensation in fiscal year 2011.  Mr. Hurd’s compensation included $698,106 in base salary, $68,349,000 in option grants, and $7,299,368 in incentive-based pay.  Mr. Ellison, the second highest paid officer, earned $ 77,556,015 in total compensation in fiscal year 2011.  Mr. Ellison’s compensation included $1 in base salary, $62,668,200 in option grants, $13,341,994 in incentive based pay, and $1,531,233 in security related expenses for Mr. Ellison’s residence.