Last year I wondered why Oracle CEO and founder Larry Ellison continued to receive additional stock options when he already had more than 1 billion:

“However, I do have a beef with Ellison’s compensation that should get a sympathetic ear from Oracle’s shareholders: Why is the company doling out more stock to a man who already owns 22.3 percen?”

It’s not like I expected Ellison or Oracle’ s board to listen to me. And guess what? They didn’t!

I came back from vacation today to find this nugget about Oracle’s board awarding Ellison another 7 million stock options for the fourth year in a row.   The four-page report, called “Larry Ellison Rides Again,”  comes from Graef Crystal, one of the most respected voices on executive compensation. In meticulous detail, Crystal breaks down the numbers, and in doing so, points out the absurdity of this latest award.

Perhaps there’s no more room for outrage when it comes to executive compensation, or Ellison continuing to rack up more options, but in any case, here are the highlights of Crystal’s analysis.

First, Crystal gives the history of Ellison’s recent stock option awards:

  • “On July 6, 2006, he received a grant covering 7,000,000 shares with a strike price of $14.57 and a term of 10 years. The company declared the option to have a grant date fair value of $50 million.”
  • “On July 5, 2007, he received a second grant covering another 7,000,000 shares, with a strike price of $20.49 and a term of 10 years. The company declared the option to have a grant date fair value of $71 million.”
  • “On July 3, 2008, he received a third grant again covering 7,000,000 shares, with a strike price of $20.73 and a term of 10 years. The company’s declaration of grant date fair value is not currently known, as the proxy covering the fiscal year ended May 31, 2009 has not yet been filed.”
  • “On July 2, 2009, he received a fourth grant again covering 7,000,000 shares, with a strike price of $21.04 and a term of 10 years. The company’s declaration of grant date fair value is not currently known, as the proxy will not be filed for over a year.”

Was he really worth that? Crystal:

“It is important to observe here that the strike prices of the most recent three grants — $20.49 for the grant made on July 5, 2007, $20.73 for the grant made on July 3, 2008 and $21.04 for the grant made on July 2, 2009 – are essentially unchanged. The compounded rate of stock price appreciation between July 5, 2007 and July 2, 2009 was just 1.46 percent per year. And for the single year ended July 2, 2009, Oracle delivered an appreciation of only 1.32 percent.”

And:

“To be fair to Mr. Ellison, while his stock price has gone essentially nowhere in the last few years, the overall stock market has gone to hell. For the fiscal year ended May 31, 2009, Oracle’s total return was negative 14 percent. But that beat the return on the Standard & Poor’s 500 Index by 19 percentage points. And it beat the S&P Information Technology Index by 14 percentage points.
Still, a conventional stock option is not intended to reward for relative performance, only for absolute performance.
And when it comes to absolute performance for the fiscal years 2008 and 2009, Mr. Ellison shows up as a poor performer.”

Finally:

“There’s no question though, that in the ultra-long term, Mr. Ellison has been a spectacular performer. His company first went public on April 15, 1986 at a price of $0.0772 a share. Had you bought a share back then and held it until today, the value of your investment would have increased 325 times. The equivalent figure for the S&P 500 Index: 3.8 times.
But that’s how he came to be worth $24 billion (not counting the billions in Oracle stock that he has already sold). That is not justification for all the more recent largesse.” (My emphasis).

I’ll just end by reposting what I wrote last year. There’s no argument to be made that Ellison needs one single share of additional stock in Oracle to keep his interests aligned with those of shareholders:

“Do I think Ellison’s 1.15 billion remaining shares aren’t enough to align his interests? Do I think he doesn’t have a long-term interest in Oracle’s success? And do I think there’s much chance that Ellison might bolt, for say, Facebook?

No, no and no.”