The company just revealed a new, 100% performance-based equity package for its two CEOs and CTO aimed at reducing their total compensation over the next five years. The details were revealed in an investor presentation filed with the Security and Exchange Commission on Tuesday.
The three executives — joint CEOs Safra Catz and Mark Hurd, and Ellison — will still get a base salary. But in order for the execs to receive about $US100 million each in stock awards in 2022, they will have to meet some specific targets.
Under the new rules, equity awards are based on two factors: whether the team is able to significantly grow Oracle’s cloud business, and whether Oracle returns value to shareholders.
Among the goals, the team must get Oracle’s stock to an average price of $US80 per share for at least 30-days. Currently, it hovers around $US50 per share.
Another goal is to hit $US20 billion in total cloud revenues in one fiscal year. Total cloud revenues in 2017 were $US4.57 billion.
Playing catch up
Oracle’s cloud business is fast growing, but it’s still lagging behind companies like Amazon, Google and Microsoft. Its main advantage is that it’s capable of running Oracle databases lightning-fast.
Cloud services made up 12% of revenues in 2017, an increase from 8% in 2016. Overall, cloud revenues increased 58% year-over-year.
Should the executives meet their goals, they will each receive a total of $US103.7 million in 2022, or $US20.74 million annually for the five-year challenge.
While $US103.7 million a lot of money, when broken down into annual compensation, this is actually a 47% decrease from the 2017 equity each executive received, which was worth just under $US40 million.
The CEOs and CTO also receive base salaries and performance-based bonuses on top of the performance-based equity packages (Ellison gets a $US1 salary, the two CEOs are paid $US950,000 a year). However, equity makes up the majority of annual compensation for all three of the executives.
Performance was introduced as a partial factor in 2015, to appease investors who had become increasingly uncomfortable with executive pay at the company. More than half of the company’s investors voted against its pay practices between 2012 and 2015, according to Bloomberg.