San Francisco: Oracle Corp. changed its executive compensation plan, tying pay packages more closely to the company’s performance following shareholder lobbying and Larry Ellison’s decision to step down as chief executive officer.

Ellison’s performance-based stock award was cut by 187,500 shares, or $7.28 million based on Oracle’s closing price on Tuesday, and his stock-option award for fiscal 2015 was reduced by 750,000 shares, according to a filing with the US Securities and Exchange Commission. Ellison’s total pay last year was $67.3 million, down from $79.6 million the prior year.

Mark Hurd and Safra Catz were both named CEOs of the software maker on 18 September, while Ellison became chairman and took on the title of chief technology officer. Hurd will run sales, marketing and strategy, while Catz will remain chief financial officer and oversee legal and manufacturing operations. Each received a one-time grant of 500,000 stock options and a performance-based stock award of 125,000 shares in connection with their promotions, according to the filing.

Hurd and Catz earned $37.7 million each in fiscal 2014, compared with $44.3 million in the previous year, the company said in a separate filing on Tuesday. Total pay for the executives, who were co-presidents before their promotions, declined after the company missed some of its profit targets.

Shareholder vote

Last year, in a non-binding vote, Oracle shareholders rejected the pay packages of Ellison and other executives, following the recommendation by a proxy adviser that their compensation didn’t match up to the company’s performance. Oracle has also tussled with CtW Investment Group, part of a labor group named Change to Win, which has criticized its remuneration policies.

In fiscal 2015, the company is introducing performance stock units, which are awarded to Ellison, Catz and Hurd based on how well Oracle does in terms of cash flow and revenue growth compared with technology peers International Business Machines Corp. (IBM), Hewlett-Packard Co., Cisco Systems Inc., EMC Corp., SAP SE, Inc. and Workday Inc.

“You could argue that’s a somewhat representative set of companies that they compete with," said Jack Andrews, an analyst at DA Davidson and Co., who has the equivalent of a hold rating on Oracle stock. Compensating the executives according to sales and cash-flow growth against rivals is “better than a lot of companies that specifically reward according to EPS," he said. “You can manipulate that."

The company also granted performance stock units to Thomas Kurian, executive vice-president of product development, and John Fowler, executive vice-president of systems. These will be awarded according to revenue growth in key business units within the company’s cloud and hardware divisions, compared with internal targets.

Ellison’s move

Ellison is leaving the day-to-day operations of Oracle at a time when the software industry he helped champion has been disrupted by the rise of cloud-computing technologies. Oracle reported fiscal first-quarter profit and sales last week that missed analysts’ estimates, as the company struggled to keep pace with the shift to computing through the Web.

Oracle said there will be no change to the salaries and executive bonus opportunities for Ellison, Hurd and Catz. Ellison, 70, is worth $43.7 billion and ranks seventh on the Bloomberg Billionaires Index.

Oracle’s pay figures come from the US Securities and Exchange Commission-mandated summary compensation table, which reports some awards in the year they’re granted rather than for the year they’re earned. Some awards are restricted, vesting and paying out over a set time frame, and the receipt of others may depend on future performance goals. The summary compensation table also counts changes in pension and the value of perks.

Shareholder resolution

Separately, five institutional investors submitted a shareholder resolution to Oracle seeking independent board appointments at the company’s annual meeting, scheduled for November.

The joint proposal by PGGM, the second-largest Dutch pension fund; the Nathan Cummings Foundation; CalSTRS; Railpen Investments; and United Auto Workers pension is aimed at putting pressure on Oracle’s directors to be more responsive to shareholders’ concerns about the independence of its board and the executives’ compensation, the investors said.

“We’ve got a non-responsive board here," said Catherine Jackson, the corporate-governance adviser at PGGM, in an interview. “They have been non- or unresponsive to our attempts for outreach over the last several years."

Deborah Hellinger, a spokeswoman for Oracle, declined to comment on the resolution.

Board control

The resolution asks Oracle to let shareholders nominate as many as a quarter of the board’s members.

“Appointing Larry Ellison formalizes the perception we’ve always had that Larry Ellison controls the board," Jackson said, referring to Ellison’s appointment as chairman. “I don’t know how putting him in that role is going to further strengthen the board’s independence and accountability towards these other non-management shareholders."

In its proxy filing on Tuesday, Oracle said its annual meeting of stockholders will be held on 5 November at the company’s headquarters in Redwood City, California. Bloomberg