Oracle's Ellison: Pay King
Larry Ellison, founder and chief executive of software maker Oracle Corp. (NasdaqGS: ORCL - News), topped the list of best-paid executives of public companies during the past decade, receiving $1.84 billion in compensation, according to a Wall Street Journal analysis of CEO pay.
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Coming in No. 2 on the compensation list was Barry Diller, who received roughly $1.14 billion from IAC/InterActive and Expedia.com, the online travel site IAC spun off in 2005, where he remains chairman.
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Following Mr. Diller were Occidental Petroleum Corp. (NYSE: OXY - News) CEO Ray Irani at $857 million, Apple Inc.'s (NasdaqGS: AAPL - News) Steve Jobs with $749 million and, in fifth place, Capital One Financial Corp. (NYSE: COF - News) CEO Richard Fairbank at $569 million.
Four of the top 25 CEOs worked at financial companies, two on Wall Street: former Lehman Brothers (Other OTC: LEHMQ.PK - News) CEO Richard S. Fuld, at No. 11 with $457 million, and former Citigroup Inc. (NYSE: C - News) CEO Sandy Weill, who ranked 19th at $361 million. The others were Mr. Fairbank and former Countrywide Financial Corp. CEO Angelo Mozilo.
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The Journal analysis includes salaries, bonuses, perks and realized gains on both restricted stock and stock options; it excludes new grants of restricted stock and stock options. The analysis didn't track whether executives sold shares they acquired after they exercised stock options or after previously restricted stock vested.
The survey shows that only some of the best-paid executives in the decade oversaw great stock gains for shareholders.
The size of executive pay packages, and the ways companies try to align executive pay to shareholder returns, became a heated political topic at several points in the last 10 years, especially in the wake of accounting scandals early in the decade and the Wall Street collapse of 2008. Critics say stock options sometimes work too well-pushing executives to make risky moves that lift the stock price in the short run, but ultimately hurt the company.
Oracle shareholders saw the value of their stock triple, while shareholders of Apple saw their stock soar nearly 12 times over. But shareholders of another tech giant, Dell Inc. (NasdaqGS: DELL - News), lost 66% of the value of their stock during the decade, while CEO Michael Dell, who launched the computer maker in his dorm room in the 1980s, brought home $454 million.
Four of the 10 highest-earning executives ran companies whose shareholders lost money over the decade: IAC/InterActive, Countrywide, Capital One and Cendant Corp.
The disparity between those CEOs' fortunes and those of their shareholders is "pretty depressing," and "suggests there's a fair amount of pay without performance," said Jesse Fried, a law professor at Harvard University and co-author of a 2004 book, "Pay Without Performance: The Unfulfilled Promise of Executive Compensation." But Steven Kaplan, a professor at the University of Chicago's Booth School of Business, said that in general, "the guys who got the big payoffs deliver."
Consider Mr. Ellison, a 65-year-old sailing enthusiast who founded Oracle in 1977. In the 10 years ended May 31, 2009, the most recent fiscal year for which Oracle has disclosed pay data, its market capitalization nearly tripled, to $98 billion, from $36 billion.
It has since risen further. Mr. Ellison's 23% stake in Oracle is valued at roughly $28.8 billion. Realized gains on options accounted for 97% of Mr. Ellison's total compensation.
An Oracle spokeswoman declined to comment.
Mr. Diller of IAC and a spokeswoman for Capital One's Mr. Fairbank say their compensation reflects solid returns for shareholders over earlier periods.
For example, Mr. Diller in 2005 exercised more than 22 million IAC and Expedia stock options that had been granted in 1995, recording a paper gain of $463 million; he still holds the shares. Over that period, IAC stock rose more than four-fold.
"I did exactly as well as shareholders during the exact same counting period," Mr. Diller said in an interview. "If you're thinking of alignment with shareholders, I can't imagine a more aligned system."
Mr. Fairbank also recognized big gains from options granted in 1995 and exercised in 2005; he took in $249 million that year, nearly half his total for the decade. Over the period of 1995 to 2005, Capital One shares rose eightfold. Mr. Fairbank hasn't been paid a salary or bonus since 1997, a spokeswoman said.
The stocks of Countrywide and Lehman Brothers, meanwhile, soared for years before the housing slowdown and financial crisis. That allowed Mr. Mozilo, the former CEO of Countrywide, and Mr. Fuld, the former Lehman CEO, to reap big gains on options before their companies faltered.
Mr. Mozilo's attorney, David Siegel, didn't respond to requests for comment. Former Cendant CEO Henry Silverman didn't return calls. Mr. Fuld's attorney, Patricia Hynes, said in an email that the Journal should exclude Mr. Fuld's gains on stock and stock-option grants prior to 2000; she didn't respond to requests for further comment.
Even at some companies that have done well, some shareholders say the CEO is paid too much. Occidental shares rose more than sevenfold in the past decade. But shareholders in May opposed the oil company's executive-pay plan in a nonbinding vote.
Investors who campaigned against Occidental's pay plan say the CEO, Mr. Irani, was paid roughly three times as much as other oil-company executives. They contend the board sets his pay too high and his performance targets too low.
An Occidental spokesman said company directors believe in "excellent pay for excellent performance." Most of Mr. Irani's pay is tied to Occidental's operating results and share price, the spokesman noted, and all of his stock and option awards are now linked either to operating results or share price.
A Dell spokesman said most of Mr. Dell's compensation reflected gains on options granted in the 1990s, when Dell's stock price soared. He noted that Mr. Dell hasn't received a bonus for four years and hasn't been granted stock or stock options for six years.
Changes in executive-pay systems beginning in the 1980s were aimed at better aligning the fortunes of CEOs and their shareholders.
Salaries were restricte
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