DEFA14A 1 d805993ddefa14a.htm DEFA14A DEFA14A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

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Oracle Corporation

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Investor Presentation
October 2014


Copyright ©
2014, Oracle and/or its affiliates. All rights reserved.
2
Executive Summary
Pay-for-Performance.
We
substantially
strengthened
our
executive
compensation
plan
by:
1)
making
50%
of
long-term
equity
performance
based;
2)
Requiring
material
long-term
outperformance for vesting; 3) Allowing vesting for PSUs to go to zero for underperformance
Strong
Performance
and
Commitment
to
Stockholder
Returns.
Oracle
had
Total
Revenues
of
$38.3B
for
FY2014.
Approximately
90%
of
aggregate
FY2013
and
FY2014 Free
Cash Flow, or roughly $24.4B was returned to Oracle stockholders
Strong Governance Practices.
We have a strong, independent Board that serves the
interests
of
stockholders
and
we
are
committed
to
best
practices
in
corporate
governance and
pay governance
Stockholder
Engagement.
During
our
last
fiscal
year,
members
of
our
Board
met
with
investors
and
shared
the
diverse
and
wide-ranging
feedback
with
the
full
Board.
We
made
changes
to
our
executive
compensation
for
FY2015
based
on
common
elements
of
the
investor feedback. We are engaging in additional meetings to gauge investor reactions to
these changes and seek support for the 2014 Annual Meeting


Copyright ©
2014, Oracle and/or its affiliates. All rights reserved.
3
Overview of Oracle
Cloud
4% of Revenue
US$38.3 billion total GAAP revenue in FY 2014
100% of the Fortune 100 are customers
Over 400,000 customers in 145+ countries
Invested $5.2 billion in R&D in FY2014
More than 120,000 employees
#1 provider of enterprise software worldwide and leading provider of hardware and services for
Oracle database and middleware software, application software, cloud infrastructure, and hardware
systems
Asia Pacific
16% of Revenue
EMEA
31% of Revenue
Americas
53% of Revenue
On-Premise Software
72% of Revenue
Hardware
14% of
Revenue
Services
10% of
Revenue


Company Transformation
One
of
Oracle’s
primary
areas
of
focus
over
the
next
few
years
is
becoming
the
#1
company
in
cloud
computing’s
two
most
profitable
segments
SaaS
and
PaaS
Software Revenue
Cloud Revenue
4
FY10
FY11
FY12
FY13
FY14
IaaS
SaaS/PaaS
+88%
+12%
4 Year
CAGR
0
5
10
15
20
25
30
FY10
FY11
FY12
FY13
FY14
Software and Cloud
4 Year
CAGR
Copyright ©
2014, Oracle and/or its affiliates. All rights reserved.


Copyright ©
2014, Oracle and/or its affiliates. All rights reserved.
Demonstrated Results
~ 90% of FY13/FY14 Free Cash Flow Returned
to Stockholders
Free Cash Flow Grew 14% CAGR
EPS Grew 14% CAGR
Source:
GAAP
results
except
for
EPS
and
Free
Cash
Flow.
GAAP
to
Non-GAAP
reconciliations
are
available
at
www.oracle.com/investor
Stock
chart:
FactSet
Research.
Prices
for
the
last
10
years
were
indexed
(10/04
9/14)
5
0
2
4
6
8
10
12
14
FY10
FY11
FY12
FY13
FY14
Buybacks
Dividends
FY10
FY11
FY12
FY13
FY14
$8.5B
$10.8B
$13.1B
$13.6B
$14.3B
FY10
FY11
FY12
FY13
FY14
$1.67
$2.22
$2.46
$2.68
$2.87
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Oracle
S&P 500
Nasdaq
Dow Jones
Oracle Stock Has Outperformed


Copyright ©
2014, Oracle and/or its affiliates. All rights reserved.
Significant Compensation Changes for FY 2015
We made significant changes for FY 2015…
Introduced Performance Stock Units (“PSUs”)
PSUs are earned based on relative or absolute
performance depending on each NEO’s position
PSUs are long-term, performance based, and subject to robust
metrics tailored to business responsibilities
Significantly reduced number of shares subject to stock option
granted to Mr. Ellison, Ms. Catz, and Mr. Hurd
…consistent with areas of investor focus
Performance-based (relative and absolute)
compensation
Long-term performance periods
Quantum of pay and dilution
6
The Board and Compensation Committee have taken steps to meaningfully enhance our compensation
program and increase responsiveness to our stockholders
We engaged with 13 of our top 20 stockholders, representing approximately 30% of unaffiliated shares in the
last fiscal year to hear their views and discuss areas of concern regarding governance and compensation


Copyright ©
2014, Oracle and/or its affiliates. All rights reserved.
7
Compensation Program Overview & Objectives
* Excludes
approximately
1%
tied
to
“All
Other
Compensation”
(e.g.,
the
amount
related
to
all
perquisites
and
other
personal
benefits)
Our goal: Align the interests of executive officers with those of stockholders; provide incentives to executive
officers for superior performance; and attract and retain highly
talented and productive executive officers
Compensation
Element
Designed
to Reward
Annual & Long-Term Incentive Metrics
% of
2014
NEO
Comp*
Performance-
Based/
“At Risk”
Base Salary
Experience, industry
knowledge, duties,
scope of responsibility
N/A
2%
Annual
Performance-
Based
Cash
Bonus
Success in achieving
annual results
Bonus
based
on
growth
in
non-GAAP
Pre-Tax
Profits
from
FY2013 to FY2014
If non-GAAP pre-tax profits do not grow Y-o-Y, no bonus is paid
$0 bonus in FY2013 and 16% of target bonus in FY2014
1%
Long-Term
Incentive
Compensation
Success in achieving
sustainable long-term
results
50% of target PSUs are tied to relative growth in total consolidated
revenues
on a U.S. GAAP basis
50% of target PSUs are tied to relative growth in total consolidated
operating cash flow (OCF)
Objective
relative
performance
metrics
both
revenue
and
OCF
growth
requires
relative
performance
above
the
weighted
average
of
the
peer
group
for
target
payout,
and
performance
in
the
bottom quartile of peer group results in zero payout
96%


Copyright ©
2014, Oracle and/or its affiliates. All rights reserved.
8
Compensation Best Practices
Vast
majority
of
executive
compensation
is
“at
risk”
or
performance
based
o
96% of Named Executive Officer (“NEO”) compensation is equity-based
o
50% of NEO long-term incentives are now structured as long-term, performance-based units
o
Annual incentive bonus is based on rigorous, objective metrics
Strong historical pay-for-performance alignment
Engagement efforts with investors on executive compensation
o
In
the
last
fiscal
year,
we
engaged
with
13
our
top
20
investors
representing
approximately
30%
of
the
unaffiliated shares
o
Directors participated in a majority of these engagements
Meaningful stock ownership guidelines for NEOs and directors, with executives and directors holding
25% of Oracle’s stock
Double trigger change-in-control benefits under equity plan
Clawback policy for executive officers
Independent compensation consultant


Copyright ©
2014, Oracle and/or its affiliates. All rights reserved.
9
Sound Corporate Governance Practices
Annual director elections
Stockholder ability to call a special meeting
Stockholder ability to act by written consent
Director majority voting policy
Diverse and experienced Board with significant stockholder representation
Independent Presiding Director
Committees are 100% independent
Active and engaged Board, with several independent directors serving on multiple committees,
participating
in
key
customer
events
(e.g.,
Oracle
OpenWorld
and
Oracle
President
Council
Forums)


Copyright ©
2014, Oracle and/or its affiliates. All rights reserved.
10
Proxy Access Stockholder Proposal
The Oracle Board of Directors opposes the “proxy access”
proposal submitted by The Nathan Cummings Foundation and certain other stockholders
for the following reasons and requests that stockholders vote “against”
this proposal:
Existing Governance Mechanisms Ensure Board Accountability
All directors elected annually with majority vote standard
Directors who fail to receive majority vote must tender their resignations for Board consideration
No supermajority stockholder voting requirements and no “poison pill”
Stockholders already have the right to call special stockholder meetings (subject to conditions in the Oracle bylaws)
Stockholders Currently Have Avenues to Communicate with the Board
Stockholders may communicate with any director in writing
Stockholders have the ability to submit proposals through 14a-8
Proxy Access Undermines Processes of the Nomination and Governance Committee
N&G Committee specifically tasked to find the right nominees with the appropriate skill sets the Oracle Board needs
Proxy Access would allow for a nominee with a narrow focus beholden to one specific special interest group to potentially join the Oracle Board
Potentially Adverse Consequences if Oracle Board Were to Adopt Proxy Access
Encourages short term focus for the benefit of one group of stockholders rather than the long term benefit for all stockholders
Significant disruption to Oracle’s management team and the Board as a result of dealing with distraction of divisive proxy contests
stockholders
Potential disruption to the effective operation of existing Board with special interest directors creating dissention and precluding the Board’s ability to
function effectively
Potentially discourages highly qualified director candidates from serving on the Oracle Board
Both time and financial resources would be deployed to deal with proxy contests which is a distraction from the goal of increasing value for all
Stockholders may propose director nominees to the Nomination and Governance Committee for consideration


Copyright ©
2014, Oracle and/or its affiliates. All rights reserved.
11
"Safe
Harbor"
Statement:
Statements
in
this
presentation
relating
to
Oracle's
future plans, expectations, beliefs, intentions and prospects are "forward-
looking statements" and are subject to material risks and uncertainties. A
detailed
discussion
of
these
factors
and
other
risks
that
affect
our
business
is
contained in our SEC filings, including our most recent reports on Form 10-K
and Form 10-Q, particularly under the heading "Risk Factors." Copies of these
filings are available online from the SEC or by contacting Oracle Corporation's
Investor Relations Department at (650) 506-4073 or by clicking on SEC Filings
on Oracle’s Investor Relations website at http://www.oracle.com/investor. All
information set forth in this presentation is current as of October 15, 2014.
Oracle undertakes no duty to update any statement in light of new information
or future events.
SAFE HARBOR STATEMENT