Oracle chief gets 44 per cent pay hike - and $6.5m bonus

Oracle chief Larry Ellison received a salary hike and bonus, along with a hefty options award for fiscal 2005, in part due to the company's closure of its protracted and controversial PeopleSoft acquisition.

Ellison received a 44 per cent salary increase to $975,000, according to the company's filing with the Securities and Exchange Commission on Tuesday. And his annual bonus jumped to $6.5m in fiscal 2005 - more than double the level in the previous year.

Oracle's board also approved awarding 2.5 million options to Ellison for fiscal 2005, more than double the 900,000 options he received in the previous year.

With the salary hike, bonus and millions of dollars in options he exercised during the year, Ellison rang up a total compensation package of $75.3m for fiscal 2005.

Investors, however, have not fared as well.

Oracle's stock has risen as high as 34 per cent in fiscal 2005. However, measured against the S&P 500 and Dow Jones Software indexes over a five-year period, the stock has underperformed, according to Oracle's SEC filing. A $100 investment in Oracle at the end of that period would be worth $35.62 in 2005, while the same investment in the S&P 500 would be worth $90.74.

Oracle's board based Ellison's compensation hike on several factors ranging from an improvement in the company's pre-tax operating profit, on a non-GAAP basis, to the PeopleSoft merger, which removed a sizable competitor in the applications market and gives Oracle more leverage against heavyweight SAP AG.

Ellison's compensation is appropriate, the board noted in its SEC filing, given his "leadership of our long-term growth strategy, consisting of both external growth through our successful acquisitions of companies such as PeopleSoft and Retek and internal growth of our existing lines of business".

The board also cited Ellison's leadership on the company's Project Fusion project, which is designed to fully merge PeopleSoft and Oracle applications, and cited success with its grid computing efforts to use its software to serve as a platform for linking low-cost servers together to act as one unit.

Oracle's board, meanwhile, plans to keep Ellison's annual salary rate at $1m in fiscal 2006 and is submitting a proposed 2006 executive bonus plan for investors to consider at the company's annual shareholders meeting, scheduled for October.

Last June, as Oracle began its new fiscal year, Ellison also received an option to purchase six million shares of common stock at the then-fair-market rate of $12.34 per share, according to the SEC filing. Oracle shares were priced at $12.90 in midday trading on Wednesday.

Dawn Kawamoto writes for CNET News.com