Okay. We're ready to go. Good morning, ladies and gentlemen. I'm Jeff Henley, Vice Chairman of the Board of Directors. It's my pleasure to welcome you to our Annual Meeting, our Annual Shareholders Meeting and according with the notice of the meeting, I call to order the 30 7th Annual Meeting of the Shareholders of Oracle Corporation.
Each stockholder was given an agenda for today's meeting. We will first conduct the formal portion of the stockholders' meeting in accordance with this agenda. Following adjournment of the formal portion, we'll have a presentation after which we will have an opportunity for questions and discussion. Before proceeding to the business of the meeting, I'd like to make certain introductions. First, I would like to introduce myself and the other directors who are standing for elections.
So as I mentioned, my name is Jeff Henley. I've been Director since June 1995 and Vice Chairman since September 2014. Prior to that, I served as Chairman since January 2004. I also previously served as Oracle's Chief Financial Officer from March 1991 to July 2004. Larry Ellison was appointed Chairman of the Board and Chief Technology Officer in September 2014.
Prior to that, Mr. Ellison was our Chief Executive Officer and a Director since he founded Oracle in June 1977. Safra Katz has been a Director since October September 2014. Prior to that, Mrs. Katz served as President and Chief Financial Officer.
Mark V. Heard has been a Director since September 2010 and was appointed Chief Executive Officer of Oracle in September 2014. Prior to that, Mr. Heard served as President of Oracle. Prior to joining Oracle, he was Chairman and CEO of Hewlett Packard Company.
Doctor. Michael Bostkin has been a Director of Oracle since April 1994. He currently is Chair of the Nomination and Governance Committee and Vice Chair of the Finance and Audit Committee. Michael is the Tully M. Friedman Professor of Economics and Hoover Institution Senior Fellow at Stanford University.
Jeff Berg has been the Director since February 1997 and is currently a member of the Nomination and Governance Committee and the Independence Committee. He is the Founder and Chairman of Resolution, a talent and literary agency as well as former Chairman and Chief Executive Officer of International Creative Management Inc, 1 of the largest talent agencies in the entertainment industry. Hector Garcina Molina has been a Director since October 2000 and 1 and is currently a member of the Independence Committee. He is the Leonard Bacek and Sandra Lerner Professor in Department of Computer Science and Electrical Engineering at Stanford University. Ray Bingham has been a Director since November 2002 and serves as the Chair of both the Finance and Audit Committee and the Independence Committee and is an alternate member of the Nomination and Governance Committee.
He is an Advisory Director of General Atlantic LLC, a leading global private equity firm. Naomi Seligmann has been a Director since November 2005 and is currently a member of the compensation committee. She's a senior partner at Osterker von Simpson, a leading technology research firm which chairs the CIO Strategy Exchange. George H. Konradis has been Director since January 2008.
He's currently a member of the Nomination and Governance Committee and Compensation Committee. He's the Chairman of Akamai Technologies Inc. And previously served as Akamai's Chief Executive Officer. Bruce R. Chisholm has been a Director since July 2008 and is currently the Chair of the Compensation Committee and a member of the Finance and Audit Committee.
He's an independent consultant and serves as a senior advisor to Permura Advisors LLP, a leading private equity firm and as a venture partner at Voyager Capital. He previously served as Chief Executive Officer of Adobe Systems Incorporated. Seated next to me is Dorian Daly, Oracle's General Counsel and Secretary. So also present today from Ernst and Young LLP, our independent registered public accounting is David Cabral. Prior to this meeting, we asked if wished to make any statements at today's meeting.
And David indicated that while he will not make a formal presentation, he would be glad to respond to any questions during the question and answer period. Finally, we are being assisted today by Joshua McKinnon, a representative of the American Stock Transfer and Trust Company LLC, our Inspector of Elections intabulation of the proxies and ballots. The minutes of last year's annual meeting are available and any stockholder wishing to inspect the minutes should contact our corporate secretary. So now let's move on to the formal portion of the meeting. Dorian Daly will report on the mailing of the notice of this meeting.
Mr. Vice Chairman, this meeting is held pursuant to a notice dated September 23, 2014. On or about September 23, 2014, each stockholder of record as of the close of business on September 8, 2014 was sent either a notification of Internet availability of proxy materials or the notice itself. All documents concerning notice of the meeting will be filed with the records of the meeting. A proof of mailing and the list of stockholders entitled to vote are both available for inspection by any stockholder wishing to do so.
Edourian will now advise whether a quorum is present at the meeting and canvas the stockholders present. Those stockholders who have returned proxies have authorized the persons identified in the proxies to vote on the proposals coming before the meeting.
On the record date, there were approximately 4,437,000,000, 908,441 shares of Oracle's common stock issued outstanding and entitled to vote at this meeting. A majority of these shares is present in person or by proxy and therefore a quorum necessary to transact business is present. If you have a proxy to be voted this meeting that has not been delivered to the Inspector of Elections, you should register your name with the monitors and show them the proxy. If you have submitted a proxy, but now wish to withdraw the proxy and submit a new proxy or vote in person, you should register with monitors if you have not already done so. If you have not submitted a proxy and you wish to vote in person, you should now register with the monitors if you have not already done so.
Please raise your hand if you need to register your name with the monitors or if you require any assistance with your ballot or your proxy. The polls will close at the conclusion of the formal portion of the meeting. So please be sure to register with the monitors and hand in your ballot or proxy prior to the conclusion of the formal portion of the meeting.
Okay. Now there's one hand out here to another hand. So should we wait or continue on? Continue. Okay.
So thanks, Dorian. I hereby declare a quorum is present at this meeting. On behalf of the Board of Directors of Oracle, I'd like to express my appreciation to all stockholders who returned their ballot their proxies or submitted ballots. There are 7 items of business on the agenda for this year's meeting. 3, management proposals and 4, stockholder proposals.
Final vote totals for each of the proposals voted upon today will be made publicly available within the next few days. I'll start with the management proposals. The first matter to be acted upon by the stock holders is the election of 11 directors to serve until the next annual meeting of stockholders. I just introduced the nominees recommended by the Board of Directors and additional information about them is in the proxy statement. Nominations are now in order.
I nominate Jeff Henley, Lawrence Ellison, Safra Katz, Mark Hurd, Michael Boskin, Jeffrey Berg, Hector Garcia Molina, Ray Bingham, Naomi Seligman, George Conratis and Bruce Shizen.
Is there a second to these nominations?
I second the nominations.
Okay. It's been moved and seconded that the nominees be elected directors of Oracle. Will the secretary now announce the results of the vote?
Each nominee for the election to the Board of Directors has received the affirmative vote of a majority of Oracle's outstanding shares of common stock present and entitled to vote at this meeting.
I hereby declare that all the nominees for Director have been duly elected. The next item of business is the non binding advisory vote by stockholders on the compensation paid to Oracle's named executive officers as disclosed in Oracle's proxy statement filed in connection with this meeting. This is commonly referred to as seon pay vote. Will the Secretary please indicate the results of the voting?
Based on the preliminary numbers available at the start of this meeting 1,670,434,377 shares voted for the say on pay resolution. 1,909,000,005 157 shares voted against the say on pay resolution and 4,428,482 shares abstained.
Thank you. The non binding advisory vote on Oracle's compensation program for executive officers is hereby noted. Okay. The next matter is the ratification of the appointment of Ernst and Young LLP as our independent registered public accounting firm by the Finance and Audit Committee of the Board of Directors. Is there a motion to ratify the appointment of Ernst and Young as our independent registered public accounting firm?
I move to ratify the appointment of Ernst and Young as Oracle's independent registered public accounting firm.
And is there a second?
I second the motion.
It's been moved and seconded to ratify the appointment of Ernst and Young as our independent registered public accounting firm. Will the secretary now announce the results of the vote?
Proposal received the affirmative vote of a majority of Oracle's outstanding shares of common stock present and entitled to vote at this meeting.
The appointment of Ernst and Young to audit the financial statements of Oracle and its subsidiaries for fiscal year 2015 has been duly ratified. Okay. So the next matter being submitted to shareholders for action is the adoption of proposal submitted by Bruce T. Herbert, the Chief Executive of Investor Voices on behalf of the Equality Network Foundation, a stockholder of Oracle. The proposal requests that the Board amend Oracle's governing documents to provide that all matters presented to shock stockholders for a vote other than election of directors shall be decided by a simple majority of the shares voted for and against an item or withheld in the case of Board elections.
This requested policy would apply to all matters other than election of officers unless stockholders have approved higher thresholds or applicable laws or stock exchange, stock exchange regulations dictate otherwise. I understand that William Dempsey will represent a quality network foundation. Is William Dempsey present? Okay. All right.
Pursuant to the rules of conduct for the meeting, you will have 5 minutes or less to present the proposal and move for its adoption.
Thank you, Mr. Vice Chairman. Yes, my name is Bill Dempsey. I was asked to present this on behalf of Investor Voices Seattle. Proposal Number 4, it's on Page 64 of the proxy.
It does call for Oracle to embrace fair, consistent, simple majority vote counting for all items being voted upon. The reason is as a nation, we're justly proud of the democratic principles. And as you know, electoral voting in America is called simple majority voting in which we count before and against votes in order to determine a total. However, when we examine the voting practices of corporate America, we find that votes are not all counted using a simple majority in the way that yesterday's elections were. Oracle for instance uses 2 different vote counting formulas in its proxy, each of which can favor management while reducing support for everything else.
An important study commissioned by CalPERS last year examined America's largest 1,000 companies and found that 48% employees simple majority voting, the formula requested by this proposal. People appreciate and respect an even playing field. However, the playing field is decidedly not even when companies count one way for certain management items then count a different way for everything else. These practices are not democratic in the way that yesterday's elections were. They result in confusion, send mixed messages and can disadvantage shareholders.
That's why the proponents call for proposal number 4. Thank you.
Okay. Thank you. The Board opposes the adoption of this proposal. We believe that our current voting tabulation methodology of including abstentations best reflects and honors the intent of our stockholders who choose to abstain on a proposal. This standard applies identically to both management sponsored and stockholder sponsored proposals and ensures that a matter has the requisite affirmative support for approval by our stockholders.
As a Delaware corporation, Delaware corporate law governs the voting standards for actions by our stockholders and our existing voting standards are fully compliant with the Delaware law standards. We believe that approval of the stockholder proposal would not further compliance with our already high standards, would be inconsistent with the default Delaware law standards followed by a majority of Delaware Corporations and would not enhance stockholder value or serve the best interests of our stockholders. Our Board is committed to strong corporate governance. We have already established highly effective corporate governance structures and processes. We do not believe that this proposal will enhance our corporate governance in any meaningful way.
Consequently, the Board does not believe the proposal is in the best interest of Oracle or its stockholders and is recommended against the stockholder proposal. It's been moved that the stockholder's proposal regarding vote tabulation be approved. Will the secretary now announce the results of that vote?
This stockholder proposal was defeated by a majority of Oracle's outstanding shares of common stock present and entitled to vote at this meeting.
So I hereby declare that the stockholder proposal regarding vote tabulation has been defeated. The next matter being submitted for the 3rd year in a row to stockholders for action is the adoption of the proposal submitted by the Controller of the City of New York, Scott M. Stringer as custodian and trustee of the New York City Employees Retirement System, the New York City Fire Department Pension Fund, the New York City Teachers Retirement System and the New York City Police Pension Fund and as custodian of the New York City Board of Education Retirement System. The proposal requests that the compensation committee of the Board of Directors in setting performance measures for top executives include multiple weighted metrics that correctly reflect both individual and business accomplishments over an established multiyear period and excluding proprietary information disclosed to the shareholders any change made in the basket of metrics during the multiyear period. We understand that Maureen O'Brien will represent the City of New York Office of the Controller at this meeting.
Is Maureen O'Brien present? Maureen. Just a moment. Pursuant to the rules of
of the New York City Comptroller Scott M. Stringer and the trustees of the New York City Pension Funds. The New York City Pension Funds are substantial long term Oracle shareholders with 7,300,000 shares valued at more than 120,000,000 dollars Proposal 5 asked that the Board set performance measures for its executive pay using multiple targets that correctly reflect both individual and business accomplishments over an established multiyear period. The proposal does not direct the compensation committee to utilize specific metrics and therefore does not infringe on the committee's ability to set remuneration packages. Compensation consulting firms recommend the use of multiple performance measures in setting executive pay.
The consulting firm Mercer, for example, believes that performance measures often have to be complex to be effective and the performance measures should cover a range of relevant dimensions of performance. Relying on a single performance metric may incentivize excessive risk taking and encourage executives to focus on a single aspect of the company's performance rather than on a range of relevant dimensions as Mercer recommends. The use of a multi year performance period may better align executive pay with the interest of long term shareholders such as the New York City Pension Funds. Although the company introduced performance share units based on 2 metrics for its 2015 long term equity incentive plan, the bulk of the NEO's pay packages are not performance based as time based options are still significant. Additionally, short term incentive is still based on a single metric.
The proxy says the company reached out to discuss its proposed changes with large shareholders. We would have been happy to discuss our proposal with the Board or management, but no one ever asked even though this is the 3rd consecutive year that this proposal has been filed. Moreover, any incremental progress on the structure of the company's pay programs has been overshadowed by the sheer magnitude of the persistent pay for performance disconnect at this company. The Board's decision to leave Mr. Ellison as Chair of the Board overseeing not 1, but 2 highly paid CEOs exacerbates the concerns on this Board.
We understand Mr. Ellison may add significant value to the company, but he should provide that support in a role other than non independent chair. It is for these reasons that we also want to vote our strong support for proposal number 7 on proxy access, which would give substantial long term shareholders a a meaningful voice in director elections. Proxy access would allow Oracle shareholders the ability to nominate the kind of truly independent candidates that we need to look out for our best interests. We urge shareholders to support these proposals.
Okay, thank you. The Board opposes the adoption of this proposal. Despite the proponents statements to the contrary, we believe that our current executive compensation program is significantly performance driven. We continue to effectively link pay to performance by allocating a vast majority of our executive officers' total compensation to performance based vehicles either in the form of annual performance cash bonuses, which require improved financial performance in form of year over year growth in non GAAP pre tax profits or stock options, which require an increase in our stock price to have value. Moreover, for fiscal 2015, a portion of each named Executive Officer's equity award consists of performance stock units.
The performance stock units are subject to predetermined specified and quantified performance criteria, including revenue growth and operating cash flow. We believe that our existing executive compensation program achieves an appropriate balance between encouraging our senior executives to take actions that are consistent with our business strategy of constantly improving our performance and building long term shareholder value and discouraging executives from taking inappropriate or unnecessary risks. Consequently, the Board does not believe the proposal is in the best interest of Oracle or its stockholders and is recommended against this stockholder proposal. It has been moved that the shareholders proposal regarding multiple performance metrics be approved. Will the secretary now announce the results of the vote?
This stockholder proposal was defeated by a majority of Oracle's outstanding shares of common stock present and entitled to vote at this meeting.
I hereby declare that the stockholders proposal regarding multiple performance metrics has been defeated. The next matter being submitted for the 2nd year in a row to stockholders for action is the adoption of the proposal submitted by the AFL CIO Equity Fund, a stockholder of Oracle and co sponsored by Trowell Trade S and P 500 Index Fund and the City of Philadelphia, each also shareholders of Oracle. The proposal requests that the compensation committee adopt a policy that all equity compensation plans submitted for stockholder approval after the 2014 Annual Meeting of Stockholders under Section 162 of the Internal Revenue Code will specify the awards that will result from performance. This will require stockholder approval of quantified quantifiable performance metrics, numerical formulas and payout schedules for at least a majority awards to the named executive officers. We understand that Maureen O'Brien will represent the AFL SAO Equity Fund at this meeting.
So Maureen?
Thanks. I hereby move proposal number 6 on behalf of the AFL CIO Equity Index Fund, the City of Philadelphia Public Employee Retirement Systems and the TrialTrades S and P 500 Index Fund. Proposal number 6 asks that the Board supply shareholders with the information required to make an informed vote. Yesterday was an Election Day and just as well informed voters make better decisions at the ballot, better informed shareholders make better decisions on the company's proxy ballot. The problem is right now when shareholders vote on the equity plan for the company, the company states that it's performance based, but it doesn't give us any of the details to be actually be able to evaluate that.
Rather than making clear to shareholders, which metrics the company is using and how those metrics are weighed, the Board informs that it may consider up to 23 different metrics. Shareholders are left in the dark about how the company will judge performance and therefore we can't judge when we're asked to vote on this whether we agree with how the Board evaluating performance. This request is not a common one. It's not a common shareholder proposal that you see at corporate ballots. This was filed at Oracle because the Board continues to pay excessive amounts of executive compensation that are not tied tightly enough to performance.
If I wrote down Mrs. Daley's numbers correctly, I think we're at 65% of shareholders voting against the executive compensation plan. Finally, it's worth pointing out that the company feigns confusion about this proposal in the opposition statement. Our proposal is clear. It gives the Board complete discretion, which we believe it's entitled to, to select which metrics it uses.
It only asks that they tell shareholders what the metrics are and says that they can be changed as often as the Board sees fit. If however, the Board or management was generally confused by our request, they could have simply reached out to us. We remain eager to discuss our proposal. Thank you.
Okay. Thank you. The Board opposes the adoption of this proposal. We believe that our current procedures to determine equity compensation awarded to our named executive officers are fair and transparent, serve the best interest of the stockholders and advance the objectives of our executive compensation program by driving performance to create long term stockholder value, providing compensation opportunities that are competitive with those offered by companies with which we compete for executive talent. Implementing the rigid requirements contained in this proposal would restrict our flexibility to adapt performance metrics and performance targets to changing market conditions and in turn hinder our ability to attract retain, attract and motivate talented executives.
Moreover, for fiscal 2015, a portion of each named executive officers' executive award consists of performance stock units. The performance stock units are subject to predetermined specified quantified performance criteria including revenue growth and operating cash flow. Furthermore, we believe that certain aspects of the proposal are unclear. For instance, it is unclear whether a majority of the awards refers to greater than 50% of the actual number of awards granted, granted to the named executive officers or greater than 50% of the aggregate compensation resulting from awards. The proposal fails to specify whether it would apply only to new executive compensation plans submitted for shareholder approval or also to amendments to our long term equity incentive plan.
Additionally, the proposal provides no guidance on how awards should be valued. Consequently, the Board does not believe the proposal is in the best interest of Oracle or its stockholders and is recommended against this stockholder proposal. It's been moved that the stockholder's proposal regarding quantifiable performance metrics be approved. Will the Secretary now announce the results of the vote?
The stockholder proposal was defeated by a majority of Oracle's outstanding shares of common stock present and entitled to vote at this meeting.
So I hereby declare that the stockholders proposal regarding quantifiable performance metrics has been defeated. The next matter being submitted to stockholders for action is the adoption of the proposal submitted by the Nathan Cummings Foundation, a stockholder of Oracle and co sponsored by the California State Teachers Retirement System, PGGM Bergam Spier, I didn't pronounce that very well, Railways Pension Trustee Company Limited and UAW Retiree Medical Benefits Trust, each also stockholders of Oracle. The proposal requests that each of the stockholders of Oracle Corporation ask the Board of Directors to adopt and present for shareholder approval a proxy access by law. Such a by law would require Oracle to include in proxy materials prepared for a shareholders meeting at which directors are to be elected the name, supporting statement and certain other information of any director candidate nominated by a shareholder or group of shareholders that beneficially owned 3% or more of Oracle's outstanding common stock continuously for at least 3 years before the number of shareholders candidates cannot exceed 1 quarter of the number of directors then serving. So we understand that William Dempsey will represent the Nathan Cummings Foundation at this meeting.
Are there additional proponents that also would like to present or desiring to speak? Yes. Okay. So pursuant to the rules of conduct for the meeting, we'll have a total of 5 minutes to present the proposal and move for its adoption.
Thank you, Vice Chairman, Henley. So I'm Bill Dempsey. I'm the Chief Financial Officer for the Nathan Cummings Foundation. We are moving proposal number 7. With your permission, I will not read the entire proposal.
I will instead refer shareholders to Page 73 of the proxy. I will however just briefly highlight a few reasons why this proposal has garnered so much support from our company's major investors. As long term holders, the Nathan Cummings Foundation sees a direct connection between strong corporate governance practices and value creation. This is backed up by ISS, Institutional Shareholder Services, which is recommended that its clients vote for our proposal. BlackRock, which is a significant holder of our company's shares also has been supportive of proxy access for long term shareholders.
I do wish to recognize some of our co sponsors who are here today, and I'll ask them to address this proposal briefly in just a moment. But before I turn to my colleagues, I do wish to just take note of the unusual nature of what's taking place here today. The sponsors of this proposal prefer to engage companies privately. However, Oracle's Board has refused to meet with us on this matter. So it is dismaying that I'm obligated to disclose to our fellow shareholders today, that this Board has refused to engage on some very legitimate concerns.
And in my experience, dealing with scores of companies working on very contentious and difficult issues, frankly, I've never witnessed the lack of engagement and the lack of respect for shareholders that we've experienced from Oracle's Board. This intransigence and rigidity has damaged our company's reputation with shareholders, the media and other important stakeholders. With that, Mr. Chairman, I do hope that the Board will take to heart what we're saying today. And I will turn remarks over to my colleague, Brian Rice from CalSTRS.
Thank you. Good morning. My name is Brian Rice. I'm here representing the California State Teachers' Retirement System or CalSTRS, owners of over 10,000,000 shares of Oracle stock and co sponsors the shareholder proposal on proxy access. CalSTRS believes that long term shareholders should have a meaningful voice electing directors that represent them in the boardroom.
We believe the need for proxy access is evident in Oracle, given the risk to shareholders from insufficient board accountability and poorly designed compensation programs. The shareholders that submitted the proposal made multiple attempts to engage the Board in these issues, despite the large and broad shareholder base that we represent and our efforts to be accommodating our request for engagement have been ignored. We hope other shareholders share our desire for a more accountable Board at Oracle and that this will be demonstrated through a strong support for our proxy access proposal. We believe that Oracle is an important California company and we want it and our investment in it to have continued and sustainable success in the future. We believe a properly structured compensation plan, a leadership structure that ensures accountability and a governance standard like proxy access should all be in place at all companies including Oracle.
Thank you.
So to Catherine.
Thank you. My name is Catherine Jackson. I represent PGM Investments, bit of an easier way to describe the fund from the Netherlands. We would like to actually address Doctor. Boskin as he's been identified as the Presiding Director with his question.
Doctor. Boskin, we stand here today as long term shareholders of Oracle Corporation who have long held concerns regarding the interest whose interest the Board of Oracle is acting in. Counter to some of the comments made here earlier, we actually believe that decisions around compensation, Board structure and Board composition indicate to us that the interests of the 73% of shareholders who are not physically present in the Board room are disproportionately smaller than our combined holdings would suggest that they should be. We are seeking a commitment from you here today and your fellow independent Board representatives to address the serious Board governance concerns created by this imbalance in the Boardroom that we and many of our other shareholders have expressed over the previous years. We're also asking that you commit to having a constructive dialogue with us in these matters.
Will you commit to these requests?
No. We can defer this to the open Q and A session after, but we're not taking questions on this proposal right now. Yes. One minute perhaps we're a bit over.
Okay. My name is Deborah Gilshan from the U. K. Railways Pension Fund and I've traveled from London to attend the meeting today. We hope that you take up our offer to engage with us in a constructive dialogue as the independent board members.
It's in all of our interests that these issues do not remain unresolved. And we look forward to a proper dialogue with you as the independent board members that are supposed to represent all shareholders in the boardroom.
Okay. All right. Thanks to you all. The Board opposes the adoption of this proposal. Contrary to the proponents' contentions, our current corporate governance guidelines and Board practices provide long term shareholders a meaningful voice in electing directors.
Adoption of this proposal would not only be unnecessary, but also potentially expensive and disruptive. Proxy access would serve only to interfere with our Board's ability to serve the long term interest of all of our stockholders. The proposal ignores the mechanisms we already have instituted to provide stockholders with access to the Board. The Board is accountable to Oracle stockholders through the protections that are embedded in our governing documents. For instance, all directors are elected annually.
Our corporate governance guidelines include a requirement that directors who fail to receive the required majority in uncontested elections must tend to their resignation for consideration by the Board. Our governing documents do not contain any super majority voting requirements and stockholders are allowed to call a special meeting subject to conditions set forth in our bylaws. In addition, our stockholders currently have the right to communicate directly with any director, including the Chairman of the Board in writing. Proposed director nominees for the nomination and governance committees, consideration and submit proposals for presentation in an annual meeting and inclusion in Oracle's proxy statement for the annual meeting subject to certain conditions and SEC rules. So we believe that our existing corporate governance policies provide the appropriate balance between ensuring Board accountability to stockholders and enabling the Board to effectively oversee Oracle's business and affairs for the long term benefit of stockholders.
In addition, these policies provide our stockholders with meaningful access to Board members. More than simply unnecessary, proxy access could harm our company, Board of Directors and stockholders by significantly disrupting the company and Board operations, promoting the influence of special interests, creating factions on the Board leading to dissension and delay and discouraging highly qualified Director
The meeting be adjourned.
Is there a second?
I second the motion.
It's been moved and seconded that the meeting be adjourned. Is there any opposition to the motion? Okay. The formal part of the meeting is adjourned and the polls are now closed. So next, I'll give a brief business overview of Oracle.
And before moving on, the Secretary will read our safe harbor statement.
Today's discussion may include expectations, predictions, estimates or other information that might be considered forward looking. While these forward looking statements represent our current judgment on what the future holds, they're subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revisions of these forward looking statements in light of new information or future events. Throughout today's discussion, we'll attempt to present some important factors relating to our business that may affect our predictions, and you should also review our most recent Form 10 ks and Form 10 Q for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock.
A PDF copy of our related earnings press releases and financial tables, which include a GAAP to non GAAP reconciliation, can be viewed and downloaded on the Oracle Investor Relations website at www.oracle.com/investor.
Okay. So Slide 4, okay. So we read the Safe Harbor statement. So again, just I'll go through these slides very quickly, kind of set the stage for the Q and A with the Board, kind of led by Larry Ellison. So we've used this slide for many years.
We have a very large footprint or stack of technology, both in hardware and software. And it goes up and down all the way up to industry specific apps down through so called horizontal apps, a lot of new cloud applications. And what we've always tried to do is have best of breed products. We have an open architecture, so we can interoperate obviously with other technologies. But in our own case, where customers buy multi walls of our product, we want them to integrate tightly, smoothly and reduce complexity for them and compete at every layer of that stack.
But ultimately, our real plan and vision is to add a lot of value by bringing a complete solution to customers. We call it apps all the way down to the disk. So we're well known as a database company where we started many years ago, but we've achieved over the years a very strong market position and have listed a variety of areas where we have the number one market share in the world. So it's a lot longer list than just our database and we're very proud of many of the areas where we're very, very competitive. And obviously, we have a number of other sections.
We may not be number 1, but our intention is to get there. In terms of the company's profile, we've been around since our founding, as I mentioned in the introduction when I introduced Larry since 'seventy seven. We've obviously gotten a lot bigger over the years. So today, a very large company, very large global company. We have 100 of 1000 of customers.
We're in the business to business business to business kind of part of the market. We don't really sell to consumers, but we have a lot of customers, a lot of employees all around the world and very importantly, a lot of people that work very hard on continuing to innovate, which is the lifeblood of this industry. So we have 36,000 developers and engineers. We have a lot of technical support people. We have a lot of people technical consultants to help along with many, many partners that work with our technology.
And so it's really been a long successful ride, but the journey continues. We have a lot of very new exciting things we're doing and our ambition is to continue to grow and prosper as I would say it, I guess. This is the performance for the last fiscal year that ended in May. So you can see that our software revenue grew, our hardware revenue grew, obviously total revenue, our operating revenue grew. And at this size and scale, we generate a lot of cash every year with $14,000,000,000 last year.
This is a look geographically at how our revenue remainder in Asia Pacific. In terms of the products or the revenue splits in the company, the bulk of the company is still in what we call software licenses and support. With the acquisition of Sun a few years ago, we are in the hardware business. That's about 14% of our business and about 10% of our business is in services. And if you cut down the software number, a small piece at this stage is in cloud.
But as you will see, I hope over the years. We're very committed to the cloud. We think it's a very important change in the industry, and we expect that, that cloud percentage of the pie will grow significantly over time. If you look back over the last 4 years, our total revenue has grown at a compounded rate of 9%. Our software component within that total revenue is identical at 9%.
And the piece that in blue as I showed in that other pie chart is cloud is growing at a significantly higher rate, which to be expected based upon the fact that it's relatively small and has a great opportunity, I think, we think to grow at continually high rates. And if you break down that cloud number between what we call infrastructure as a service versus which is we've been in that business a bit longer, the newer part of the business, the SaaS and the so called platform as a service is growing at much, much higher rates. And we believe both of those segments will continue to do very well with all the new initiatives that we've been announcing and will continue to announce over the next couple of years. So if you look at our business model, I mean, we've long been a non premise software company. We've had a lot of recurring revenue in our support and updates area.
And the same will continue in the cloud because that's very much a recurring revenue kind of business model. In terms of free cash flow, the last 4 year trend has been a compounding at 14% a year. If you look at how we spend the cash, we've spent tens of 1,000,000,000 of dollars in acquisitions over the last 10 years. So we're certainly been aggressive in making acquisitions to complement our stack, to expand the diversity of what we're offering customers. But we've also been able to generate dividends and very importantly, have had a steady buyback program for many years.
So we have a strong financial position. We have a strong balance sheet, a high return on equity and assets. We have a lot of cash. We have a modest debt to equity ratio. And certainly, when you take out offset debt against cash, we have a net cash on balance position.
So we think we're in a good position to continue to invest and grow the innovation that's going on in the company to make appropriate acquisitions when they come up and to continue to generate strong shareholder value. In terms of comparative performance, obviously, everything is relative in life. So we compare ourselves to a lot of our other technology peers. This is a list of some of the larger cap stock tech companies out there that we compare ourselves to. And then we also will do a comparison on just the Dow.
These are again large companies in a variety of industries. So if you look at Oracle's revenue growth over time compared to both of those peer groups, we've done a reasonably good job. We're ahead. On operating income, the story is the same. So we're never satisfied.
We always want to get better, but we think we have done a reasonably good job as a large company of competing with a lot of our counterparts in other big tech companies as well as Dow 30 kind of companies. And the same goes for cash flow, free cash flow. And obviously, because of all that, our stock has performed relatively well against those same indices as well as the I can't read it. I think it's the S and P 500, right? So it's kind of small for me to read way back here.
But anyway, comparatively, our stock also has done well versus broad indexes and things like that. So that's the end of the formal that formal or financial update. And now we'll turn to Q and A. So Larry, you want to lead that off?
Anybody?
Sure.
Yes. I
was wondering if Mr. Daley or Mr. Ellison, if you could please report the percentages for the votes that you cited?
I can't.
I'm happy to talk with you afterwards. I don't have all the foot tallies with me, although I do think that the Cianpi numbers that Mr. Brian referenced are incorrect. I think we're closer to 54%, 55% against, not 65%.
So 54%, 55% against on Sanpei. And number 7 for proxy access?
I'm sorry, I don't have that. But I'm happy to speak with you about it afterwards.
I mean, why not just close it to every We
still have the number with me right
Okay.
That is the number I had.
Ms. Jelson, I was wondering if you would respond to the characterizations that were made about the breakdown in trust between some of your institutional investors and the company?
I'm not aware of any breakdown in trust.
Well, what I cited was the fact that you've refused the Board's refused to meet with institutional investors who have raised legitimate concerns that it's out of step with
the crisis? I'll let someone else comment, but our Board routinely goes out and proactively meets with a variety of our shareholders.
So you'd be willing to meet with us on the proxy access issue?
Me personally meet with you? No chance. Yes, over here.
Hi. I'm Debbie Deljian from the can I hold the microphone? From the U. K. Railways Pension Fund.
And For the past 4 years together with PGGM, we have written to various individual Board members seeking a meeting to discuss compensation and Board independence concerns. We've traveled from London and from the Netherlands to meet with you and we've made ourselves available. We've had no acknowledgment of these letters from the directors that we spoke we've written to nor has any meeting been forthcoming with independent Board members. We are seeking commitment from you here today as the forum of the shareholder meeting as this is the only opportunity we have been given to address Board members. So we are seeking commitment from 1 independent Board member to meet with us to discuss these concerns as legitimate concerns from long term shareholders in your company.
There's an opportunity here for Board members to provide commitment to dialogue.
How do I turn this on?
It's on.
It's on. Okay. I am for a few more minutes the Presiding Director. We have well established procedures. I never received your written communication if there was a follow-up in the transmission of it to me or to anyone else.
Let me apologize for that. Had I received it, I would have responded. The company would have responded. We, in general, do not believe it is desirable or appropriate for individual board members to be meeting with individual or small numbers of shareholders, including yourselves. We believe the proper thing to do is for if you have questions, you have concerns, submit them.
That you do. It is not appropriate in my opinion, let others speak for themselves if they want to, for individual Board members to be going out and meeting with individual shareholders. Amongst other things, there are very severe penalties under the SEC if anything is inadvertently discussed, it shouldn't be if non public information is disclosed under Regulation FD. So these have to be carefully monitored, carefully done. We do have a process when we had the say on pay vote last year, for example, we went back and took a very careful look at our compensation.
Not only changed the executive compensation, the matter that was described in Mr. Henley's rebuttal to your reply or explanation, the reasons the company was against your specific proposal and the say on paper proposal, but we changed the compensation for the entire company. That was an immense exercise. It took an amazing amount of work by lots of people.
Oracle's Board remains an outlier and they're in tough transitions to speak with shareholders. Your same pay vote has failed for the
We waited until after we had done our revised compensation program, so we knew what we'd actually be talking about. And there was an effort made to meet with a variety of shareholders at that time, okay? I'm sorry you're disappointed in the Board. Others of our shareholders are quite pleased with what the Board did.
Okay. So I think we should move on and let other shareholders be able to comment here, ask questions.
You're going to hold it, so I don't throw it at anybody. My name is Shelton Ehrlich. I've been a shareholder for a while. Are you all aware that at least 3 out of this the 4 proposals we heard today were submitted by organizations that have coercive powers over the people they supposedly represent. I don't know about true the vote or whatever the other one was.
These are organizations that are political. You cite political and sometimes criminal. One of the groups talked about the controller. Recent New York State controller went to prison. CalPERS had a executive this year be convicted of something.
My question is, doesn't the company think it's time to begin a lobbying effort to free up those poor people who are represented by these losers, get 401s instead of defined benefit plans? That's it.
Well, as attractive as me answering that question is, I'm going to let someone else tackle that. If no one wants to, let me just emphasize what Doctor. Voskin said. The reason I don't meet privately with shareholders either in my office or in bars is that there are very stern SEC regulations that prevent us from engaging in these conversations where we might unevenly disclose information about the company. We have these a very formal process in dealing with our shareholders.
I can talk to the fact that our many of our board members have made trips all over the country to meet with our shareholders, discuss a variety of governance issues with the shareholders. I mean, that's unusual. We're pretty good. The mails are pretty good. And if you send us letters, I suspect we do receive them.
I don't know what happened. Now that's an outlier kind of event. Did you send more than one letter? And you sent repeated letter. You repeatedly sent letters and nobody ever saw them.
Well, that's surprising. Did you follow it up with calls? Again, speaking for the Board as a whole, we continuously we have a formal practice and a process where we're constantly interacting with our shareholders. I don't know about these letters that were sent, but never received over and over again. It's unusual.
But as far as some of these processes being politically motivated, I mean a lot a great deal in our world is politically motivated. I have really have no problem with that. It's just kind of the what happens when you live in a democracy. So anyone else have any questions?
I'm confused because we've heard that the Board has met with shareholders. They've flown all around the country to meet with shareholders, but you can't meet with shareholders because there's SEC regulations
No, no. We need a formal process to do that. Michael, do you want to add anything to that?
No. We have a formal process and we've met with some of our largest shareholders.
Can you
tell us what that process is? If receiving a shareholder proposal is not an obvious request to talk about something? What's the formal process that we need to
follow? We listen every year to what our shareholders are saying in a variety of forums. May I finish please? May I finish, ma'am? You asked me a question, may I answer it?
Okay. We listen to what our shareholders say in a variety of forms from the annual meeting to the proposals we receive and the votes they're on to informal communications. Some letters do get through. I don't know what happened to yours. To our analyst meetings, we have a lot of feedback from shareholders on a lot of issues quite aside from what you what your governance desires are.
So we listen to all those things. They are among many inputs we use in trying to govern the company well and manage it in a way that will enable it to succeed, which in fact as Mr. Henley's slide shows, it has done remarkably. We've almost tripled the shareholder the value of the company in the last 10 years. So that's number 1.
Number 2, when we believe there is something that we can go out and say, for example, because we've done this big exercise and change the compensation program of the company, we try to get a list of some shareholders, it would be good to discuss this with. This happened this year very late in the process after all the proposals were submitted, after the proxy went out, because we didn't want to just change despite the proposals from a variety of people, just change the form of pay for the top people. We have had the view that we ought to have a consistent pay structure throughout the company, which rewards the most successful people with our greatest responsibilities and rewards them for success. So we made some fairly substantial changes in that, introducing performance shares, for example. We had to go to all of our to our major to the major people involved, to the heads of the major divisions involved, to the employees who would be affected to explain what we were thinking about and get feedback from them.
This was a very long process. So it came very late in the process. If it wasn't timely enough for you, I'm sorry about that. But in any event, this was done. We believe we listened carefully.
And it was one of, and let me emphasize, only one of many inputs that went into making our decisions about what to do.
Okay. We're going to have to move on.
Let me add one thing to that in that. I think we understand your proposals. I personally won't meet with you because I don't agree with them. And I don't see how spending any additional time with you will help will convince either one of us.
I'm sorry. I think we're not going to keep debating this. I think we'll try to make sure the letters get through properly in the future. But I think we've got other shareholders here. We need to give them a balance some time to ask other things.
I'm Jerry Down, a long time shareholder back to 1980 before it was Oracle, right, Larry? I'd like to thank you all for your great participation and contributions. Larry, give us a little vision of the future. What do you see this company being in 5 years?
Well, the industry and the interesting thing about the tech industry, it's always going through one transformation or another. And we've lived through several transformation. When the company was founded, the bulk of computing was done on mini computers and mainframe computers. It's a long time ago when IBM Corporation with their mainframe and Digital Equipment Corporation with their mini computers dominated all aspects of computing. After a run of a couple of decades of that, a new technology introduced by Microsoft and Intel called client server computing or PCs showed up.
And there was a new computing architecture that became enormously popular. And the landscape of our competitors and the character of our technology had to change and adapt to this fundamental change in generation of computing. So we had to adapt as a company. We had to adapt our technology. We had to adapt our support organization, our sales organization to this new challenge and this new set of competitors and where Microsoft became our primary competitor.
And we did just that. We were actually very successfully made the transition from mini computers and mainframes to PCs and client server computing. And we strengthened our position as the number one database company in the world even as we transitioned again to PC client server and had this formidable new competitor called Microsoft. Thereafter, client server computing was succeeded by Internet Computing, where a lot of the data moved from servers, small Windows servers attached to a local area network attached to a bunch of PCs, they moved on to larger servers, usually UNIX servers attached to the Internet. And people didn't have computer programs running lots and lots of different application programs running on their PC, rather they had an Internet browser whereby they accessed these Internet systems.
So we moved from mainframe to mini computer to PC client server, then we did and made another migration to Internet computing. And we had a slogan at that time, the Internet changes everything. And Oracle made that transition from PC client server computing to Internet computing. And we strengthened our position again visavis the competition. We faced a whole new group of competitors.
They were called Sybase and Ingress and a bunch of innovative start up companies. But as the architecture changed for a second time, we got stronger. And we allowed our customers to move their data from mainframes and mini computers to PCs and client servers client server and then again for to Internet servers, where applications access that data via Internet browsers. And right now, the reason I go back and discuss that history is right now we're going through another transition. My point is every time we've had one of these transitions, Oracle has gotten stronger.
We face a new set of competitors, have to enhance our technology. And each time that's happened, we have increased our market share in database, increased our market share in applications, increased our overall sales and increased our overall profitability and cash flow. We're facing yet another transition. The move from Internet architecture, if you will, to cloud systems, which is pretty much the same technology as the Internet systems that preceded it, but a different business model whereby people pay for the applications by the month. It's got more of a rental model if you will as a purchase model, where the applications and the data and a lot and the storage and all of that stuff is available on the Internet or the more popular term on the in the cloud these days.
And again, we think we're in a great position to do what we did during the transition from mainframe and minicomputers to PC client server. What we did during transition PC client server to the Internet. During the Internet transition to cloud, we think we're in position to strengthen our overall market share, improve our top line and improve our bottom line. We think we can and will become the number one cloud computing company in the world and keep that long promise we made to customers when they first bought our products that as the computer architecture changes and migrates, we will allow you to move your data and move your applications without having to rearrange your data or rewrite your applications. Puts us in a very, very strong position and so far so good.
Our cloud computing business is growing very, very rapidly. We're utterly committed to it. By the way, it's not simply a technology change. It means we have to reorganize our sales force to compete with yet again a new set of competitors like the salesforce.com and Workday where last generation it was IBM and SAP. Now that sounds kind of funny that we used to compete with these giants IBM and SAP and they've largely in our minds been replaced by the next generation Salesforce and Workday much smaller companies.
Well, I kind of like the fact that we're trading IBM and SAP as competitors for Salesforce and Workday. I think we have the advantage of scale. We have the advantage of making investing $5,000,000,000 a year in R and D. We think we can beat salesforce.com and beat Workday And as I say become the number one cloud computing company. That's our goal.
Jeff put up a whole list of areas where we are currently number 1 and we're an ambitious company. We'd like to add to that list and we think we're in good position to do so.
Okay. Thank you very much. I think we're done. Are we done? Yes.
Yes. Yes. All right. You want to do one more? How
much time do
we have? Sure. What do we want?
All right. How do you do? I'm Bruce Whitson, former employee back in the 1990s. And since then, there's been acquisitions of like Sun as a hardware platform, obviously, it came with that Java. And I'd just like to know a little bit more about how the hardware portion of the business, how that's doing?
Maybe Mr. Heard can answer this question or just in general the response and how that has fit into the overall go to market strategy. Is Sun as a or let's just say now the Oracle Sun Platforms and so the hardware business, how does that fit in? And how are you leveraging that? Is that a business that's growing?
Is do you want to diversify even more? I mean, are you I know we had professional services. Do you want to get into management consulting? There's the HPs of the world. Obviously, you know a lot about that.
That's a very diversified company. Is there a vision for Oracle there? And going into acquiring like, for example, PricewaterhouseCoopers kind of brand to get more in the more management consulting. So there's a kind of an overall market mix that I'm curious about and particularly how the hardware portion is playing into it.
Is this on? That was a lot of questions. So let me try to just give you your first question. The hardware business fits in as Jeff described. We're going to market really with the products and our sales force as Larry mentioned is specialized.
So we have people that specialize in hardware. At the same time, we try to sell as a vertically integrated stack. So you'll see us going in with hardware as a solution end to end in our applications, our middleware, our database and our hardware. At the same time, we will compete with many of those hardware vendors you described on a hardware to hardware like basis. The hardware market has a couple of big changes going on right now.
1, there's a very big secular change in the hardware market, as Larry talked about cloud computing. In that case, much of the hardware is consumed or bought by the actual provider of the application. So therefore, the end user customers, you would typically think about it, isn't buying the hardware, it's bought by a salesforce.com, it's bought by a work In fact, we've now shipped over 11,000 of these engineered systems into the market and these are big, big computers that are optimized with the software and the hardware together, much like you might see in a consumer. That's given us a significant competitive advantage. If you like Oracle software, you'll love Oracle's hardware working with Oracle's software.
So it's given us a tremendous competitive advantage with Sun bringing its hardware capabilities now married with Oracle's software capabilities to deliver a solution. As an example, when you reference previous companies that I've been with, it's if you're with a hardware company, it's every hardware company's dream to have the assets of a major software company. The combination of these two assets being Oracle pre SUN and Sun coming to Oracle now gives Oracle actually those assets through the entire stack. So it's a tremendous competitive advantage for us both as we deliver our cloud solutions as well as what we can do with our customers in the traditional on premise market.
All right. Any others? Okay. I think we're done. Thank you very much.