Good day, and welcome to the 43rd Annual Meeting of Stockholders of Oracle Corporation. I would now like to turn the conference over to Jeff Henley, Vice Chairman of the Board of Directors. Please go ahead, sir.
Good morning, ladies and gentlemen. I'm Jeff Henley, Vice Chairman of the Board of Directors. And along with my fellow In accordance with the notice of the meeting, I call to order the 43rd Annual Meeting of Stockholders of Oracle Corporation. For the first time, we are holding our Annual Stockholders Meeting virtually. We made the decision to hold the meeting virtually in the light of the COVID-nineteen outbreak for the safety and well-being of our stockholders, directors and employees and taking into account the protocols of local, state and federal governments.
We will first conduct the formal portion of the stockholders' meeting in accordance with the agenda you see on your screen. Following adjournment of the formal portion, there will be an opportunity for us to answer stockholder questions. Some of you have already submitted questions. Stockholders may also submit questions at any time during this meeting in the space provided on the virtual meeting screen. We ask that you please identify yourself when submitting a question.
As a reminder, this meeting is being recorded. For election and joining us remotely today. As mentioned, my name is Jeff Henley. I have been a Director since 1995 and Vice Chairman since 2014. Previous to that I served as Chairman.
I also previously was Oracle's Chief Financial Officer from 1991 to 2004. Larry Ellison was promoted to Chairman of the Board and Chief Technology Officer in 2014. Previously, Mr. Ellison was our CEO and has been a Director since he founded Oracle in 7. Zafar Katz has been a Director since 2001 and was appointed CEO of Oracle in 2014.
Prior to that, Ms. Katz served as President and Chief Financial Officer. Doctor. Michael Boskin has been a Director since 1994. Doctor.
Boskin is the Tully M. Friedman Professor of Economics and the Wofford Family Hoover Institution Senior Fellow at Stanford University. Jeff Berg has been a Director since 1997. He's Chairman of Northside Services, a media and entertainment advisory firm. Mr.
Berg was previously Chairman and CEO of International Creative Management. Naomi Seligman has been a Director since 2005. She is a senior partner at Ostergren von Simpson, a technology research firm that shares the CIO Strategy Exchange. George Kinedes has been a Director since 2,008. He is an Executive Advisor to Akamai Technologies and previously served as Akamai's Chairman and CEO.
Bruce Chizen has been a Director since 2008. He's an independent consultant and serves as Senior Advisor to Premier Advisors and Venture Capital at Voyager Capital. He previously served as CEO of Adobe Systems. Secretary Leon Panetta has been a Director since 2015. Secretary Panetta previously served as the U.
S. Secretary of Defense and as Director of the Central Intelligence Agency. He is the Co Founder and Chairman of the Panetta Institute For Public Policy. Renee James has been a Director since 2015. She is the Chairman and CEO of Ampere Computing, a producer of high performance semiconductors for hyperscale cloud, storage and edge computing.
She's also an operating executive at the Carlyle Group. She previously served as President of Intel Corporation. Rick Morman has been a Director since 2018. He is currently a Senior Advisor to Amtrak and previously served as Amtrak's President and CEO. He also previously served as Chairman and CEO of Norfolk Southern Corporation.
Bill Ferret has been a Director since 2018. He previously served as CEO of Deloitte Touche Tomatsu. Rona Fairhead served as joined the Board in 2019. She previously served as Minister of Trade, Minister of State for Trade and Export Promotion in the Department of International Trade in the United Kingdom. And prior to that she served as Chair of the BBC Trust.
Vishal Sikka joined the Board in 2019. He is CEO of Vanae Systems, a startup company that provides advanced software and services in artificial intelligence and machine learning. Also President at this meeting is Ryan Higgins, Oracle's Vice President and Associate General Counsel and Corporate Secretary. We are also joined here today by representatives from Ernst and Young, our independent auditors. They will be available during the question and answer session after the formal meeting to respond to appropriate questions.
Finally, Oracle has appointed Broadridge Financial Services to act as Inspector of Elections. Catherine Blackwell, representing Broadridge is with us today and has taken the oath of the Inspector of Elections. 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 to the formal portion of the meeting. Brian Higgins will report on the mailing of the notice of this meeting.
Thanks, Jeff. This meeting is held pursuant to a notice dated September 18, 2020. I have an affidavit of mailing from Broadridge Financial Solutions certifying as to the giving of notice of this meeting and the sending of proxy materials to stockholders of record as of September 8, 2020, all of which Broadridge commenced distributing to stockholders on September 18, 2020.
I also have a copy of
the 2020 annual report, which includes financial statements certified by Ernst and Young. A copy of this Annual Report was centered made available to each stockholder entitled to vote at this meeting and an electronic copy of the Annual Report is available on the website used to access this meeting. I also have the list of holders of record of common stock of the company at the close of business on September 8, 2020. This list of stockholders has been open for examination for any purpose relevant to this meeting for the past 10 days. This list is available for inspection during this meeting by any stockholder through the website used to access the meeting.
All documents concerning notice of the meeting, including proof of mailing will be filed with the minutes of this meeting. This meeting is held in accordance with Oracle's bylaws and Delaware law. A copy of the rules of conduct that govern today's meetings can be found in the Meeting Materials section of the website for today's virtual meeting. We ask that you abide by these rules in order to facilitate an orderly meeting.
Ryan 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 3,010,000,000,88,841 shares of oracle's common stock issued outstanding and entitled to vote at this meeting. I have been informed by the Inspector of Elections that a majority of these shares is present in person or by proxy and therefore a form is necessary to transact business is present. It is now approximately 10:15 and the polls are open, but will close shortly. All Oracle stockholders entitled to vote at this meeting have the ability to do so online. If you are a stockholder entitled to vote and have not yet voted, or if you want to change your previously cast vote, please do so now.
Please remember that if you have already voted by proxy, it is not necessary to vote again. Once we complete the formal portion of the meeting, we will close the polls.
Thank you. I declare a quorum is present at this meeting. On behalf of Oracle's Board, I'd like to express my appreciation to all stockholders who returned their proxies or submitted ballots. There are 6 items of business on the agenda for this year's meeting, 4 management proposals and 2 stockholder proposals. All voting results announced today are preliminary final.
Vote totals for each of the proposals voted upon today will be made publicly available on a Form 8 ks within 4 business days. We will start with the management proposals. The first matter of business is the election of 14 directors to serve until the next annual meeting of stockholders. The nominees recommended by the Board of Directors are Larry Ellison, Jeff Henley, Stafford Katz, Michael Boskin, Jeff Bird, Naomi Seligman, George Conredes, Bruce Chisholm, Leon Panetta, Renee James, Rick Gorman, Bill Perrette, Rona Barehead and Vishal Cica. Additional information about each of these nominees can be found on Pages 9 through 13 of Oracle's proxy statement.
Will the Secretary announce the results of the vote?
Each nominee for election to the Board of Directors has received the affirmative vote of a majority of Oracle shares of common stock present and entitled to vote at this meeting.
I 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 officer as discussed in Oracle's proxy statement filed in connection with this meeting. This is commonly referred to as say on pay vote. Will the secretary please indicate the results of the vote?
This proposal received the affirmative vote of a majority of Oracle's shares of common stock present and entitled to vote at this meeting.
Thank you. The SAON paid proposal has been approved. The next matter is the approval of the Oracle Corporation 2020 Equity Incentive Plan. When the Secretary announced the results of the vote.
This proposal also received the affirmative vote of a majority of Oracle shares of common stock present and entitled to vote at this meeting.
The equity plan proposal has been approved. The next matter is the ratification of the appointment of Ernst and Young LLP as Oracle's independent registered public accounting firm by the Finance and Audit Committee of the Board of Directors. The Board of Directors recommends the ratification of the appointment of Ernst and Young as our independent registered public accounting firm for fiscal year 2021. Will the secretary announce the results of the vote?
This proposal received the affirmative vote of a majority of Oracle shares of common stock present and entitled to vote at the meeting.
The appointment of Ernst and Young as Oracle's independent registered public accounting firm for fiscal year 2021 has been duly ratified. The next item of business is the proposal submitted by Pax World Funds, a stockholder of Oracle. The proposal, which appears on Page 72 of Oracle's proxy statement, requests that the company provide a report disclosing certain information regarding pay equity. We understand that Heather Smith will represent PACS World Funds at this meeting. Operator, please unmute the line of Heather Smith.
Pursuant to the rules of conduct for the meeting, you will have up to 5 minutes to present the proposal.
Operator, can you let Heather Smith in?
Yes.
Good morning, Mr. Vice Chairman. My name is Heather Smith, and I am here to present proposal number 5 on behalf of TaxRold Fund. Our proposal requests that Oracle issue a report identifying whether a gender or racial pay gap exists among its employees, And if so, outline the steps being taken to reduce the gap and support advancement opportunities for women and minorities. Despite strong shareholder interest in pay equity reporting, nearly 2 thirds of Oracle's independent shareholders supported this proposal in 2018 2019.
None of Oracle's public reporting addresses pay equity for U. S. Employees. This issue is particularly relevant to Oracle in light of an ongoing employee lawsuit alleging gender pay discrimination at the company. Pay and equity and advancement opportunities for diverse talent are well known concerns in the technology industry.
Glassdoor has found an unexplained statistically significant gender pay gap for women in the technology industry of 5.4% higher than the U. S. Average of 4.9%. McKinsey reports that women continue to be underrepresented in the technology software industry and their representation falls as they move through the talent pipeline. Oracle's workforce composition reflects this.
Women comprise 30% of the workforce, but hold just 24% of leadership positions, figures that have not changed appreciably since 2016. In an industry where innovation and better problem solving, both of which have been correlated with greater gender diversity are critical drivers of business success, Oracle can and should be doing more to close the gender gap in its workforce. Publicly committing to and ensuring equal pay for equal work can help address this gap. Studies show that pay transparency can reduce gender differences in pay, while increasing female hires, promotions and employee satisfaction. Oracle's failure to comprehensively address pay equity issues and its ongoing unresponsiveness to investor and employee concern may place the company at a competitive disadvantage when it comes to talent recruitment, retention and employee productivity.
A number of companies have already published information about their pay equity practices and have committed to closing any disparities, including significant technology peers like Amazon, Cisco Systems, Adobe, Intel, Microsoft and SAP. In fact, nearly all of the competitors listed in Oracle's most recent annual report have published the results of pay analysis and outlined the processes in place to support pay equity. For these reasons, there's a compelling case for enhanced pay equity reporting and oversight at Oracle. Developing a more transparent approach would assure stakeholders that Oracle is proactively managing this issue as part of its talent management strategy, position it to achieve greater gender diversity and reduce regulatory and reputational risks. You very much, Mr.
Vice Chairman.
Thank you, Heather. The Board opposes this proposal for the reasons described in the proxy statement. Will the secretary announce the results of the vote?
This proposal was defeated by a majority of Oracle shares of common stock president entitled to vote at this meeting.
I declare that the stockholder proposal regarding a pay equity report has been defeated. The next item of business is the proposal submitted by Kenneth Steiner, a stockholder of Oracle. The proposal, which appears on Page 75 of Oracle's proxy statement, requests that the Board adopt a policy requiring the Board Chair to be an independent member of the Board. We understand that John Chevantin, I'm sorry if I didn't pronounce it right, will represent Kenneth Steiner at this meeting. Operator, please unmute the line for John.
Hello. This is John Chibadan for Ken Steiner proposal. Can you hear me okay?
Yes. I just want to finish by saying that pursuant to the rules of conduct for the meeting, you'll have 5 minutes to present the proposal.
Proposal 6, Independent Board Chairman. Cheryl has requested our Board of Directors adopt the policy and amend our governing documents as necessary to require that the Chairman of the Board be independent member of the Board. This proposal allows a reasonable amount of time for implementation. It's important to have an independent Board Chairman as a consistent long term policy to build up the oversight role of the directors. The following Directors received from 23% to 28% in negative votes at the 2019 Annual Meeting.
Bruce Chisholm, the Lead Director Charles Moorman George Perejes Jeffrey Berg, Naomi Selkman, Leon Panetta. The 23% to 28% in negative votes are worse than they seem since Mr. Lawrence Elson, who controls 35 percent of the vote is assumed to have voted in favor of these directors. These directors also controlled 100% of the executive pay committee, 75% of the nomination committee and 50% of the audit committee. Meanwhile, Ms.
Katz, CEO received $191,000,000 in total realized pay in 2019. Plus there's a long history of shareholders rejecting the excessive Oracle executive pay. 2015, it was 51% rejection. 2016, it was 55% rejection. 2017, 50% rejection 2018, 46% rejection 2019, 42% rejection.
This is a good reason for the preliminary percentage rejection to be announced live before the close of today's meeting. There is never much variation in the final percentage vote result from the percentage that is known now by the Inspector of Elections. Most companies have rejection rates of 5% to 10% for the executive pay. The 42% to 45% rejection above is worse than it seems because Mr. Ellison, who controls 35% of the vote is assumed to have voted in favor of this excessive executive pay.
Management uses inconsistent logic in resisting this proposal. Management said that the Board needs flexibility, yet the Board denies shareholders flexibility. Management said shareholders should not have any flexibility whatsoever beyond a strict rigid limit of 20 shareholders who must together own a combined 3% of our company stock, which equals a massive $5,000,000,000 of Oracle stock to work together to nominate a proxy access director candidate. This proposal topic won 44% support at a previous Oracle Annual Meeting. This 44% support represented overwhelming majority support from the non insider shares.
Please vote yes, Independent Board Chairman, Proposal 6.
Thank you. The Board opposes this proposal for the reasons described in the secretary announce the results of the vote?
Thanks, Jeff. This proposal was defeated by a majority of Oracle's shares of common stock present and entitled to vote at this meeting.
I declare that the stockholder proposal regarding an independent Board share has been defeated. So it's now approximately 10:25 Pacific Time and the polls are now closed. This concludes the formal part of the meeting, which is now adjourned. So we are now at the point of the meeting that we provide for general questions and discussion. Provided on the virtual meeting screen.
We ask that you please identify yourself when submitting the question. Please note that our answers to stockholder questions 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 should review our most recent Form 10 ks and Form 10 Q for a discussion of risks that may affect our future results or the market price of our stock. You are cautioned, Bakken plays undue reliance on forward looking statements, which reflect our opinions only as of today.
Please keep in mind that we're not obligating ourselves to update these forward looking statements in light of new information or future events.
Thanks, Jeff. Though we may not be able to answer every question, we will endeavor to answer as many stockholder submitted questions as we can that comply with the meeting rules of conduct and are germane to Oracle's business. As an initial matter, I would note that we will not be answering any questions regarding the TikTok transaction and refer stockholders to our prior public statement. The first question is that they would like to hear Larry's views on Oracle's overall competitive position today as well as how do you see that changing over the next 5 years?
Okay. Let's see. Oracle is in 2 specific businesses. We're in the cloud application business, where we're either the largest or second largest application supplier in the cloud. Oracle and Salesforce are 1 and 2 in that area.
And we're an infrastructure supplier in the cloud. So I'm very happy that and Oracle is unique in the fact that we are the only a company, the only major cloud player that competes in infrastructure where our primary competitors are Amazon, Microsoft and Google and applications in the cloud where our primary competitor is salesforce.com. We're the only major cloud company that competes in both of those areas. As I say, while we're doing extremely well in applications, we are by far and away the number one provider of cloud applications for ERP. Our 2 products Fusion ERP and NetSuite ERP are 1 and 2 in the cloud ERP business.
So we have a very substantial market share and a lead over a huge lead over our nearest competitor in back office applications. We are also Salesforce's number one competitor in the front office with our cloud products. So in applications, we're doing exceedingly well. We've been doing exceedingly well for some time. We are newer to the infrastructure business, but we have some conspicuous wins to be proud of over the last 12 months.
The most interesting and the most well publicized was the fact that Zoom, which had been running on AWS and Google and looked at moving some of their capacity to Microsoft, chose Oracle to expand during the pandemic. And right now, Oracle holds enormous numbers of meetings with tens of millions of people on Zoom every single day from the Oracle from Oracle Cloud Data Centers. In fact, Oracle runs more Zoom meetings than any other cloud. We run more Zoom meetings than AWS. We run more Zoom meetings than Zoom runs out of its own cloud.
There are a number of other examples we're doing extremely well. In high performance computing and infrastructure, most of the major car companies use Oracle for high performance computing. We're very strong in that market. In video conferencing like Zoom, a company called 8x8 moved all We have made we've retained, We have retained a leadership position in cloud applications. So I think we're positioned for still more growth both in infrastructure and applications.
And once again, I'll repeat, we are the only cloud company that competes in both infrastructure and application.
Thank you, Larry. The next question states, you've mentioned several times in the past that the Autonomous Database is the most important product in the company's history, except possibly for the original database. Can you help us understand why?
Well, the Autonomous Database is a unique piece of software. It's an autonomous system. Autonomous systems are things like self driving cars where you don't tell it how to do something, you tell it what you wanted to do. You say, take me to 33214 Pacific Coast Highway in Malibu. And the car then figures out how to do that.
You're not involved in navigating the car from where you currently are to the destination. You simply tell it where you want to go and it gets there. So there is no opportunity for human beings to make an error when driving the car and navigating the car to that location. Autonomous systems famously take the labor out of the process. So you're not driving the car.
There is no wheel. There are no pedals. You don't drive the car. So there's no human labor. If you take the human labor out, you also take out human error.
Autonomous cars are much safer than cars driven by human beings. So you will see a whole new generation of autonomous taxis from people like Tesla and others. Well, this notion of autonomy also applies to software. To run the Oracle database properly, you have to be a very skilled and trained IT professional. It's an enormously powerful system, but it's also again, it also takes a lot of it takes years to become proficient in running the database in an optimal way and in the best possible way.
What the Oracle Autonomous Database does is it takes all the labor out of running the system. If you need more storage capacity, it automatically goes out and gets more storage capacity and without any human intervention. If there is a security vulnerability that occurs in the database, The database automatically heals itself. It automatically applies a security update or what's sometimes called a patch to fix the security vulnerability. It does that without any human intervention at all.
The database backs itself up. The database tunes itself. So when you build the when you first roll out an application and human being tunes the system and a non autonomous system, it runs optimally for a while. And then a human being has to come back and retune it as the database grows and the access patterns change. That's not true in an autonomous database.
The autonomous database constantly performance tunes itself without any human intervention. The autonomous database takes the human labor out of the system, saving you enormous amounts of money. And perhaps even better, by taking the human labor out, it eliminates human error. So people can't make mistakes. The great thing about that is if you look at all of the problems Amazon has had with its database technology and AWS, the problems have been caused by human beings misconfiguring those systems, thereby creating a security vulnerability.
Therefore, you think you see companies like Capital One losing tens of millions of employee of their customer records and credit card numbers and social security numbers and things like that in Amazon. And that's because of human error. The human being made a mistake and misconfigured their system at Amazon. Amazon says that's not our mistake. That was the mistake of the people at Capital One.
They made a configuration error. Our approach to solving that problem is to say, human beings should not configure complex IT systems like a database. The computer should automatically or more precisely autonomously configure itself. If the computer autonomously configures itself, there are no human errors. You cannot make a configuration error.
And you solve all of these security problems that are caused by either human error or human mischief. In fact, it's the only way to solve those security problems. So the reason I say the Oracle Autonomous Database is the most important new technology ever since the original Oracle Database is we are the only ones that have pretty comprehensively solved the problem of data security in the cloud by taking human beings out of the process. So there cannot be human error and there cannot be human mischief.
Thanks, Larry. So the last question we had is asks how you see the ERP market changing over the next few years, especially in light of recent competitor announcements?
That's another question for me?
Yes.
How do I see the market changing? I see the market getting bigger and bigger and bigger as people are migrating to the cloud. The amazing thing, the amazing opportunity that's in front of Oracle is SAP never built SAP is the leader in the previous generation of ERP systems. SAP was the largest on premise ERP supplier ERP system supplier. We were number 2 to SAP in the previous generation of on premise applications.
As we migrate ERP as the ERP customers move from on premise systems to cloud systems, Oracle gives them a couple of options. 1 that we built and one that we bought. So for larger companies, we built an ERP system called Fusion. For smaller companies, we acquired an ERP system called NetSuite. So we have 2 offerings in the ER, the 2 true cloud offerings for ERP.
ERP.
Cloud, creating a gigantic opportunity for Oracle. Think about it. Our number one competitor for on premise ERP didn't show up in the cloud. Now SAP, don't get me wrong, SAP bought a bunch of what we call edge products for the cloud. They bought Ariba for procurement.
They bought the SuccessFactors for human resources. They bought Concur. They bought a few but these are little edge applications all around the ERP system. But they never ever rewrote their ERP system for the cloud. That's truly extraordinary.
Their ERP code that they're selling right now is that 35 year old code that they've had the bulk of it is the 35 year old code written in a proprietary language called AVAP never ever designed for the cloud. I mean they'll host it for you. They'll put it on a computer and host it in a data center for you, but it is not true cloud software. We update our cloud software, our ERP cloud software every 3 months. You get new features and new functions and we continuously improve the product.
That's just the characteristic of true cloud software. They don't do any of that. They don't do any of that. So they have abandoned their position or excuse me, they never really moved to the cloud. I guess they haven't abandoned it.
They're still competing. But they don't have a true cloud system, which allows us to go in and take vast swaths of market share every quarter. And we're doing extremely well against SAP. Those with the most have the most to lose. SAP was the winner in the on premise ERP wars And they don't even have a product in cloud ERP.
They have this stuff we call Focal Cloud or what's called hosting. So we have this enormous opportunity to go from the overall number 2 supplier in ERP, which we were in the on premise world to the number one supplier, where we of ERP, where we are in the cloud world. That is true right now. We have around just under 30,000 cloud ERP customers. An amazing number, 30,000.
Our closest competitor has a few 100 and our closest competitor is not SAP. So we have the opportunity to really dominate the ERP business in the cloud as SAP's overall installed base erodes because of their failure to move to the cloud. So I'm very optimistic this will be a source of growth and profits for Oracle this year, next year and the next several years as the world finishes its migration from on premise to the cloud.
Great. Thanks, Larry. That concludes the question and answer session of part of the meeting. I'll pass it back to Jeff Henley.
Ladies and gentlemen, thank you for attending today's meeting and be well.