Oracle, Silicon Valley, venture capital, Web/Tech, Weblogs

Larry Highest Paid CEO? Damn Right.

It's not everyday you find yourself defending a guy that everyone else hates. Oh wait. Actually, I tend to do that a lot. I even found myself doing that last night! But most of them, I defend because I've gotten to know them well enough that I know they don't deserve their public reps. That is not the case with Mr. Ellison.

In the entire time I've been a reporter in Silicon Valley-- including covering Oracle for BusinessWeek-- I've never gotten to interview Larry in person, for a variety of reasons we won't go into here. I've even flown cross country to meet him and it hasn't happened.

But in my time covering Oracle, I have learned one thing: He may not deserve how much he's making, but he deserves to be one of the most highly paid CEOs in the Valley.

Let's look at what he has accomplished:

1. Built a successful publicly-traded technology company. Ok, thousands of people have done that.

2. Managed to go from founder to chief executive and stay chief executive even as the company grew to the second largest software company in the world. Is still chief executive today. Um, Ok no one else has done that. Even Ellison's close friend Steve Jobs left and came back. Bill Gates hasn't been CEO for a long time.

3. Successfully expanded his company from one dominant product line. Mostly. Ok, databases are still the bulk of the company. But failing initially with business applications and other products didn't stop Larry from relentlessly building out those product lines even if he had to buy every other company in softwaredom to get there. Only the most storied Valley companies have done that. This is usually where tech companies stumble. They do one thing well, and have no follow up act, and slowly become irrelevant.

4. Ellison gets where software is going. What are the most breakout business software companies of recent years? You could argue Salesforce.com and NetSuite--  both of which Larry seeded back when no one thought software as a service was a viable business. I don't know any CEOs at that level who have that kind of golden touch as an angel investor too. Not to say they don't exist-- I'm just not aware of them.

5. He also gets where the technology business is going. Remember back in 2004 or so when he kept telling everyone software was a mature business and it was going to consolidate and people thought he was crazy? Remember the first ever "hostile" software deal and how everyone said hostile deals would never work in software because people are so important? First off, PeopleSoft did work. Second, the whole tech industry has followed suit. There are few CEOs who get the business and technical halves of their industries that well.

Look, I have a lot of good friends who loathe Larry Ellison, who have been wronged by him, who will probably be horrified by this post. And I have every reason to hate him: He's that one, stupid Moby Dick interview that I've never been able to land in nearly ten years of reporting on the Valley. (Although truth be told, I only covered Oracle a few of those years and they were the years he was hardly speaking to anyone. Still.)

But shareholders are not electing him president or best friend. They're paying him to be a good CEO, and he may be one of the only ones worth what he's being paid. Can you imagine what would have become of Oracle with, say, one-time successors Ray Lane or Gary Bloom at the helm? He definitely deserves to be higher paid than EMC's Joe Tucci, Intel's Paul Otellini, or Cisco's John Chambers. Just look at the stock prices! If he was peddling sexy iPods, not boring business software, we'd hear about his "genius" daily, not his legendary playboy, free-spending ways. Or at least, not just his playboy, free-spending ways.

Comments

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Very interesting take on it! I find myself torn, as a nonshareholder tech-watcher: I appreciate good business, but don't always find CEOs who are mean or jerks to be my favorite role models. It's worse with someone like, say, Jobs. I find it interesting at least to watch Ellison's weird exploits. That's all totally separate from the issue of executive compensation... but at least, you're right, he does seem to be creating a nice amount of value here and doing more to earn his keep than many others with high salaries.

Sarah, as soon as I heard about your book, I put in a request for it at the Yale library, but it comes out the day after school ends. I'll try to pick it up as some fun summer reading, I guess!

what would jesus say?

Well I'm not sure what you're defending him against. I don't think anyone is questioning his abilities as a capitalist. He's made it very clear that he's great at that.

He has a negative reputation because he's an asshole. Allegedly.

There've been plenty of great businessmen who were also assholes. Somewhere along the line they came under the impression (whether accurate or not) that they could commit their energy to making friends or to making money. Larry likes yachts, so Larry chose the money. He seems like he's pretty okay with his decision too.

You may have a point when it comes to relative comparisons of worth among CEOs of major public companies.

But the larger point, I think, is the 3rd-world-ize-ation of America as the compensation gap between the very top and the very bottom continues to grow at seemingly ever-increasing rates.

A country with huge gaps between the uber-wealthy few and the poor masses is not a healthy country, long-term.

Sarah, you're forgetting Business 101: The goal of business is to increase shareholder value. That means the stock price, plain and simple. Oracle's stock has simple not been so great for many years. It has still not recovered to pre-bust levels, so anyone holding since then are still waiting. We're talking about 8 years now. Not a good ROI for those folks.

great comments all! thanks!

@ Gordon: i think that's a fair point. but remember oracle doesn't operate in a vacuum. you have to compare them to other late 1990s enterprise computing high-flyers. Bea? siebel? peoplesoft? what about sun? ask those shareholders if jonathan schwartz deserved to be as high up on the list as he was. remember we're no longer a world of buy and hold and a lot of people made a good deal of money off oracle during it's acquisition spree-- which was deemed "doomed" when ellison started it.

While I agree with Gordon that the increasing of shareholder value is at the core of all corporate governance, I have to side with Sarah that compared to its peers,and within the context of "post-burst" survivors, Oracle has held its own.

I am no fan of Ellison, but Sarah's statement that "... shareholders are not electing him president or best friend. They're paying him to be a good CEO.." is something that should be part of every public companies annual report. Well done!

thanks for the comment, Peter. i'd be happy to get royalties from every annual report...or at least a link. oh wait, some things are still printed on dead trees. :(

I worked for Larry Ellison and his team for the last three years in product development but left in January. I left for a number of reasons all of which have to do directly with LJE's inability to lead. Fusion Applications are a disaster and so is the 11g Fusion Middleware - there are no project plans, no resource leveling, not top down architecture designs, no tracked dependencies, etc. Essentially Oracle Apps and Middleware run at CMM 0. As a former customer I'm appalled and disappointed. As a former employee I'm dismayed that last year after one of Oracle's best performances in a long time - Safra, Charles, and LJE got such great compensation but short changed most employees. Oracle is the new software graveyard led by corporate pillagers.

Aside from anticipating and leading the first major acquisition phase in the software industry, your points are incorrect. LJE and his teams has consistently demonstrated an inability to produce products, build/retain talent, and innovate. They failed in ERP, middleware, analytics, and more - they wasted so much time and money they essentially paid for all of these products more than twice. LJE doesn't deserve half this compensation package and was lucky to make it through all of these repeated failures as CEO.

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