Oracle's $1B Executive Stock Options Now Underwater
Mega stock awards lose value as Oracle shares plummet 53% in a year
1Massive executive compensation packages
Oracle granted co-founder Larry Ellison and co-CEOs Clay Magouyrk and Mike Sicilia stock options worth $988 million at grant date in fiscal 2026. Ellison's package was valued at $117.8 million with a $280 strike price, while Magouyrk and Sicilia received $621.7 million and $248.7 million respectively at $308 strike prices. These awards were made during a year when Oracle's cloud business boomed and shares delivered a 38% total return, but by fiscal year-end on May 31, all options were underwater due to the stock's 53% decline over 12 months.
2Unique equity compensation structure
Oracle's 'Equity Choice Program' allows executives to choose between 100% stock options, 100% restricted stock units (RSUs), or a 50-50 mix. Choosing options grants four times the number of options compared to RSUs, reflecting their higher risk. New CFO Hilary Maxson opted for $10.4 million in RSUs (worth $12.7 million at grant, now $7.7 million) and $26 million in options priced at $185. Oracle values options differently, counting four options as one share, totaling $400 million for the three top executives.
3Business performance vs. stock decline
Despite the stock's poor performance, Oracle's cloud revenue grew 39% to $34 billion, with cloud infrastructure up 77% to $18.1 billion. Total revenue increased 17% to $67.4 billion, and remaining performance obligations ballooned to $638 billion from $138 billion. However, free cash flow was negative $23.7 billion, and Oracle sold $43 billion in senior notes, including $20 billion at $141 per share during the summer. These financial maneuvers occurred alongside massive data center investments totaling $55.7 billion in capital expenditures.
4Executive compensation philosophy
Oracle defends its compensation strategy, stating underwater options prove the plan is working as intended. The board emphasized options are 'strongly performance-based' and noted no special actions were taken to compensate for losses. While most Fortune 500 companies have shifted to performance shares and RSUs, Oracle maintains its option-heavy approach. Executives received $4.9 million cash bonuses, with Ellison's base salary increasing from $1 to $950,000, matching the co-CEOs' salaries.
5Contrast with employee experience
While executives received substantial compensation, Oracle conducted layoffs and most employee stock options are underwater. The median global employee's total compensation dropped from $98,899 in fiscal 2025 to $94,740 in 2026. This disparity occurs as Oracle cites a competitive market for cloud and AI leadership talent to justify executive pay. The company's debt insurance costs hit records after invoking force majeure on a New Mexico data center, adding to financial pressures.
6Market reaction and investor concerns
Investors have punished Oracle's stock, which closed at $137 on Friday, down 53% over 12 months. The dramatic decline means Magouyrk and Sicilia's options require the stock to more than double from current levels to have value. Bloomberg reported rising costs to insure Oracle's debt against default. Shareholders will vote on the pay plan November 18, with the proxy statement highlighting the compensation committee's alignment of pay with performance.
7Leadership transition context
Magouyrk and Sicilia received their packages days after their September 2025 promotions to co-CEOs, replacing Safra Catz who remains executive vice chair. The timing placed their grants near the stock's peak. Other executives made different equity choices: Catz, chief legal officer Stuart Levey, and operations chief Douglas Kehring opted for RSUs, while global field operations president Mark Hura chose options. These decisions now show varying outcomes based on Oracle's stock performance.
8Compensation strategy implications
Oracle's approach highlights the risks of stock-heavy compensation in volatile markets. While the company argues underwater options align executive interests with shareholders, the $1 billion in now-worthless awards raise questions about grant timing and size. The situation contrasts with Oracle's business growth, showing how capital-intensive cloud investments and market sentiment can diverge from operational performance. The upcoming shareholder vote will test investor appetite for this compensation philosophy.
Original article: Fortune | FORTUNE — Oracle's $1B Executive Stock Options Now Underwater