Oracle’s Billion-Dollar Executive Stock Grants Ended the Year Underwater
Oracle Gave Larry Ellison and His Co-CEOs Nearly $1 Billion in Stock Options. By Year End, Every Single One Was Underwater
Oracle awarded Larry Ellison and the company’s co-CEOs stock options valued at nearly $1 billion. By the end of the year, however, every one of those options was underwater—meaning the market value of Oracle shares had fallen below the exercise price attached to the awards.
When an option is underwater, exercising it would not be financially advantageous at that moment because executives could buy shares for less on the open market. The options can still retain value if the stock later rises above the exercise price, but their immediate value is effectively zero.
The outcome underscores the performance-based nature of executive stock compensation. Rather than receiving the full value of the award upfront, recipients depend on the company’s share price increasing above specified levels for the options to become valuable.
It also illustrates the risk involved in using stock options as a major part of executive pay. A large headline grant does not guarantee a comparable payout: if the stock does not meet the required thresholds, the awards may provide little or no realized value.
