Oracle Corp. shareholders are putting up a rare and semi-successfulfight against rising executive pay at Oracle Corp. In anon-binding "say-on-pay" vote at Oracle's annual meeting yesterday,they rejected the pay packages for top managers, including Founder andChief Executive Officer (CEO) Larry Ellison.

The protest vote was influenced by a group of powerful institutional advisors,  including the Institutional Shareholder Services (ISS), which recommended the vote, and the California Employees' Retirement System, which supported it.

ISS also recommended withholding votes for Oracle board Chairman Jeff  Henley and seven independent board members, including Bruce Chizen, George Conrades and Naomi Seligman, who all serve on the compensation committee. But that effort failed, and all of the board members were re-appointed.

Declining Pay

Oracle's overall executive compensation has been declining in the pastthree years. The total pay packages dropped 15% from 2012 to 2013, according to Morningstar Inc., a research firm. Ellison made $96 million in annual compensation in 2012, but that dropped to $80 million in fiscal year 2013, which ended in May, Morningstar's analysis of corporate filings found.

Still, Ellison is among the most highly paid CEOs in the world, even though his annual salary is only $1. Most of his compensation comes in the form of stock-option awards and most of his net wroth — all $38 billion of it — derives from his 25% stake in the company.

Ellison declined his annual cash bonus of $1.2 million for fiscal 2013 after Oracle missed growth targets. 

With Ellison's high net worth and large stake in the company, the shareholder action is mostly symbolic. But it is significant because it represents a rare case of a successful shareholder revolt against a corporate board.

Other Dissatisfied Shareholders

Other organizations have also protested the compensation plan. CalSTRS (California State Teachers’ Retirement System) Investments, PGGM Investments and RPMI Railpen Investments, all institutional holders, sent a joint letter to the board expressing their dissatisfaction.

This is the second year in a row that shareholders have protested compensation for Oracle executives through a non-binding "say on pay" vote.

Learning Opportunities

The ISS recently assigned Oracle its highest "governance risk" rating of10 in a report, meaning it does not regard the company as having boardgovernance that is responsive to shareholders. ISS, in an emailedstatement, pointed out that "no" votes on say-on-pay are extremely rare.

"Oracle is just the 12th company in the Russel 3000 universe to record multiple sub-50 percent votes on say-on-pay,"  ISS noted.

Analysts Are Mum

Several analysts with Wall Street firms were willing to speak to on background about the issue, but declined to speak on the record. As one told me, there is  "little upside" in speaking publicly on the issue.

The news was unlikely to influence the bulk of investors, who are more concerned about the company's growth and earnings, two analysts said.

In the end, the shareholder protests are probably more dramatic than meaningful. Oracle is still largely seen as Ellison's company because he founded it and still owns such a large stake.

Oracle did not respond for requests for comment.