Oracle Grants $988M Stock Options to Ellison and Co-CEOs
Oracle granted Larry Ellison and its new co‑CEOs a combined $988 million in stock options, but by fiscal year‑end all were underwater due to a sharp decline in the company’s share price. The move reflects Oracle’s strategy to attract top talent amid a competitive cloud market.
By Felo News Desk · Published
Oracle announced that it had awarded co‑founder Larry Ellison and its newly appointed co‑chief executive officers, Clay Magouyrk and Mike Sicilia, a combined stock option package valued at $988 million on the grant date in fiscal 2026. The awards were made as the company’s cloud business expanded, driving a 38% total return on its shares during the year. By the close of the fiscal year on May 31, however, every one of those options was underwater, meaning the strike price exceeded the market price of Oracle stock.
How the Options Were Structured
Ellison’s award was valued at $117.8 million when it was granted in October and carries a strike price of $280 per share. The co‑CEOs’ packages, valued at $621.7 million and $248.7 million respectively, were granted just days after their September 2025 promotions. Their exercise price is $308, double the current market price of Oracle’s stock, which closed at $137 on Friday. For Magouyrk and Sicilia to realize any profit, the share price would need to more than double.
Oracle’s new chief financial officer, Hilary Maxson, who joined in April 2026, opted into the company’s “Equity Choice Program.” This program allows executives to choose between 100% stock options, 100% restricted stock units (RSUs), or a 50‑50 mix. If an executive selects stock options, they receive four times the number of options compared to the equivalent RSUs, reflecting the higher risk associated with options. Maxson chose a mix, allocating $10.4 million to RSUs and the remainder to options priced at $185, which are also currently underwater.
Why Oracle Is Using Options
Oracle’s proxy statement explains that the use of stock options is intended to align executive incentives with long‑term shareholder value. The company notes that options “are strongly performance‑based” and that the compensation committee did not take special actions to protect executives from potential losses. The board emphasizes that the plan is functioning as designed, with the lack of intrinsic value in the options indicating that the market has not yet reached the required performance thresholds.
Other executives also made choices that reflect their risk tolerance. Chief legal officer Stuart Levey and operations chief Douglas Kehring opted for RSUs, while global field operations president Mark Hura chose options. The varying selections underscore the flexibility of Oracle’s equity program and the differing views on market volatility among senior leaders.
Financial Performance Amid Volatility
Despite the sharp decline in share price, Oracle’s financial results for fiscal 2026 were robust. Cloud revenue rose 39% to $34 billion, and cloud infrastructure revenue grew 77% to $18.1 billion. Total revenue increased 17% to $67.4 billion. However, the company’s free cash flow was negative $23.7 billion, and it issued $43 billion of senior notes. Oracle also sold $20 billion of stock at $141 per share during the summer, a move that further diluted shareholder value.
Oracle’s performance obligations ballooned to $638 billion by year‑end, up from $138 billion the previous year. The company’s aggressive investment in data centers—spending $55.7 billion in capital expenditures last fiscal year—reflects its strategy to support a growing cloud and AI customer base. Nevertheless, the volatility in Oracle’s stock price has led to a wave of employee layoffs and a decline in median employee compensation from $98,899 to $94,740.
What Happens Next?
Oracle’s compensation plan will be put to a shareholder vote on November 18. The company’s board has highlighted that the current structure of stock options is a deliberate choice to reward executives only when the company’s share price surpasses the high strike prices set at grant. As Oracle continues to navigate a competitive cloud market and a volatile equity environment, the outcome of the shareholder vote could shape future executive incentive plans.
For now, all three executives—Ellison, Magouyrk, and Sicilia—received $4.9 million in cash bonuses and a raise to a base salary of $950,000, aligning their compensation with the company’s top performers. While the options remain underwater, the cash bonuses and salary increases provide immediate financial benefits to the leadership team.
Oracle’s story illustrates the tension between rewarding executives for long‑term performance and the short‑term impact of market volatility. Investors and analysts will watch closely as the company’s compensation strategy evolves and as Oracle seeks to maintain its position in the rapidly growing cloud sector.
Key facts
- Oracle awarded $988 million in stock options to Ellison and new co‑CEOs
- All options are underwater due to a 53% drop in share price
- Oracle’s Equity Choice Program offers options, RSUs, or a mix
- Cloud revenue grew 39% to $34 billion in fiscal 2026
- Shareholder vote on compensation plan set for Nov. 18
Why it matters
The decision to grant high‑strike stock options reflects Oracle’s strategy to align executive incentives with long‑term shareholder value, but the current underwater status highlights the risks of market volatility for executive compensation.
Frequently asked questions
What does it mean for an option to be underwater?
An option is underwater when its strike price is higher than the current market price of the underlying stock, meaning exercising the option would result in a loss.
Why did Oracle choose high strike prices for the options?
High strike prices are used to tie executive rewards to significant share price appreciation, ensuring that executives benefit only if the company’s stock performs strongly.
What is the Equity Choice Program?
Oracle’s Equity Choice Program lets executives select between 100% stock options, 100% RSUs, or a 50‑50 mix, allowing them to tailor their compensation to their risk preference.
Sources
- [1] fortune.com — originally reported as “Oracle gave Larry Ellison and his new co-CEOs nearly $1 billion in stock options. By fiscal year end, all were underwater”
