The Ol’ Stick-and-Carrot

Oy vey!

Larry Ellison is at it again. This time, the shenanigans revolve around the
eleventh hour firing of Pier Falotti, Oracle’s
executive VP of overseas operations in Geneva, Switzerland. With just four
days until his remaining $10 million worth of options were set to vest as
part of a lucrative stock options package, Falotti was let go by the
database giant for taking a sick day.

In a nutshell, Falotti jumped ship as executive VP of Ma Bell’s
international operations in the mid-90s in favor of the red carpet
treatment offered by Oracle. Including incentives, the journeyman pulled
down a cool million in cash each year, but that was pocket change compared
to the 600,000 options Oracle granted its new hire.

Falotti has already cashed in to the tune of nearly $50 million, but with
his last 125,000 options set to vest in just four days, he received a phone
call from everyone’s favorite flamboyant oddball. It turns out that Falotti
had called in sick a day prior, and Oracle pounced on the chance to tighten
its purse strings. Oracle wasted little time filing a lawsuit in a Bay area
District Court requesting a ruling to decide whether Falotti’s employment
agreement falls under a California jurisdiction or Swiss law. Because in
the Alps, a company can’t terminate an employee if said employee is too
sick to go to work.

According to Oracle’s lawsuit, the company contends that Falotti was in
fact working during his two days off, and that a doctor’s note wouldn’t be
that hard to come by when millions in options were at stake. It’s more than
likely that the employment agreement will be subject to a California court,
and even if it weren’t, Oracle looks prepared to spend that $10 million on
attorney’s fees just for spite.

So what are the implications here and what’s the fallout likely to be after
the dust settles? Well, first off, regardless of the reasoning behind
Falotti’s pink slip, his employer’s timing couldn’t be worse. There’s the
perception of a tremendous amount of greed and arrogance on Oracle’s part
here and some signs that point to a bevy of bad blood between Oracle’s top
banana and its former VP of international operations.

Whether Falotti ever sees the last of his loot remains to be seen. On the
surface, he has a strong case and a sizable war chest to thumb wrestle with
Oracle’s lawyers. But that’s not the meat and potatoes of this brouhaha.
The real damage is likely to be to Oracle’s image, because anyone familiar
with the high-tech industry knows that stock options are the
stick-and-carrot that attracts top talent.

Snatching options from lower-level worker bees is a commonplace activity
amongst technology companies these days. But usually transient employees
leave the payday on the table and walk away quietly in a booming economy.
While this is one of a handful of high-profile executives cut loose in a
tight labor market, it’s not the only one involving Oracle.

Headhunters may encounter difficulty convincing crackerjack execs to jump
ship for a position at Oracle in the future. They read the papers just like
anyone else, and when it comes to the options game, Oracle’s committing a
technical foul. If you have a slightly less rewarding career with a
traditional blue chip firm, it’ll still smell sweeter than slaving at the
number-two software firm only to have the rug pulled from under you in the
home stretch.

In a twist of irony, Ellison bought this year’s America’s Cup runner-up
yacht AmericaOne from a fellow club member last week. While financial
details weren’t disclosed, in a round about way, a modest portion of
Falotti’s nest egg is floating somewhere in a San Francisco harbor as we

Any questions or comments, love letters or hate mail? As always, feel
free to forward them to [email protected].

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