Shareholders Re-elect PeopleSofts Board

However, at PeopleSoft's annual meeting, shareholders said the company must be held accountable for stock options.

At an annual shareholders meeting surprisingly lacking in any real backlash, PeopleSoft Inc. investors showed they approve of the current board of directors and its choice of fiduciary overseers.

However, shareholders also flexed their collective muscles by voting in a measure that will ensure PeopleSoft count employee and director stock options as expenses—a measure the board unanimously recommended against.

With a total of 294,211,180 voting shares represented, out of some 363 million outstanding shares, voters chose to re-elect PeopleSofts four sitting board members and to ratify the selection of KPMG LLP as independent auditor for the 2004 fiscal year.

With 132 million votes in favor, and 113 million votes against the measure to recognize employee and director stock options as income, shareholders effectively said that PeopleSofts board needs to be accountable to bonuses handed out to employees and, more importantly, to directors.

"Stock options comprise a large portion of PeopleSofts senior executive compensation, and stock options are an integral part of PS executive compensation package," said Albert Carlson, representing the American Federation of State, County and Municipal Employees, a PeopleSoft institutional shareholder. "According to the companys proxy report in 2003, CEO Craig Conways cash compensation totaled over $3.25 million and stock options [were] worth $14.9 million and $42.9 million, depending on the [stocks] return."

Carlson said the AFSCME believes that expensing stock options more accurately reflects the cost of awards to a company and better reflects true earnings to the company.

"They are of value to the recipient and a cost to the company," said Carlson.

In addition to fielding basic corporate governance issues, PeopleSoft, of Pleasanton, Calif., has been fending off a nine-month hostile takeover bid from Oracle Corp.—an attempted merger that the U.S. Department of Justice is currently trying to block. On Feb. 27 the Justice Department filed suit against Oracle in a San Francisco federal court.

In addition to its tender offer now valued at $9.4 billion, Oracle attempted to overthrow PeopleSofts board through a proxy battle. Based on three PeopleSoft shares that it owns, Oracle announced its own slate of nominees for PeopleSofts board. When the Justice Department announced it would file suit to try to block the acquisition, Oracle withdrew its slate.

With no other nominees on the table, Craig Conway, PeopleSofts president and CEO; George "Skip" Battle; Frank Fanzilli Jr.; and Cyril Yansouni were handily re-elected to the board this morning.

The votes in favor of each board member were not unanimous, however. Preliminary results indicate that while Conway won by a large margin—293 million votes for his re-election and 4 million votes against—4.8 percent of the shareholders hoped to appoint a new board member.

With a total of 292 million votes, Battle received 280 million in his favor and 12 million against. Fanzilli received a total of 293 million votes, 284 million in his favor and 9 million withheld. Yansouni saw a total of 293 million votes, with 279 for his re-election and 14 million against it.

Next page: Questions about Oracles tender offer.