Oracle mulls vote on open source at upcoming shareholders meeting

On Friday, November 2, Oracle will convene its shareholder meeting. As part of that meeting, this year it's supposed to consider an open-source friendly proposal which, for a variety of reasons, it is asking its shareholders to reject. (See page 55 of its proxy statement here.)

What is the proposal? That Oracle adopt a resolution that the company consider the social and environmental impact of using open source. The underlying intention, I believe, is to nudge Oracle to take on a more protective approach to open source. Oracle wants the resolution axed.

The language of the shareholder proposal is fairly vague, which may be one reason it's not getting much love from Oracle. However, as Jonas Kron, the attorney representing Lawrence Fahn (Oracle shareholder), told me, SEC (Securities and Exchange Commission) rules significantly restrict what they can ask for in the proposal, forcing them to file a proposal that focused on social and environmental impacts - a very safe area within the SEC rules.

So, the proposal actually calls for this resolution:

RESOLVED: the shareholders request that the Board issue, at reasonable expense, an Open Source Social Responsibility Report to shareholders by April 2008 that discusses the social and environmental impacts of Oracle's existing and potential open source policies and practices. We request the report be a policy level discussion which excludes proprietary and confidential information (including, for example, information that may interfere with litigation, legal strategies, lobbying or regulatory issues).

To my unstudied eye, this seems to not go far enough. But Kron indicated that the proposal is not meant to be a be-all/end-all for Oracle on open source. Rather, it's intended to serve as a placeholder and an opportunity for Fahn/Kron to get the issue of open source on the Oracle board's agenda rather than as a complete reflection of Fahn's and Kron's goals or interests. However, Kron noted that even despite this limitation to shareholder proposals this structure still enables him to use this mechanism to solicit real changes in corporate behavior through dialogue.

What could be accomplished with the proposal? It's a way for Oracle's shareholders to demonstrate support for Oracle's open-source efforts (noted in Oracle's opposition statement on page 55), and to vote to encourage them to go further.

By the way, it's important to note something about Oracle shareholder vote totals. As Kron detailed to me:

Given the fact that Larry Ellison owns just shy of 25% of Oracle shares and mutual funds and other institutional investors who invariably will vote with management as a matter of practice own around 40%; a vote in favor of just 5% would actually be very meaningful because it means that 15% of shareholders who as a practical matter would actually think about how to vote, voted for the proposal. Put another way, if a single shareholder owning 15% (or even 5%) of the company asked management to pay attention to an issue, they likely would. In fact, under securities laws, 5% ownership is considered significant enough to warrant specific disclosures of information. The point being that this shareholder resolution presents a leverage point that can be used to communicate to management in a powerful way that its investors think Oracle should continue to take positive steps towards open source.

Oracle doesn't want this proposal on the agenda. It thinks it already does enough for/with open source, and so need not put the matter before its shareholders, though it also indicates the following:

The Board of Directors does not believe that it is in the best interests of the stockholders to spend additional Company time and resources preparing and distributing a unique report which focuses on relatively limited aspects of our efforts to benefit our stockholders, customers, employees and policy makers around the world. However, to better inform our stockholders on the positive impact of our various open source and open standards activities we intend to include additional information about our open source activities in the next "Oracle's Commitment" report. This report, which is available on our website, discusses various aspects of our involvement in our communities and encourages the involvement of others.

Maybe, maybe not. If you're an Oracle shareholder, make your voice heard.