Golden parachutes ready for top Sun execs

Sun CEO Jonathan Schwartz, chairman Scott McNealy, and other company executives stand to get large severance packages if they opt against staying on after Oracle deal closes

If Oracle's acquisition of Sun Microsystems goes as planned, CEO Jonathan Schwartz will receive a severance package of about $12 million, and board chairman and co-founder Scott McNealy, about $9.5 million, according to the proxy statement filed Monday.

The severance packages are large, but not on the scale of the $21 million-plus paid to former Hewlett-Packard Co. CEO Carly Fiorina, or the whopping $210 million severance paid to former Home Depot CEO Robert Nardelli.

[ Special report: Oracle buys Sun for $74. billion. ]

But a severance agreement doesn't mean these Sun executives are exiting once the acquisition is completed. The proxy statement noted that Larry Ellison, Oracle's CEO, "spoke generally" to McNealy about "about a role" in the combined company, but that no agreement has yet been reached, Sun shareholders will vote July 16 on whether to accept Oracle's $7.4 billion offer.

And what of Schwartz? It's possible he will sign on with Oracle, or take a path perhaps similar to Paul Maritz, a former top Microsoft executive who left to launch a startup company that was ultimately acquired by EMC. Maritz stayed at EMC and now heads its VMware unit.

Or, Schwartz may take an eclectic, career-changing path similar to that taken by Fiorina. The former HP CEO was an adviser to Republican Sen. John McCain in his bid last year for the White House and is now said to be considering whether to run herself next year as a Republican against Democratic U.S. Sen. Barbara Boxer.

Charles King, an analyst at Pund-IT Inc. in Hayward, Calif., believes the severance packages may help Oracle encourage top Sun executives to stick around after the acquisition. While Sun wasn't financially successful under Schwartz, King said he was responsible for the open source strategy and products "that made the company so attractive to Oracle."

Retaining the Sun executives may help Oracle keep Sun customers from defecting to competitors, added King. "The last thing you want to give customers is a reason to start having serious discussions with HP and IBM." McNealy, in particular, headed Sun's federal efforts, which is a big part of Sun's business. McNealy also recommended to President Barack Obama's transition team that the White House appoint a CIO, and not just a CTO as initially planned. Obama evidently took that advice.

Gordon Haff, an analyst at Illuminata in Nashua, N.H., believes Scott and McNealy are unlikely to stay on after the deal closes. Since leaving as CEO, McNealy had stepped away from day-to-day operations, and while Schwartz had some good ideas, Haff points out that "quite frankly, the company did not flourish under Jonathan."

Nonetheless, Rob Enderle, an independent analyst in San Jose, Calif., said the severance packages don't appear to be excessive.

"Schwartz's severance package appears to be in line with his salary and within range of other packages in the Valley, so I think it will be hard to sustain an argument that it is uniquely excessive," said Enderle. But given that Sun was failing, Schwartz took a deal that was lucrative for himself and for his company. "He had to sell it or shut it down," he said.

This story, "Golden parachutes ready for top Sun execs" was originally published by Computerworld.

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