Oracle’s Management Shift Was Designed to Retain New CEOs

Part of the reason why Oracle founder Larry Ellison stepped aside as CEO yesterday was to reward two of his longtime lieutenants, Mark Hurd and Safra Catz, who are now co-CEOs.

With Ellison taking the CTO title, the new managerial triumvirate now running Oracle is a simple formalization of an arrangement that had evolved since 2010 (when Hurd joined the company after leaving HP), but there’s more to it. The move is about setting Oracle on a course for long-term stability. And doing that required ensuring beyond the whiff of any doubt that both Hurd, 57, and Catz, 52, would remain at Oracle.

Sources familiar with the matter tell Re/code the two had recently been headhunted for jobs outside Oracle. Neither engaged in any significant talks, according to the sources, and it’s unclear which companies approached them. Hurd’s name was floated twice publicly, once as a potential CEO at Dell during its buyout campaign last year, and again as a possible successor to Steve Ballmer at Microsoft before Satya Nadella got the nod. There were approaches from other companies in addition to those two, the sources say.

Oracle declined to comment.

Hurd earned a combined $43.6 million in salary and stock-based compensation at Oracle last year, and was subject to what sources describe as a rigid retention package. Oracle’s proxy filing says Hurd received five million shares in each of his first five years as the company’s president. The terms of that compensation package would have expired in April or May of this year, according to one source familiar with the matter. This would have freed Hurd to begin talking to outside companies as early as February or March of this year.

The situation was similar for Catz, who is the highest-paid female executive in the world. Like Hurd, she made about $43.6 million in combined salary and stock-based compensation last year, and nearly $52 million the year before that. In 2012, she was given options to buy five million Oracle shares at a strike price of $29.72, vesting over four years, according to Oracle’s proxy. She too has been approached for jobs outside of Oracle, sources say, but like Hurd, declined to engage in any talks.

And while the terms of their compensation as CEOs hasn’t yet been disclosed, both will certainly see increases.

What’s less clear is exactly how long the dual-CEO structure can work. While the three executives maintained that the new arrangement would amount to no change in Oracle’s day-to-day operations, dual-CEO and co-CEO structures often fail over the long run. Examples where it has both worked and failed include Oracle rival SAP where Bill McDermott was recently promoted to sole CEO, making him the first American to run the Germany-based software giant. Another is BlackBerry, where for years founders Mike Lazaridis and Jim Balsillie divvied up the engineering and business sides of the business as co-CEOs. It worked until it didn’t. Time will tell if it works at Oracle.

This article originally appeared on Recode.net.