A look at Oracle Corp's (ORCL) proxy statement filed September 11, 2000, reveals that CEO Lawrence Ellison will take all of his pay in stock options for four years. For the company's fiscal year ending May 31, 2000, Ellison was paid $208,000 in base salary and received no annual bonus. This is considerably less than he received in fiscal 1999: a base salary of $1 million and a bonus of $2.75 million. But before you start worrying about how the Ellisons are going to make ends meet, take a look at the next column on the summary compensation table. It shows that Larry Ellison was awarded 20 million (yes, 20 million) stock options in fiscal 2000 - as compared with a mere 3 million options in fiscal 1999. The footnotes and subsequent tables reveal that the 20 million options are intended to be for four years (2000 through 2003). So, the company is saying this is like granting him only 5 million options this year. These options, which were granted in June 1999 (during fiscal 2000), have an exercise price of $13.75. However, the stock underwent a 2:1 split in October 2000, resulting in 40 million options at an exercise price of $6.88 for Ellison. What are these options worth? According to the company's proxy based on a methodology prescribed by the SEC, when the options were granted they had a "potential realizable value" of $173 million to $438 million, based on assumed annual stock appreciation rates of 5 percent and 10 percent per year, respectively. This translates to roughly $43 to $110 million per year for the four-year period they are intended to cover. In truth, these options are actually worth a lot more. As of the close of the stock market on July 11, 2001, Oracle was trading at $18 a share. Ellison's paper gain on the 40 million options is $445 million, but he's only vested 50 percent, or $222.5 million. While those numbers seem staggering, it's a decrease from last year's potential compensation. As of the close of the stock market on October 4, 2000, Oracle was trading at $68.12 per share. His paper gain on his then 20 million options was a staggering $1 billion. Vested 25 percent, he had a potential payout of $250 million, slightly higher than his potential payout one year later, even though he's farther along in the vesting schedule. The compensation committee states that it has changed the CEO's compensation so that he will receive no salary and no bonus for four years. In lieu of all other forms of pay, he will receive just the 20 million options. In its statement the committee says the following. "The changes to the Chief Executive Officer's compensation plan more closely align his compensation with the Company's stock performance. The Black-Scholes value of the option grant given to the Chief Executive Officer was approximately $191 million and will be the Chief Executive Officer's only option grant for the four-year period from fiscal 2000 to fiscal 2003." - Bill Coleman, Senior Vice President of Compensation