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updated 1/13/2004 12:50:30 PM ET 2004-01-13T17:50:30

Larry Ellison's controversial leadership of Oracle was effectively reined in on Monday as the software company announced an unexpected shake-up in its senior management.

Mr. Ellison who has enjoyed wide-ranging control over the company he founded and remains its largest shareholder with more than 26 percent, will give up his role as chairman. The company also handed more power to two other senior executives, each of whom was given the new title of president.

The surprise move shifts power to three executives who have come to play an increasingly important role at Oracle in recent months after the uproar caused by its hostile takeover bid for rival PeopleSoft. The handling of the bid has caused consternation among PeopleSoft customers and brought a renewed focus on Mr. Ellison's swashbuckling but controversial leadership.

One person close to the company said that Mr. Ellison had been closely involved in discussions about the shift in roles, while another said that he had been primarily responsible for instigating the changes. Mr. Ellison was unavailable for comment.

Jeff Henley, Oracle’s chief financial officer, will give up his existing duties to become a full-time chairman of the company and, effectively, Mr. Ellison's boss. Safra Catz, a former investment banker who has been a close aide to Mr. Ellison, and Chuck Phillips, a former Morgan Stanley analyst, were promoted to the role of president.

Michael Boskin, the independent director at Oracle who chairs the company's board-level nominating committee, said the changes had been prompted mainly by a desire to promote the three executives, not to limit Mr. Ellison's influence.

The board had been concerned that Mr. Henley, 57, would retire and wanted to keep him at the company longer, said Mr. Boskin. The promotions of Ms. Catz and Mr. Phillips were also to aimed at recognising their greater responsibilities.

“Larry remains Oracle's leader and will be for quite some yet,” said Mr. Boskin.

Despite that, the changes echo a shake-up at the company more than a decade ago that also saw Mr. Ellison stripped of authority. Following questions about the company's accounting policies, Mr. Henley was brought in from the outside to oversee the company's finances and Mr. Ellison stepped down as chairman, though he was later reinstated.

While the changes did not reflect any reduction in his responsibilities, they would free Mr. Ellison to concentrate on areas of strategy and technology development, which were his main areas of interest, one person close to the company said.

Copyright The Financial Times Ltd. All rights reserved.

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