Social Responsibility Advocates Demand Open Source Action From Oracle

| About: Oracle Corporation (ORCL)
This article is now exclusive for PRO subscribers.

Dennis Byron submits: There is a “corporate/social responsibility” initiative at the November Oracle (NYSE:ORCL) shareholders meeting that merits IT investor attention (and not just the attention of Oracle investors). A pair of experienced corporate/social responsibility advocates has put a proposal on the Oracle proxy that requires the Oracle board to “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.”

The Oracle shareholder responsible for the ballot question is Lawrence Fahn, a long-time environmental activist and former president of the national Sierra Club. The prime mover behind the question is Jonas Kron, a lawyer with experience in the procedures required for activist-investor efforts. He says he is acting in this situation as a supporter/admirer of the open source software [OSS] movement, not just as a legal advisor.

I think Mr. Kron and Mr. Fahn are asking the wrong question to the wrong company at the wrong time. I asked them why.

Mr. Kahn and Mr. Kron are, respectively, the executive director and legal counsel to an organization called As You Sow [AYS] of San Francisco. AYS was founded in 1992 “to increase corporate accountability.” One of its aims is centered on the Environmental Enforcement Program (apparently related primarily to California). Another is more universal and centered on Corporate Social Responsibility “to use shareholder advocacy and the financial markets to catalyze positive change within public held companies.” However, although the proxy lists AYS’ name and address, Mr. Fahn says that the organization has not yet decided to pursue OSS on an organizational level. Instead, he submitted it on his own behalf after discussions with Mr. Kron.

The pair certainly knows more about placing social responsibility questions on the corporate agenda than I (in fact, I thank them for educating me on the subject). But the wording of the ballot question indicates only a passing knowledge of OSS. The proposal mixes up the OSS and technology standards movements in a way that does neither justice. It also implies OSS can do a lot of things that are way beyond possibility.

OSS is partially a social movement. But as a social movement it is more a virtual network of Elks’ lodges for hackers than it is the Paris Commune. For most of those who analyze OSS as a movement, Dennis Ritchie summarizes the sense of OSS best in describing some of his thoughts during the Unix invention process: “What we wanted to preserve was just not a good environment in which to do programming, but a system around which a fellowship could form.” (source: Alacatel-Lucent (ALU) web site). There is a small radical (not meant as a criticism) element of the OSS movement called the Free Software Foundation [FSF] behind that barricade over there. But the FSF has nothing to do with the Oracle proxy and in fact even vehemently opposes the words “open source.”

From an investment perspective however, OSS is a research and development model that saves corporations—suppliers and users alike—substantial upfront investment.

In some investment research and analysis, OSS is also a business model that drives technology suppliers to a high-margin services mentality from a dependence on increasingly commoditized low margin products.

Whichever way investors want to view OSS, it can have no more to do with “catalyzing change” within public companies, especially suppliers of IT, than any other technology since it is only a means to an end (and even a means to a means).

The sponsors indicated that proxy-question procedure is partially responsible for the wording of the proposal. SEC regulations forbid ballot questions that simply ask shareholders to vote on company operational aspects. For example, Mr. Fahn and Mr. Kron could not ask investors to vote to have Oracle adopt OSS as its driving technology principle, although that is what they would like to see happen at Oracle and in other corporations. So, instead, their proposal asks for a report on how OSS contributes to Oracle’s social responsibility.

As for choosing Oracle, I was stumped before I talked to the sponsors. Oracle has a respectable place in the OSS community but it's not a big user like Google (NASDAQ:GOOG), or a mover and shaker like Red Hat (NYSE:RHT), or the OSS villain that Microsoft (NASDAQ:MSFT) is always painted to be. Mr. Fahn’s answer is “time of year.” Because Oracle proxies in the Fall and most corporations meet in the Spring, it is easier for them to approach Oracle on what they acknowledge is a personal, not organizational, pursuit. In the Spring, they are too busy with AYS initiatives. That answered both my “Why Oracle?” and “Why now?” questions.

Naturally, Oracle opposes the proposal because boards always oppose proxy proposals that they didn’t propose. But on the face of it (and I still believe there is more to this under the covers), the OSS movement should oppose the whole idea as poorly timed and too abstract. The blindsiding of Oracle also makes the OSS community look bad, although I cannot find any OSS-aligned organization behind the AYS effort.