PeopleSoft Directors May Face Opposition

Institutional Shareholder Services, the nation’s largest advisor to money managers on proxy voting, said Monday that it might recommend investors withhold their votes for PeopleSoft Inc. directors at the company’s meeting this month.

The service is concerned about some actions taken by PeopleSoft in its fight against Oracle Corp.’s $9.4-billion hostile takeover.

“We’re unhappy with some of the decisions PeopleSoft has made without shareholder input,” said Patrick McGurn, an Institutional Shareholder vice president. These include the company’s offer of customer rebates and possible introduction of a “poison pill” provision, making it prohibitively expensive for Oracle or anyone else to buy PeopleSoft.

A decision to withhold votes from PeopleSoft’s four directors would be a setback for the company, which won a reprieve last week when Oracle decided not to present its own proxy slate at the meeting. Institutional Shareholder Services, with 750 institutional subscribers, was the first to recommend Walt Disney Co. shareholders withhold votes for Chairman Michael Eisner.

Eisner has lost the support of at least 10 states’ pension funds. The possible challenge to PeopleSoft is similar to one that Disney shareholders, unhappy with Eisner’s performance, may make this week when they vote at the company’s annual meeting in Philadelphia, McGurn said.

“As Disney is learning the hard way, people are looking at the level of no vote as a referendum on the board,” McGurn said.

Institutional Shareholder will decide “within the week” whether to advise investors to withhold support at the meeting March 25, McGurn said. He said he wanted to discuss the concerns with PeopleSoft before making a recommendation.

Oracle stopped soliciting proxies for use at the meeting and pulled its slate after the Justice Department announced Thursday that it would file suit in federal court to block the takeover. Oracle said its decision to challenge the Justice Department lawsuit would extend beyond the shareholders meeting, prompting the Redwood City, Calif., company to extend its tender offer for PeopleSoft to June 25 from March 12.

Oracle is offering $26 a share for PeopleSoft, which last year became the No. 2 maker of software for business tasks such as accounting and inventory after its acquisition of rival J.D. Edwards & Co. Oracle is the No. 3 supplier of such software. Germany’s SAP remains the market leader.

Meanwhile, Oracle Chief Executive Larry Ellison, who has derided Microsoft Corp. as a “convicted monopolist,” is seeking to enlist his rival -- willingly or not -- to bolster his hostile bid for Pleasanton, Calif.-based PeopleSoft.

Oracle plans to request information from Microsoft to challenge the government’s stance that Oracle’s offer for PeopleSoft would violate antitrust laws.

Ellison and Oracle are trying to undermine the Justice Department’s conclusion that only SAP would remain a significant rival in the market for complex accounting software if the takeover took place.

Depositions from Microsoft, the world’s largest maker of software, may show it is planning to enter the market, a lawyer for Oracle said.

“Certainly Microsoft is top of mind,” said Daniel Wall of San Francisco-based Latham & Watkins, which is working for Oracle. “We’re going to have to see what we get cooperatively and what we have to get through subpoena.”

In seeking evidence from Microsoft in his own antitrust case, Ellison is turning to a company he has spent a decade lambasting as monopolistic. Oracle will try to convince a U.S. District judge that competition from Microsoft and others wasn’t properly considered by the Justice Department when it sued to block the company’s takeover of PeopleSoft

Also on Monday, Vaughn R. Walker, a U.S. judge in San Francisco who once practiced antitrust law, was assigned to oversee the government’s challenge to Oracle’s bid for PeopleSoft.

PeopleSoft shares fell 30 cents to $21.28, while Oracle rose 21 cents to $13.08, both on Nasdaq.