Ethics of Oracle vs. PeopleSoft

Abstract 

The early 2000s were a turbulent time for the tech industry as rapid mergers and acquisitions reshaped markets and fueled fierce competition. Oracle’s 2003 hostile takeover attempt of PeopleSoft became a defining example of the tension between shareholder value and stakeholder responsibility. This case study explores how both companies struggled to uphold ethical standards, using frameworks such as Just War Theory (JWT), Corporate Social Responsibility (CSR), and Stakeholder Theory. Oracle’s low initial offer and aggressive tactics failed to meet key JWT principles like just cause and right intention, weakening the ethical foundation of its bid. On the other side, PeopleSoft’s use of a poison pill and its Customer Assurance Program—while legally within bounds—raised concerns about transparency, fiduciary responsibility, and proportionality. More ethical acquisition planning involving open communication and stakeholder input could have reduced conflict and protected long-term interests. Likewise, PeopleSoft’s corporate governance reforms might have led to a more accountable and inclusive response. Overall, this case shows how hostile takeovers that overlook ethical frameworks can cause significant harm to organizations, communities, and employees.

Introduction 

In the early 2000s, the tech industry underwent a major change, with large mergers and acquisitions becoming more common as companies competed for dominance. One of the most talked-about cases from this time was Oracle’s hostile takeover of PeopleSoft. According to Oracle v. PeopleSoft: A Case Study, by David Millstone & Guhan Subramanian (2005), which will be the primary piece we will analyze in this paper, the deal officially closed on January 7, 2005, but not before an 18-month battle that sparked legal action, media attention, and serious ethical questions (Millstone & Subramanian, 2005, p. 22). While Oracle claimed the acquisition was strategic, PeopleSoft pushed back, concerned about losing its identity, laying off employees, and compromising customer relationships.

At the heart of this case is a big ethical question: should companies make decisions based only on what’s best for shareholders, or do they owe something more to their employees, customers, and communities? Oracle’s initial offer of $16 per share—below the company’s average trading price—was seen by many as a move to weaken PeopleSoft rather than genuinely collaborate (Millstone & Subramanian, 2005, p. 5). In response, PeopleSoft’s leadership used defensive tactics like poison pills and a Customer Assurance Program, which added even more tension to the situation. While technically legal, these strategies made people question whether management was acting in the company's best interests—or just trying to stay in control.

This paper explores the ethical challenges of this takeover using Just War Theory (JWT), Stakeholder Theory, and Corporate Social Responsibility (CSR). Both companies made decisions that impacted thousands of employees and investors, and it’s worth asking whether those decisions were made with fairness, transparency, and long-term responsibility in mind. When companies go through mergers or takeovers, it’s not just about money—it’s about people. In this case, the human side of the story got lost in the middle of corporate strategy.

Analysis of Main Issues and Problems

Bidding Low and Instilling Reasonable Doubt

The proposed merger between Oracle and PeopleSoft began with differing visions. Craig Conway, PeopleSoft’s CEO, wanted to lead a newly merged, standalone company, while Oracle CEO Larry Ellison envisioned absorbing PeopleSoft into Oracle. This first disagreement initiated a hostile dynamic that rapidly escalated into a hostile takeover attempt. According to Michael Kinsella (2016), from an ethical perspective grounded in JWT, Oracle’s initial bid failed to meet the principles of just cause and right intention (Kinsella, 2016). Market dominance motivated the offer more than a commitment to stakeholder value, innovation, or product development.

Oracle's choice to offer $16 per share -3.6 % below the 30-day average trading price and 12.1% below the 180-day average—was taken as a calculated attempt to devalue PeopleSoft and create destabilization (Millstone & Subramanian, 2005, p. 5). According to Willie E. Hopkins & Shirley A. Hopkins in The Ethics of Downsizing: Perceptions of Rights and Responsibilities (1999), Oracle’s approach would be viewed as ethically concerning because of the implications surrounding stakeholder rights, particularly those of employees and customers who faced job insecurity and narrowing support for key software products (Hopkins & Hopkins, 1999). John Orlando (1999) may interpret that shareholders are being prioritized above stakeholders according to the shareholder versus stakeholder theory (Orland, 1999). The move also violated principles of Corporate Social Responsibility (CSR) outlined by Michael Kinsella (2016), as Oracle seemed primarily focused on weakening a competitor rather than creating long-term value. Furthermore, the public bidding process ignored possible pathways for cooperative dialogue, which would have better aligned with the ethical framework of last resort in JWT (Kinsella, 2016).

Safra Catz, appointed to manage Oracle’s M&A strategy, chose an initial lowball bid, which created distrust and offended PeopleSoft (Millstone & Subramanian, 2005, p. 5). PeopleSoft retaliated by acquiring J.D. Edwards, which Oracle described as a defensive and desperate move. This tit-for-tat approach escalated corporate hostility and created a morally ambiguous atmosphere. PeopleSoft’s original CEO, described to be quite opposite from Ellison’s personality and subsequent successor to Conway, David Duffield, resisted the acquisition largely on moral grounds, highlighting the ethical significance of mass layoffs and community disruption. His concern for the PeopleSoft “family”—those who had built the company—underscored the emotional and moral toll of the impending acquisition: “Think how many divorces are going to happen because of this” (Millstone & Subramanian, 2005, p. 20). This perspective reflects principles from Kantian ethics and CSR, where the dignity of employees and community stability must be preserved (Hopkins & Hopkins, 1999; Orlando, 1999).

PeopleSoft’s Poison Pill in Question 

In response to Oracle’s escalating pressure, PeopleSoft enacted several anti-takeover defenses, including poison pills, golden parachutes, and a novel Customer Assurance Program (CAP). The CAP, which promised customers refunds up to five times their purchase price if Oracle cut product support, created a $2 billion liability (Millstone & Subramanian, 2005, p. 17). While legally allowed, these defenses put managerial control above shareholder rights and raised critical ethical issues. Under the JWT framework, these actions violated macro-proportionality, which is Kinsella’s idea that the benefits should outweigh the potential harm to employees, stakeholders, and markets. The costs imposed on Oracle—and indirectly on shareholders—may not have been ethically justified (Kinsella, 2016). Although PeopleSoft argued that these measures protected customers and the business ecosystem, they obstructed shareholders from making autonomous decisions about Oracle’s offer. This disharmony with transparency versus fiduciary duty, defined by Orlando (1999) as the manager's legal responsibility to act in the best interests of shareholders, perpetuated skepticism about the true motives behind these strategies (Orlando, 1999). PeopleSoft’s defenses were presented as protective of customers and stakeholders, but in reality, were they acting immorally by bypassing shareholder votes and prioritizing managerial entrenchment? The CAP, in particular, appeared more like a strategic maneuver to burden Oracle than a sincere customer guarantee (Millstone & Subramanian, 2005, pp. 17–18).

The adversarial tone reached an unethical extreme. Conway’s inflammatory metaphor comparing Oracle’s offer to “asking if I could buy your dog so I can go out back and shoot it” and Ellison’s retaliatory quip about whom he’d shoot if given one bullet not only played down stakeholder welfare but transformed corporate leaders into antagonistic actors (Millstone & Subramanian, 2005, p. 11). These developments prevented PeopleSoft from taking the moral high ground and instead took a morally questionable turn toward whom they felt a duty, especially as Oracle’s offer continued to improve. The courts, particularly in Delaware, grew wary of such entrenchment. As stated by a legal observer, “You’ve got to be dealing with the shareholders, and there’s very little wiggle room you have in your loyalty to shareholder value” (Millstone & Subramanian, 2005, p. 19). This echoes the concern from Loyola and Portilla (2016) that managerial self-interest often undermines shareholder value in hostile takeovers.

Strategies and Solutions

Ethical Acquisition Planning

Ethical acquisition planning involves balancing multiple stakeholder interests while ensuring transparency, fairness, and sustainability throughout the merger and acquisition (M&A) process (Aurora, n.d.). In the case of Oracle’s hostile takeover of PeopleSoft, Oracle’s approach lacked foundational ethical components for a responsible, values-based M&A. Rather than initiating a mutually beneficial conversation, Oracle launched a surprise tender offer that immediately cast them as a corporate aggressor (Millstone & Subramanian, 2005, p. 5). Ethical frameworks such as JWT, the Stakeholder Theory, and Kantian ethics emphasize the need for right intention, transparency, and proportional action—principles that Oracle initially ignored (Kinsella, 2016; Orlando, 1999; Hopkins & Hopkins, 1999).

A moral approach would have included a pre-acquisition dialogue facilitated by a neutral third party. Involving mediators and independent financial advisors could have helped Oracle and PeopleSoft explore mutual benefits and align strategic visions—possibly preventing the immediate breakdown in trust and hostility following Oracle’s $16 per share offer, which was below PeopleSoft’s average trading value (Millstone & Subramanian, 2005, p. 5). Oracle could have publicly articulated the ethical justifications for the bid—grounded in JWT’s principles of just cause, right intention, and macro-proportionality—by explaining how the acquisition would generate long-term value not just for shareholders but also for employees, customers, and the broader software industry (Kinsella, 2016). This would have demonstrated legitimate authority, avoided intimidation tactics, and fulfilled the requirement that a hostile bid be a last resort after exhausting cooperative options (Kinsella, 2016).

Furthermore, ethical acquisition planning demands consideration of employee welfare, job security, and long-term company culture. Oracle could have committed publicly to upholding PeopleSoft’s legacy, including customer service standards, software development, and employee support (Millstone & Subramanian, 2005, pp. 19–20). Such commitments would have built trust, reduced hostility, and signaled a genuine interest in stakeholder well-being. These actions reflect Kantian ethics, which require treating employees as ends in themselves, not merely as a means to an end (Hopkins & Hopkins, 1999; Orlando, 1999). Additionally, Oracle could have structured a post-merger integration plan that explicitly addressed stakeholder needs—minimizing layoffs, offering retraining programs, and ensuring transparent restructuring plans. These measures align with Kantian ethics and Corporate Social Responsibility (CSR), emphasizing ethical obligations beyond profit maximization (Orlando, 1999; Hopkins & Hopkins, 1999). JWT’s principles of Jus post-Bellum—particularly rights vindication, fair compensation, and rehabilitation—should also have guided Oracle’s restructuring efforts (Kinsella, 2016).

Transparent communication throughout the acquisition process—among management, employees, clients, and shareholders—would have helped mitigate uncertainty and fear, enhancing morale and preserving public trust. Instead of sowing doubt with a lowball bid and public pressure campaigns, Oracle could have opened with a fair market premium, demonstrating ethical commitment and financial respect (Millstone & Subramanian, 2005, p. 5). A more transparent, consultative acquisition strategy would have allowed both companies to engage from a place of mutual dignity and moral legitimacy. Moreover, Oracle could have adopted a multi-phase integration plan, allowing PeopleSoft’s existing systems and teams to operate semi-independently during a transitional period. This would have maintained PeopleSoft’s cultural identity while enabling Oracle to gradually introduce strategic changes (Millstone & Subramanian, 2005, p. 20). Including ethicists and human resources specialists in the M&A process would have promoted ethical clarity and ensured stakeholder fairness. Layoffs, role changes, and cultural shifts are not just operational events but human experiences with long-term consequences. Ethical acquisition planning acknowledges this and strives to grow the business without sacrificing the people within it (Orlando, 1999; Hopkins & Hopkins, 1999).

Shareholder-Centered Governance Reform (PeopleSoft’s Side)

While PeopleSoft’s resistance to Oracle’s acquisition was grounded in ethical concerns for its employees and the surrounding community, some of their tactics—such as the poison pill and the Customer Assurance Program (CAP)—had unintended consequences. These defenses created significant financial liabilities for Oracle and arguably compromised the autonomy of PeopleSoft’s shareholders (Millstone & Subramanian, 2005, p. 17). Although designed to protect stakeholders, these strategies risked crossing the ethical line into managerial entrenchment, where leadership was perceived as protecting its own position more than the company's broader obligations to shareholders (Loyola & Portilla, 2016).

Just War Theory, as adapted by Michael Kinsella (2016), reminds us that resistance must meet the ethical standards of “just cause” and “proportionality” to remain morally legitimate. In this case, the scale of PeopleSoft’s deterrent measures may have overstepped that proportionality despite good intentions. A more balanced approach—rooted in stakeholder theory and corporate social responsibility (Hopkins & Hopkins, 1999)—would have included giving shareholders a direct vote on such high-stakes decisions. This would have honored their fiduciary rights and introduced an element of moral transparency. One empathetic solution would have been forming a neutral oversight committee composed of independent board members, shareholders, employee representatives, and ethical advisors. This group could have reviewed Oracle’s proposal holistically, asking whether the offer made financial sense and aligned with the company's values, employee well-being, and long-term mission. This solution draws directly from the ethical frameworks of stakeholder theory (Orlando, 1999) and the Just War Theory’s emphasis on right intention and stakeholder protection (Kinsella, 2016).

PeopleSoft could have also embraced “constructive takeover defenses,” such as offering transparent client transition plans or protecting employee benefits during any merger process. Instead of using these protections to block Oracle altogether, they could have invited a more collaborative conversation where stakeholders felt informed and included rather than blindsided (Hopkins & Hopkins, 1999). Had PeopleSoft embraced more transparent and inclusive governance practices, it may have built stronger internal unity and moral clarity. These steps could have counterbalanced the external pressures—such as the DOJ’s legal loss, Conway’s dismissal, and growing shareholder unrest—that ultimately forced them to negotiate (Millstone & Subramanian, 2005, pp. 17–20). A transparent stakeholder-centered approach would have given employees, customers, and investors a voice, allowing PeopleSoft to protect its culture while operating within the bounds of ethical business leadership (Orlando, 1999; Loyola & Portilla, 2016). By proactively anchoring its strategy in principles of stakeholder theory, fiduciary duty, and ethical transparency, PeopleSoft could have strengthened its moral stance and strategic resilience. Ethical governance isn't about avoiding change—it’s about navigating change in a way that honors the people at the organization's heart.

Personal Experience  

In my personal experience, my company went through an acquisition in which the acquired business retained its branding, customer base, and most of its staff. At first, the integration seemed respectful and well-managed. However, significant layoffs occurred a few years later across the acquired company and our own. On both sides, many sales representatives were let go in what appeared to be a broader response to declining revenues and the AI-driven shift in the tech industry. While leadership had hinted at the potential for workforce changes, no formal communications or transparent strategies outlined the scale or timing of those layoffs. We were told that due to advancements in AI, there would be less need for customer sales representatives and that some roles could eventually be automated. This message was vague and left me feeling unsure about my own job security.

As someone who actively follows business and tech trends, I saw what Elon Musk had done at Twitter/X with massive post-acquisition layoffs. That prompted me to ask my direct manager if my position was secure. He reassured me that there were no planned changes to our immediate team. While that relieved me, I still considered other job opportunities. Eventually, I remained employed, but many of my colleagues were less fortunate. This experience made me reflect on the ethical responsibilities of companies during and after mergers. Using frameworks like Just War Theory, it’s clear that the company could have better aligned with principles such as rights vindication and proportionality, which call for transparent, fair treatment of those impacted by corporate actions (Kinsella, 2015). From a Stakeholder Theory perspective, the layoffs—without sufficient warning or preparation—highlighted a failure to fully consider the interests of employees (Freeman, 1984).

Although the company may have met its legal obligations, it did not fulfill its ethical duty to communicate clearly or support employees through the transition. A more thoughtful approach, grounded in Corporate Social Responsibility, would have included early warnings, open conversations, retraining opportunities, and support for those laid off. This experience has shown me that ethical frameworks should not just be theoretical concepts but should guide real business decisions that affect people’s livelihoods and dignity.

Biblical Integration  

Mergers and acquisitions often lead to difficult outcomes, such as layoffs, uncertainty, and broken trust. In the case of Oracle’s takeover of PeopleSoft, many employees faced the threat of losing their jobs, and the leadership at PeopleSoft—especially founder David Duffield—worried about the emotional and financial toll this would cause. Duffield even expressed concern about how many divorces might result from job losses (Millstone & Subramanian, 2005, p. 20). This highlights how real people and families are impacted when companies prioritize financial gains over people’s lives.

From a biblical perspective, employees should be treated fairly, compassionately, and with respect. As the Theology of Work Project reminds us, leaders should invite God into strategic decisions and seek guidance that honors everyone involved: “Lift the potential partnership before the Lord in prayer... ask for counsel and coaching from other godly leaders” (“God’s Wisdom in Strategic Partnerships,” n.d.). If Oracle had taken a more humble and prayerful approach, it could have chosen a path that respected PeopleSoft’s employees and legacy. The Gospel Coalition explains that even when we face risk or loss in business, we can trust God: “If you fear failure because so much is out of your control, you can turn that into a lament and into trust” (Phelan, 2023). Rather than using power and money to pressure PeopleSoft into selling, Oracle could have focused on building trust, showing employee care, and seeking a shared vision for the future. 

Scripture encourages business leaders to treat their workers with justice. Colossians 4:1 says, “Masters, provide your slaves with what is right and fair because you know that you also have a Master in heaven” (New International Version). James 5:4 adds, “The wages you failed to pay the workers… are crying out against you,” warning of the consequences of exploiting labor. Proverbs 22:1 reminds us that “A good name is more desirable than great riches,” pointing out that a company’s reputation should matter more than short-term profits. These verses support ethical business practices like offering fair severance, retraining, and honest communication—especially in transition seasons. Ultimately, a biblically informed merger values people, not just profits. Business growth can and should happen in ways that reflect justice, humility, and care for all stakeholders.

References

Aurora Training Advantage. (n.d.). Balancing stakeholder interests. https://auroratrainingadvantage.com/articles/balancing-stakeholder-interests/

Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston, MA: Pitman.

Hopkins, W. E., & Hopkins, S. A. (1999). The ethics of downsizing: Perceptions of rights and responsibilities. Journal of Business Ethics, 19(3), 241–250.

Kinsella, M. (2016). Hostile takeovers—An analysis through Just War Theory. Journal of Business Ethics, 129(4), 771–789. https://doi.org/10.1007/s10551-014-2191-4

Loyola, G., & Portilla, Y. (2016). A bargaining model of friendly and hostile takeovers. Economics Letters, 143, 56–59.

Millstone, D., & Subramanian, G. (2005). Oracle v. PeopleSoft: A case study. Harvard Business School.

Orlando, J. (1999). The fourth wave: The ethics of corporate downsizing. Journal of Business Ethics, 22(2), 109–118.

Phelan, G. (2023, January 31). Called to business—and risk. The Gospel Coalition. https://www.thegospelcoalition.org/article/called-business-risk/

Theology of Work Project. (n.d.). God’s wisdom in strategic partnerships. Theology of Work. https://www.theologyofwork.org/the-high-calling/blog/gods-wisdom-strategic

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