At next months' shareholder's meeting, Microsoft investors will be asked to vote on executive compensation, in the company's second-ever "say-on-pay"vote. The first one was held in 2009 and at the time the board decided to only allow such a vote once every three years. It's been two years and yet here we are again -- and the board wants to move to annual say-on-pay vote.
Microsoft's board is setting itself up to take stronger action against executives if the company's stock performance -- and other metrics such as the success of Windows Phone -- don't improve and improve soon. That said, this isn't HP. While calls for Ballmer's head are downright routine,Ballmer owns 333 million shares of Microsoft common stock, or nearly 4%. Just for comparison, Gates, who has been selling his stock off for years to pay for his philanthranpic interests, owns about 541 million shares, or just over 6%. To say that ousting him would be difficult is an epic understatement. (And, mind you, who would take over?)
Still, Microsoft's board wants to be seen as taking steps to better align executive pay with the company's overall performance, especially as it has so much riding on the next 12 months: Nokia's entrance into Windows Phone 7, the start of Windows 8, the new Windows Server 8, the successful integration of Skype, an $8.5 billion exependiture of Microsoft's cash reserves that has baffled most of the pundits as to its advantage for Microsoft.John Seethoff, Vice President & Deputy General Counsel, Microsoft in a blog post.Seethoff explained the change of heart: "Considering input we have received in our shareholder outreach and the preference evident from voting results at other large companies, we recommend shareholders vote to hold the say-on-pay vote every year."
In 2009, the reasons given for a three-year period between say-on-pay votes was: "Our compensation program is designed to induce and reward performance over a multi-year period. Say-on-Pay votes should occur over a similar timeframe," wrote
So, no more multi-year incentive plans?
Earlier this week,
The following executives will be part of the say-on-pay vote.
Steven A. Ballmer, our Chief Executive Officer (and our principal executive officer);
Peter S. Klein, our Chief Financial Officer (and our principal financial officer);
Kurt D. DelBene, our President, Microsoft Office Division;
Steven J. Sinofsky, our President Windows and Windows Live Division; and
B. Kevin Turner, our Chief Operating Officer.
Ballmer earned $1,376,915 in pay for the company's last fiscal year, which is a drop in the bucket compared to the salaries of most Fortune 100 CEOs. He earned $682,500 in pay and $685,500 in bonuses, although he was eligible for a bonus equal to 200% of his pay, hence the stories circulating that Ballmer only recieved half his bonus. That's a bit laughable. Ballmer already owns so much stock that he doesn't want more of it as part of his pay, SEC reports show. For the first time in years, last November, he sold about $1.3 billion in Microsoft stock or 49 million shares. So he didn't get another $600,000 in cash. He's not hurting for money.
While Ballmer's annual compensation remained about flat from 2010 -- the cash out of $1.3 billion notwidthstanding -- all other executives saw increases.
And you might enjoy this: that "other compensation" column includes matching 401K contributions, disability insurance and athletic club memberships which SEC documents explain are benefits all of Microsoft's U.S. employees have.
The compensation awarded to the above executives for the fiscal year that ended June 30, 2011 was:
|Name and Principal Position||Year||Salary ($)|
All Other Compensation($)(3)
Steven A. Ballmer
Chief Executive Officer;Director
Peter S. KleinChief Financial Officer
|Kurt D. DelBene President, Microsoft Office Division||2011||603,333||1,450,000||4,154,922||10,994||6,219,249|
|Steven J. Sinofsky President, Windows and Windows Live Division||2011||649,167||1,260,000||5,288,083||10,508||7,207,758|
B. Kevin TurnerChief Operating Officer
Will shareholders approve?