News

Microsoft's Shareholders Get Executive Pay Vote

• By Kurt Mackie
• September 21, 2009

Microsoft is instituting a "say-on-pay" policy that will let its shareholders vote on compensation for Microsoft's senior executives.

The votes will be nonbinding and can be overruled by Microsoft's board, which decides executive pay. Shareholders will be able to express their opinions on the matter every three years.

A three-year interval is needed to match Microsoft's compensation policy, argued Brad Smith, Microsoft's general counsel and corporate secretary, and John Seethoff, Microsoft's vice president and deputy general counsel. Microsoft typically assesses the performance of its executives over multiple years.

"A three-year cycle will provide investors sufficient time to evaluate the effectiveness of our short- and long-term compensation strategies and related business outcomes," they wrote in a Friday blog post.

The blog noted that Congress and the U.S. Securities and Exchange Commission are currently considering say-on-pay proposals, and that Microsoft aims to "comply with any requirements that emerge." However, those government proposals appear to be aimed at reassessing pay annually -- not every three years.

Currently, there are two U.S. Congressional bills promising nonbinding shareholder votes on executive pay. The House version is called the "Corporate and Financial Institution Compensation Fairness Act of 2009" (H.R. 3269, PDF). The Senate version is titled, "Shareholder Bill of Rights Act of 2009," sponsored by Senators Charles Schumer and Maria Cantwell.

Both bills appear to be timed to address recent financial scandals. Wall Street firms widely instituted executive pay hikes even as those firms lost millions, and even as they accepted taxpayer bailouts in the form of Troubled Asset Relief Program funds.

Microsoft has been generating less revenue during the economic downturn, and even announced layoffs affecting about 5,000 people. Chris Liddell, Microsoft's chief financial officer, has mentioned that employee pay was flat for the year. Still, some Microsoft executives received an increase, such as Microsoft's CEO Steve Ballmer.

"Microsoft Corp. raised CEO Steve Ballmer's salary by 4 percent at the start of fiscal 2009, a year in which the software maker's profit declined 17 percent as the economic meltdown decimated personal computer sales," an Associated Press story noted.

Microsoft's new say-on-pay policy is scheduled to begin on Nov. 19, at the company's next shareholder meeting.