Microsoft Corp.
Summary:
We're confident that this is one of the best, if not THE best, executive compensation program we have reviewed. If you don't believe us, see for yourself. Their proxy statement is the clearest and easiest to read you'll ever come across.
Thank you Microsoft!
Analysis:
Microsoft is a force to be reckoned with. As the largest independent software producer in the world, Microsoft holds considerable weight in the computer industry. Their products have become near-standardized for office and home computer systems. The company was recently in the news for its attempt to get even bigger with an attempt to acquire the search engine giant Yahoo!. Although talks have quieted, expect this to be revisited sometime over the next year.
Microsoft hasn't just built one of the best companies in the world; they have also created one of the best executive compensation programs around. The program is fair, is aligned with shareholders' short-term and long-term interests, and has very limited discretionary bonuses.
So… What Are They Paid?
Salaries and bonuses are some of the lowest you will find. The CEO's bonus, for instance, was a mere mortal $650,000. The NEOs pulled in an average of $580,000 in bonuses. Options were not given out in 2007.
Our favorite part of the compensation program is the stock awards section. Although the awards received by NEOs were a relatively high amount (a $4.6 million average), the low bonus and salary shows that the company is focused on aligning the interests of their executives with the performance of the company. In addition, the CEO doesn't receive any stock awards. Why, you ask?...
You mean someone actually said enough is enough? Wow… we are very impressed.
If you're not as impressed as we are, take a look at the last two areas. Microsoft has a policy that does not allow for perquisites like personal use of corporate aircraft and free cars. What about termination and change in control clauses? There are no severance payments, no "golden parachutes", and no excessive benefits. The execs just get some retirement benefits and the usual non-accelerated vesting of stock and option awards.
The only significant numbers we could find were the $2 million spent on relocation expenses for one of the NEOs and another $1.1 million given to a different NEO for his role in an old transfer options program… but at this point we're just nitpicking.
Compensation Details:
| CEO | NEO Avg. | |
|---|---|---|
| Base Salary | $620,000 | $578,958 |
| Bonus | $650,000 | $583,750 |
| Stock | $0 | $4,563,972 |
| Options | N/A | N/A |
| non-Equity Incentives | N/A | N/A |
Reference Links:
(1) Annual
Proxy Statement
(2) Annual
Report