DEF 14A of Microsoft Corp
Filed Oct 16, 2017 · FY20170001193125-17-310951
Our director nominees
Our director nominees See Part 2 – “Board of Directors” for more information. The following table provides summary information about each director nominee. Each director is elected annually by a majority of votes cast.
Our director nominees
| Name Occupation | Age | Director since | Independent | Other public boards | Committee memberships | | | | | | | | | | AC | CC | GN | RPP | | William H. Gates III Co-Chair and Trustee, Bill & Melinda Gates Foundation | 61 | 1981 | No | 1 | | | | | | Reid G. Hoffman Partner, Greylock Partners | 50 | 2017 | Yes | 0 | | | | | | Hugh F. Johnston Vice Chairman and CFO, PepsiCo, Inc. | 56 | 2017 | Yes | 0 | | | | | | Teri L. List-Stoll Executive Vice President and CFO, Gap, Inc. | 54 | 2014 | Yes | 1 | | | | | | Satya Nadella CEO, Microsoft Corporation | 50 | 2014 | No | 1 | | | | | | Charles H. Noski Former Vice Chairman, Bank of America Corporation | 65 | 2003 | Yes | 2 | | | | | | Helmut Panke Ph. D. Former Chairman of the Board of Management, BMW Bayerische Motoren Werke AG | 71 | 2003 | Yes | 1 | | | | | | Sandra E. Peterson Group Worldwide Chair, Johnson & Johnson | 58 | 2015 | Yes | 0 | | | | | | Penny S. Pritzker Chairman, PSP Capital Partners, LLC | 58 | New Nominee | Yes | 0 | | | | | | Charles W. Scharf CEO, The Bank of New York Mellon Corporation | 52 | 2014 | Yes | 1 | | | | | | Arne M. Sorenson President and CEO, Marriott International, Inc. | 58 | New Nominee | Yes | 1 | | | | | | John W. Stanton Chairman, Trilogy Partnerships | 62 | 2014 | Yes | 2 | | | | | | John W. Thompson Independent Chairman, Microsoft Corporation; Former CEO, Virtual Instruments, Inc. | 68 | 2012 | Yes | 1 | | | | | | Padmasree Warrior CEO, NIO USA, Inc. | 56 | 2015 | Yes | 0 | | | | |
Our director nominees
| AC: Audit Committee CC: Compensation Committee GN: Governance and Nominating Committee RPP: Regulatory and Public Policy Committee | (Chair) | (Member) | Financial expert |
Our director nominees
Mason Morfit will not seek re-election at the 2017 Annual Meeting. Mr. Morfit currently serves on the Audit Committee and Compensation Committee. Penny Pritzker and Arne Sorenson are both nominated for election to the Board at the Annual Meeting. The Board will consider committee appointments for Ms. Pritzker and Mr. Sorenson once elected to the Board.
Our director nominees
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Our director nominees
Our director nominees
Our director nominees
| | Age: 61 Director since: 1981 Birthplace: United States |
Our director nominees
| | Experience: Microsoft Corporation (1981-present) • Technical Advisor to Satya Nadella (CEO) (2014-present) • Co-founder and Chairman (1981-2014) • Chief Software Architect (2000-2006) • Chief Executive Officer (1981-2000) Microsoft committees: • None Other public company directorships: • Berkshire Hathaway Inc. Former public company directorships held in the past five years: • None Other positions: • Co-Chair and Trustee, Bill & Melinda Gates Foundation |
Our director nominees
| | Age: 50 Director since: 2017 Birthplace: United States INDEPENDENT |
Our director nominees
| | Experience: Greylock Partners (2009-present) (venture capital firm) • Partner (2009-present) LinkedIn Corporation (2003-2016) • Co-founder and Chairman (2003-2016) • Executive Chairman (2009) • Chief Executive Officer (2003-2007 and 2008-2009) • President, Products (2007-2008) PayPal Inc. (2000-2002) • Executive Vice President (2000-2002) Microsoft committees: • Regulatory and Public Policy Other public company directorships: • None Former public company directorships held in the past five years: • LinkedIn Corporation • Zynga Inc. |
Our director nominees
| | Age: 56 Director since: 2017 Birthplace: United States INDEPENDENT |
Our director nominees
| | Experience: PepsiCo, Inc. (1987-1999 and 2002-present) (food and beverage company) • Vice Chairman (2015-present) • Executive Vice President, and Chief Financial Officer (2010-present) • Executive Vice President, Global Operations (2009-2010) • President, Pepsi-Cola North America (2007-2009) • Various positions of increasing authority (1987-1999 and 2002-2007) Merck & Company, Inc. (1999-2002) • Vice President, Retail Marketing, Merck-Medco Managed Care LLC (1999-2002) Microsoft committees: • Audit Other public company directorships: • None Former public company directorships held in the past five years: • AOL, Inc. • Twitter Inc. |
Our director nominees
| | Age: 54 Director since: 2014 Birthplace: United States INDEPENDENT |
Our director nominees
| | Experience: Gap, Inc. (2016-present) (clothing and accessories retailer) • Executive Vice President and Chief Financial Officer (2016-present) DICK’S Sporting Goods, Inc. (2015-2016) • Executive Vice President and Chief Financial Officer (2015-2016) Kraft Foods Group, Inc. (2013-2015) • Senior Advisor (2015) • Executive Vice President and Chief Financial Officer (2013-2015) • Senior Vice President (2013) Procter & Gamble Co. (1994-2013) • Senior Vice President and Treasurer (2009-2013) • Various positions of increasing authority (1994-2009) Microsoft committees: • Audit • Governance and Nominating Other public company directorships: • Danaher Corporation Former public company directorships held in the past five years: • None Other positions: • Trustee, Financial Accounting Foundation • Practice Fellow, Financial Accounting Standards Board |
Our director nominees
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Our director nominees
| | Age: 50 Director since: 2014 Birthplace: India |
Our director nominees
| | Experience: Microsoft Corporation (1992-present) • Chief Executive Officer and Director (2014-present) • Executive Vice President, Cloud and Enterprise (2013-2014) • President, Server and Tools (2011-2013) • Senior Vice President, Online Services Division (2009-2011) • Senior Vice President, Search, Portal, and Advertising (2008-2009) • Various positions of increasing authority (1992-2008) Microsoft committees: • None Other public company directorships: • Starbucks Corporation Former public company directorships held in the past five years: • Riverbed Technology, Inc. |
Our director nominees
| | Age: 65 Director since: 2003 Birthplace: United States INDEPENDENT |
Our director nominees
| | Experience: Bank of America Corporation (2010-2012) (banking and financial services company) • Vice Chairman (2011-2012) • Executive Vice President and Chief Financial Officer (2010-2011) Northrop Grumman Corporation (2002-2005) • Corporate Vice President and Chief Financial Officer (2003-2005) • Director (2002-2005) AT&T (1999-2002) • Vice Chairman of the Board (2002) • Senior Executive Vice President and Chief Financial Officer (1999-2002) Hughes Electronics Corporation (1990-1999) • President, Chief Operating Officer and Director (1997-1999) • Vice Chairman, Chief Financial Officer and Director (1996-1997) Microsoft committees: • Audit (Chair) • Governance and Nominating Other public company directorships: • Avon Products, Inc. • The Priceline Group Inc. Former public company directorships held in the past five years: • Avery Dennison Corporation Other positions: • Chairman of the Board of Trustees, Financial Accounting Foundation • Director, National Association of Corporate Directors • Past member, Standing Advisory Group of the PCAOB |
Our director nominees
| | Age: 71 Director since: 2003 Birthplace: Germany INDEPENDENT |
Our director nominees
| | Experience: BMW Bayerische Motoren Werke AG and affiliates (1982-2006) (automobile manufacturer) • Chairman of the Board of Management (2002-2006) • Board of Management for Finance (1999-2002) • Board of Management for Human Resources and Information Technology (1996-1999) Microsoft committees: • Audit • Regulatory and Public Policy (Chair) Other public company directorships: • Singapore Airlines Limited Former public company directorships held in the past five years: • Bayer AG (supervisory board) • UBS AG |
Our director nominees
| | Age: 58 Director since: 2015 Birthplace: United States INDEPENDENT |
Our director nominees
| | Experience: Johnson & Johnson (2012-present) (medical devices, pharmaceutical and consumer goods manufacturer) • Group Worldwide Chair and member of the Executive Committee (2012-present) Bayer CropScience AG (2010-2012) • Chairman of the Board of Management (2010-2012) • Member of Board of Management (2010) Bayer HealthCare LLC (2005-2010) • Executive Vice President and President, Medical Care (2009-2010) • President, Diabetes Care Division (2005-2009) Medco Health Solutions, Inc. (1999-2004) • Group President of Government (2003-2004) • Senior Vice President, Health Businesses (2001-2003) • Senior Vice President, Marketing and Strategy (1999-2001) Microsoft committees: • Compensation • Regulatory and Public Policy Other public company directorships: • None Former public company directorships held in the past five years: • Dun & Bradstreet Corporation |
Our director nominees
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Our director nominees
| | Age: 58 Director since: New Nominee Birthplace: United States INDEPENDENT |
Our director nominees
| | Experience: United States Secretary of Commerce (2013-2017) PSP Capital Partners, LLC (present) (private investment firm) • Founder and Chairman (present) Pritzker Realty Group (present) • Co-founder and Chairman (present) Artemis Real Estate Partners (2009-2013) • Co-founder and Chairman (2009-2013) The Parking Spot (1998-2011) • Co-founder and Chairman (1998-2011) Vi Senior Living (1987-2011) • Founder and Chairman (1987-2011) Microsoft committees: • Appointment will be made after election Other public company directorships: • None Former public company directorships held in the past five years: • Hyatt Hotels Corporation Other positions: • Co-founder, Pritzker Traubert Family Foundation |
Our director nominees
| | Age: 52 Director since: 2014 Birthplace: United States INDEPENDENT |
Our director nominees
| | Experience: The Bank of New York Mellon Corporation (2017-present) (banking and financial services company) • Chief Executive Officer and Director (2017-present) Visa Inc. (2012-2016) • Chief Executive Officer and Director (2012-2016) JPMorgan Chase & Co. (2004-2012) • Managing Director, One Equity Partners, private investment arm (2011-2012) • Chief Executive Officer of Retail Financial Services (2004-2011) Bank One Corporation (2000-2004) • Chief Executive Officer of the Retail Division (2002-2004) • Chief Financial Officer (2000-2002) Citigroup, Inc. (1999-2000) • Chief Financial Officer of the Global Corporate and Investment Bank Division (1999-2000) Microsoft committees: • Compensation • Governance and Nominating Other public company directorships: • The Bank of New York Mellon Corporation Former public company directorships held in the past five years: • Visa Inc. |
Our director nominees
| | Age: 58 Director since: New Nominee Birthplace: Japan INDEPENDENT |
Our director nominees
| | Experience: Marriott International, Inc. (1996-present) (global lodging company) • President and Chief Executive Officer (2012-present) • President and Chief Operating Officer (2009-2012) • Executive Vice President, Chief Financial Officer, and President, Continental European Lodging (2003-2009) • Executive Vice President and Chief Financial Officer (1998-2003) • Senior Vice President, Business Development (1996-1998) Microsoft committees: • Appointment will be made after election Other public company directorships: • Marriott International, Inc. Former public company directorships held in the past five years: • Wal-Mart Stores, Inc. Other positions: • Director, Brand USA |
Our director nominees
| | Age: 62 Director since: 2014 Birthplace: United States INDEPENDENT |
Our director nominees
| | Experience: Trilogy Partnerships (2005-present) (investment company) • Founder and Chairman (2005-present) Clearwire Corp. (2008-2011) • Chairman of the Board (2011-2013) • Interim Chief Executive Officer (2011) • Board member (2008-2011) Western Wireless Corporation (1992-2005) • Founder, Chief Executive Officer and Chairman (1992-2005) VoiceStream Wireless Corporation (1995-2003) • Chief Executive Officer and Chairman (1995-2003) Microsoft committees: • Compensation (Chair) • Regulatory and Public Policy Other public company directorships: • Costco Wholesale Corporation • Trilogy International Partners, Inc. Former public company directorships held in the past five years: • Clearwire Corp. • Columbia Sportswear Company Other positions: • Chairman, First Avenue Entertainment LLLP, owner of Seattle Mariners (2016-present) |
Our director nominees
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Our director nominees
| | Age: 68 Director since: 2012 Birthplace: United States INDEPENDENT |
Our director nominees
| | Experience: Microsoft Corporation (2014 to present) • Non-executive Chairman of the Board Virtual Instruments Corporation (2010-2016) (computing infrastructure performance management solutions provider) • Chief Executive Officer and Director (2010-2016) Symantec Corp. (1999-2011) • Chairman of the Board (1999-2011) • Chief Executive Officer (1999-2009) IBM Corporation (1971-1999) • General Manager, IBM Americas (1996-1999) • Various positions of increasing authority (1971-1996) Microsoft committees: • Governance and Nominating (Chair) • Regulatory and Public Policy Other public company directorships: • Illumina, Inc. Former public company directorships held in the past five years: • United Parcel Service Other positions: • Executive Advisor, Riverwood Capital |
Our director nominees
| | Age: 56 Director since: 2015 Birthplace: India INDEPENDENT |
Our director nominees
| | Experience: NIO USA, Inc. (2015-present) (electric autonomous automobile manufacturer) • Chief Executive Officer and Director (2015-present) Cisco Systems, Inc. (2008-2015) • Strategic Advisor (2015) • Chief Technology and Strategy Officer (2012-2015) • Chief Technology Officer, Senior Vice President, Engineering and General Manager Global Enterprise segment (2010-2012) • Chief Technology Officer (2008-2010) Motorola, Inc. (1999-2007) • Executive Vice President and Chief Technology Officer (1999-2007) Microsoft committees: • Compensation Other public company directorships: • None Former public company directorships held in the past five years: • Box, Inc. • Gap, Inc. |
Director compensation
Director compensation The Compensation Committee periodically reviews the regular annual retainer paid to non-employee directors and makes recommendations for adjustments, as appropriate, to the Board. Our objective is to pay non-employee directors over time at or near the median of the proxy peer group, to award the majority of compensation in equity, and to make meaningful adjustments every few years, rather than smaller adjustments that are more frequent. As a result, typically we make adjustments when we fall below the median, and after adjustments, we exceed the median. There was no change in fiscal year 2017. As our CEO, Mr. Nadella does not receive additional pay for serving as a director. Mr. Gates has waived his cash and equity awards.
Director compensation
| Compensation structure for directors | | | Regular retainers (all directors except Messrs. Gates, Nadella, and Thompson) | | | Annual base retainer (TOTAL) | $325,000 | | Cash | $125,000 | | Stock award | $200,000 | | Annual committee chair retainer | $15,000 | | Annual audit committee chair retainer | $30,000 | | Annual audit committee member retainer | $15,000 | | Independent chairman retainer | | | Annual independent chairman retainer (TOTAL – in lieu of other retainers) | $675,000 | | Cash | $125,000 | | Stock award | $550,000 |
Director compensation
The Company reimburses reasonable expenses incurred for Board-related activities. Directors may participate in our corporate matching gift program for charitable donations. Director retainers are paid quarterly in arrears. Quarterly periods are measured beginning with the annual meeting. At the end of each quarterly period, we pay 25% of the total annual retainer to each director. The number of shares awarded each quarterly period is determined by dividing the dollar value of the stock award by the market price of our common stock as of the last business day of the period. Retainers are pro-rated for directors who join or leave the Board or have a change in Board role during a quarterly period. Directors may elect to defer and convert to equity all or part of their annual cash retainer, and to defer receipt of all or part of their annual equity retainer under the Deferred Compensation Plan for Non-Employee Directors. Amounts deferred are maintained in bookkeeping accounts that are deemed invested in Microsoft common stock; dividends paid on the deferred equity are deemed to be invested in our common stock. We calculate the number of shares credited by dividing each quarterly amount deferred by the closing market price of our common stock on the originally scheduled payment date. Accounts in the plan are distributed in shares of Microsoft common stock, with payments either in installments beginning on separation from Board service or in a lump sum paid no later than the fifth anniversary after separation from Board service.
Director compensation
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Fiscal year 2017 director compensation
Fiscal year 2017 director compensation This table describes the cash and equity portions of the annual retainer paid to each non-employee director who served in fiscal year 2017. Mr. Nadella received no compensation as a director. He is excluded from the table because we fully describe his compensation in Part 3 – “Named executive officer compensation.”
Fiscal year 2017 director compensation
| Name | Fees earned or paid in cash¹ ($) | Stock awards ($) | Matching charitable gifts² ($) | Total ($) | | William H. Gates III³ | 0 | 0 | 0 | 0 | | Reid G. Hoffman(4) | 20,483 | 32,773 | 0 | 53,256 | | Teri L. List-Stoll(5) | 140,000 | 200,000 | 15,000 | 355,000 | | G. Mason Morfit | 140,000 | 200,000 | 0 | 340,000 | | Charles H. Noski(6) | 170,000 | 200,000 | 0 | 370,000 | | Helmut Panke | 155,000 | 200,000 | 5,000 | 360,000 | | Sandra E. Peterson(7) | 125,000 | 200,000 | 15,000 | 340,000 | | Charles W. Scharf | 125,000 | 200,000 | 0 | 325,000 | | John W. Stanton | 140,000 | 200,000 | 0 | 340,000 | | John W. Thompson(8) | 125,000 | 550,000 | 15,000 | 690,000 | | Padmasree Warrior(9) | 125,000 | 200,000 | 0 | 325,000 |
Fiscal year 2017 director compensation
| The value of fractional shares is excluded.(1) |
Fiscal year 2017 director compensation
| Amounts in this column represent matching charitable contributions under our corporate giving program.(2) |
Fiscal year 2017 director compensation
| Mr. Gates waived his cash and equity retainer.(3) |
Fiscal year 2017 director compensation
| Mr. Hoffman’s compensation was pro-rated beginning with his service on March 14, 2017. He elected to defer his cash and stock compensation. The compensation deferred converted into 756 shares of our common stock. The aggregate award value in the “Stock awards” column represents one prorated quarterly award with a grant date fair value under FASB Accounting Standards Codification Topic 718 (“ASC 718”) of $32,773.(4) |
Fiscal year 2017 director compensation
| Ms. List-Stoll elected to defer her cash and stock compensation. The compensation deferred converted into 5,385 shares of our common stock. The aggregate award value in the “Stock awards” column represents four quarterly awards, each with a grant date fair value under ASC 718 of $50,000.(5) |
Fiscal year 2017 director compensation
| Mr. Noski elected to defer the stock award component of his compensation. The compensation deferred converted into 3,168 shares of our common stock. The aggregate award value in the “Stock awards” column represents four quarterly awards, each with a grant date fair value under ASC 718 of $50,000.(6) |
Fiscal year 2017 director compensation
| Ms. Peterson elected to defer her cash and stock compensation. The compensation deferred converted into 5,147 shares of our common stock. The aggregate award value in the “Stock awards” column represents four quarterly awards, each with a grant date fair value under ASC 718 of $50,000.(7) |
Fiscal year 2017 director compensation
| Mr. Thompson elected to defer the stock award component of his compensation. The compensation deferred converted into 8,712 shares of our common stock. The aggregate award value in the “Stock awards” column represents four quarterly awards, each with a grant date fair value under ASC 718 of $137,500.(8) |
Fiscal year 2017 director compensation
| Ms. Warrior elected to defer a portion of her cash retainer. The compensation deferred converted to 987 shares of our common stock. The aggregate award value in the “Stock awards” column represents four quarterly awards, each with a grant date fair value under ASC 718 of $50,000.(9) |
Annual compensation components
| “Incentive Plan revenue” and “Incentive Plan operating income” are defined in Annex A.* |
Annual compensation components
| The relative TSR multiplier is triggered only if Microsoft’s TSR is positive and above the 60th percentile of the S&P 500. If earned, the relative TSR multiplier can increase the PSA shares awarded by up to 50%.** |
Annual compensation components
Fiscal year 2017 cash incentives. Target cash incentives for our Named Executives were approved in September 2016. Target amounts ranged from 200% to 300% of base salary earned in fiscal year 2017. The maximum possible cash incentive was 200% of the target and the maximum result for each financial measure or performance category was 200% of target. The Incentive Plan Revenue and Incentive Plan Operating Income performance targets for the cash incentives were based on achieving the Company’s 2017 operating budget approved by the Board and reflecting appropriately ambitious performance goals. Fiscal year 2017 PSAs. PSAs were granted in September 2016 for a target number of shares of Microsoft common stock. The number of earned shares under the fiscal year 2017 PSAs will be determined after the 3-year performance period ending June 30, 2019 based on performance metrics for the performance period. Earned PSA shares vest following conclusion of the 3-year performance period, ensuring a focus on longer-term success. Fiscal year 2017 PSA performance metrics are strategic measures that align with our three ambitions and are aimed at driving new growth areas for our commercial and consumer businesses. These metrics were selected because they address areas that support long-term growth of our business, focusing on our emerging growth opportunities. The Compensation Committee is committed to setting rigorous performance goals, with the guideline that the probability of achieving the target result ranges from 40% to 60%. The metrics are reassessed, and targets set, annually because of the dynamic technology markets in which Microsoft operates. As a result, during the three-year performance period, separate targets are established for each year of performance. In establishing metrics, the Committee is mindful of the importance of balancing the business need for flexibility and long-term accountability. To avoid duplicating metrics across the incentive pay elements, beginning in fiscal year 2017 revenue and operating income were no longer used as PSA metrics because they were included as key components in our annual cash incentive. At the same time, the total equity opportunity was divided equally between target PSAs and SAs and the maximum PSA opportunity before applying the relative TSR multiplier was reduced from 300% to 200%. If the full relative TSR multiplier is earned, the maximum PSA payout would be 300% of target. The final number of earned shares will be calculated based on the aggregate results over the three separate years in the PSA performance period. Relative TSR is measured over the three-year period and, if earned, is applied to the aggregate PSA performance results.
Attributes of fiscal year 2017 PSAs
| Award feature | Design | Rationale | | Performance period | Three years, with metrics reassessed and targets set annually | Reinforces importance of long-term value creation because the value of shares that vest depends on the change in our share price over the performance cycle, and also allows for adjusted priorities in a rapidly changing competitive business environment | | Performance measures | Company-wide quantitative performance metrics. No payouts if metrics are below threshold level. | Establishes shared targets that drive accountability for annual business performance while striving for major strategic objectives | | Overlapping performance periods | New three-year performance period begins each fiscal year, with performance periods overlapping (see graphic below) | Overlapping performance periods limit impact of short-term business performance or share price fluctuations on final outcomes | | Payout opportunity | 0% to 200% of the target number of shares, before the relative TSR multiplier | Provides accountability for underperformance and incentive for outperformance. Maximum payouts expected to be rare and only possible when Microsoft has exceptional performance. | | Relative TSR multiplier | Triggered only if Microsoft’s TSR is positive and above the 60th percentile of the S&P 500 for the performance period. The multiplier will increase the number of potential shares linearly up to an additional 50% of earned shares when Microsoft’s relative TSR is at or above the 80th percentile. | Provides an opportunity to receive additional shares only if Microsoft significantly outperforms the market |
Overlapping performance periods with consistent performance goals
Overlapping performance periods with consistent performance goals Fiscal year 2017 SAs. As described above, 50% of our Named Executives’ Incentive Plan equity awards were target PSAs and 50% were SAs. SAs were granted under the Incentive Plan in September 2016 for shares of Microsoft common stock. SAs vest over four years (25% on initial vesting date, and 12.5% each six months thereafter) to support retention and align with shareholders’ interests. Mr. Courtois also received a one-time promotion award when he was appointed President, Microsoft Global Sales, Marketing, and Operations and an executive officer, recognizing the expanded scope of his responsibilities. No other fiscal year 2017 compensation. During fiscal year 2017, no other compensation was awarded to our Named Executives.
Fiscal year 2017 base salaries
Fiscal year 2017 base salaries As part of the review of target annual compensation opportunities, the Compensation Committee and, for Mr. Nadella, the independent members of the Board, approved increases to our Named Executives’ base salaries in September 2016. After considering the scope of Mr. Nadella’s role, his development as CEO and effective leadership of the Company, that his salary was unchanged since he became CEO in February 2014, and that his $1,200,000 salary was in the bottom quartile of CEO salaries at peer companies, the Committee recommended, and the independent members of the Board approved, an increase in Mr. Nadella’s base salary to $1,500,000 which aligned with median peer company salaries. The Committee also approved market-competitive base salary increases of $132,500 for Ms. Hood and $85,000 for Mr. Smith. We believe our Named Executives’ salary levels continue to be appropriate and reasonable given their capability and experience.
Cash incentive awards
Cash incentive awards The Compensation Committee increased fiscal year 2017 target percentages for cash incentives, which are measured as a percentage of salary, by 11% for Ms. Hood and by 25% for Mr. Smith. The Compensation Committee and, for Mr. Nadella, the independent members of the Board, determined the fiscal year 2017 cash incentive awards. These were based on two elements: quantitative financial performance measures and qualitative performance categories.
Financial performance
| Formulaic financial results (50% weight)¹ ($ in billions) | Threshold | Target | Maximum | Actual | | Fiscal year 2017 Incentive Plan revenue | $88.81 | $92.00 | $93.50 | $94.66 | | Fiscal year 2017 Incentive Plan operating income | $24.94 | $27.89 | $30.28 | $30.51 |
Financial performance
| Incentive Plan revenue and Incentive Plan operating income are calculated using Microsoft non-GAAP accounting measures, which assume constant dollar foreign exchange rates and excludes the net impact of Windows 10 revenue deferrals, impairment and restructuring charges, and LinkedIn financial results. The results above are different than those disclosed in our fourth quarter 2017 earnings release because our internal plan is based on constant dollars and non-GAAP earnings are reported using constant currency. See Annex A for more information on the calculation of these non-GAAP performance measures.(1) |
Qualitative performance categories
Qualitative performance categories 50% of our Named Executives’ fiscal year 2017 annual cash incentives were determined based on subjective scoring of their performance against financial, operational, and strategic indicators in three performance categories. The performance indicators varied based on the Named Executive’s responsibilities and the function or group he or she leads, and may have included (in alphabetical order in each category): These performance indicators were drawn from the scorecard we used to manage performance against Microsoft’s annual business plan. Mr. Nadella’s performance was assessed on all these performance indicators. For Mr. Nadella, the independent members of the Board also considered:
Fiscal year 2017 cash incentive calculations
Fiscal year 2017 cash incentive calculations Final results under the formulaic and structured framework portions of the cash incentive, and the resulting awards were as follows:
Fiscal year 2017 cash incentive calculations
| | Nadella | Hood | Courtois | Johnson | Smith | | Financial results (50%) | 200.00% | 200.00% | 200.00% | 200.00% | 200.00% | | Qualitative performance results (50%) | 123.33% | 140.00% | 130.00% | 103.33% | 130.00% | | Total FY17 cash incentive (% of target) | 161.66% | 170.00% | 165.00% | 151.66% | 165.00% | | Total FY17 cash incentive ($) | $7,032,406 | $3,624,896 | $2,762,884 | $2,168,795 | $3,241,543 |
Fiscal year 2017 stock awards
| Named Executive | Performance stock awards (target number of shares)¹ | Time-based stock awards (number of shares)² | Aggregate awarded value³ ($) | | Satya Nadella | 130,526 | 130,526 | 15,000,000 | | Amy E. Hood | 80,926 | 80,926 | 9,300,000 | | Jean-Philippe Courtois(4) | 65,263 | 65,263 | 7,500,000 | | Margaret L. Johnson | 43,509 | 43,509 | 5,000,000 | | Bradford L. Smith | 71,354 | 71,354 | 8,200,000 |
Fiscal year 2017 stock awards
| Fiscal year 2017 financial metrics for fiscal year 2016 PSAs (year 2 of 3)(1) ($ in billions) | Threshold | Target | Maximum | Actual | Payout as % of target award | | Fiscal year 2017 Incentive Plan revenue | 88.81 | 92.00 | 95.00 | 94.66 | 277.33% | | Fiscal year 2017 Incentive Plan operating income | 24.94 | 27.89 | 32.68 | 30.51 | 209.39% |
Fiscal year 2017 stock awards
| Incentive Plan revenue and Incentive Plan operating income are calculated using Microsoft non-GAAP accounting measures, which assume constant dollar foreign exchange rates and excludes the net impact of Windows 10 revenue deferrals, impairment and restructuring charges, and LinkedIn financial results. The results above are different than those disclosed in our fourth quarter 2017 earnings release because our internal plan is based on constant dollars and non-GAAP earnings are reported using constant currency. See Annex A for more information on the calculation of these non-GAAP performance measures.(1) |
Executive compensation program design
| • | At least 70% of the annual target compensation opportunity for our executives is delivered in equity to incentivize a long-term perspective and strong alignment with our shareholders |
Executive compensation program design
| • | We focus on the long term by subjecting a large majority of total compensation to multi-year vesting or performance requirements |
Target annual compensation mix
Target annual compensation mix At least 70% of the annual target compensation opportunity for each Named Executive is equity-based to incentivize a long-term focus and align their interests with those of our shareholders. The Compensation Committee structures the pay mix for our annual target total compensation opportunities to place a higher proportion in equity awards than the companies in our compensation peer group, providing greater alignment with the interests of our shareholders. The foregoing chart compares the fiscal year 2017 target compensation levels for our Named Executives to the average of these amounts for the named executive officers of the companies in our compensation peer group (identified in Section 3 below), using data available in mid-2016 when the Committee conducted our fiscal year 2017 compensation planning. We strive to meet our objectives while maintaining executive compensation leading practices:
Paying competitively
In assessing our fiscal year 2017 executive compensation design, we considered pay practices at the largest technology and general industry companies in terms of market capitalization, revenue, and earnings before interest, taxes, depreciation, and amortization (“EBITDA”) that were comparable to Microsoft. We selected this peer group because we believe these companies are led by executives with similarly complex roles and responsibilities. We also screened these companies to ensure they had a significant presence outside the United States, and excluded companies in the financial services sector because of the different regulatory environment in which they operate. For fiscal year 2017, this compensation peer group comprised these companies.
Paying competitively
| Peer group used for fiscal year 2017 pay analysis | | | | | | Technology | | General industry | | | | • Alphabet • Amazon • Apple • Cisco Systems • Facebook | • Hewlett-Packard • IBM • Intel • Oracle • Qualcomm | • AT&T • Chevron • Coca-Cola • Comcast • ExxonMobil | • General Electric • Johnson & Johnson • Merck • PepsiCo • Pfizer | • Procter & Gamble • Verizon • Wal-Mart • Walt Disney |
Establishing compensation opportunities
| • | Market data from our compensation peer group and other competitive market information reflecting the scale and scope of his or her role. For this purpose, the compensation peer group was tailored to comprise companies that represent the function the executive officer oversees. |
Independent compensation consultant
Independent compensation consultant The Compensation Committee retains Semler Brossy, an executive compensation consulting firm that is independent of management, to assist and advise the Committee in its review and oversight of our executive compensation program. See Part 2 – “Board of Directors – Compensation Committee – Compensation consultant” for more information on Semler Brossy’s role and independence as an advisor to the Committee.
Limited post-employment compensation
Limited post-employment compensation Our Named Executives do not have employment contracts. No Named Executive is entitled to any payments or benefits following a change in control of Microsoft. Our Named Executives may be eligible for additional vesting of their outstanding stock awards following termination of employment on the same terms as our other employees. All employees who retire from Microsoft in the United States after (a) age 65 or (b) age 55 with 15 years of service are eligible for the continuation of vesting of outstanding stock awards granted at hire or at the time of performance review, if the award was granted over one year before the date of retirement. A pro-rata portion of PSA shares will also continue vesting if the retirement occurs more than one year after the beginning of the performance period. As of June 30, 2017, only Mr. Smith was retirement-eligible, and the value of his retirement-based stock award vesting on that date was $13,665,441 (assuming PSAs are earned at 100% of target). All employees whose employment with Microsoft terminates due to death or total and permanent disability generally fully vest in their outstanding stock awards. Mr. Nadella’s long-term performance stock award (“LTPSA”), which was granted to him in connection with his appointment as CEO, would vest for the target number of shares upon his death or total and permanent disability. The value of our Named Executives’ stock awards vesting at a June 30, 2017 termination of employment due to death or total and permanent disability was: Mr. Nadella – $190,508,045; Ms. Hood – $30,786,344; Mr. Courtois – $23,956,759; Ms. Johnson – $16,225,915; and Mr. Smith – $36,059,696.
Limited post-employment compensation
| Retirement vesting | | | Our U.S. Named Executives may be eligible for additional vesting of their outstanding stock awards upon termination of employment on the same terms as our other employees. All employees who retire from Microsoft in the United States on or after (a) age 65 or (b) age 55 with 15 years of service are eligible for the continuation of vesting of outstanding stock awards granted at hire or at the time of performance review, if the award was granted over one year before the date of retirement. | Age 65 OR age 55 with 15 years of service |
Limited post-employment compensation
| 46 | |
Limited post-employment compensation
In addition, our Named Executives are eligible to participate in the Microsoft Senior Executive Severance Benefit Plan (the “Severance Plan”). The Severance Plan was adopted to help ensure continuity of key leaders by providing designated executives severance payments and benefits if their employment is terminated without cause. For purposes of the Severance Plan, “cause” means (i) a conviction or plea of guilty or no contest to a felony or certain misdemeanors; (ii) engaging in gross misconduct; (iii) repeated failure to substantially perform the duties of the executive’s role; (iv) violation of any securities laws; or (v) violation of Microsoft’s policies designed to prevent violations of law. The Severance Plan payments and benefits have four components – cash, stock vesting, continued health care, and outplacement assistance – all provided by the Company. Cash payments consist of (i) a severance payment equal to 12 months base salary plus target annual cash incentive award, payable in a lump sum within 60 days after termination of employment, and (ii) a pro-rata payment of the executive officer’s target annual cash incentive award for the partial year of work, payable in a lump sum at the same time other Incentive Plan cash awards for the year are paid. Stock vesting applies to SAs and PSAs. SAs that otherwise would vest in the 12-month period after employment terminates continue to vest. After the first year of the PSA performance period is completed, a pro-rata portion of any PSA shares will also vest, and the number of shares subject to pro-ration is the lesser of the target award shares or the shares that are otherwise earned and payable after the end of the performance period. Continued contributions to premiums for COBRA health care continuation coverage and outplacement assistance will be provided on the same terms as are available to other employees whose employment is terminated without cause. There is no change-in-control provision in the Severance Plan. To receive the Severance Plan payments and benefits, the Named Executive must execute a separation agreement that includes a release of claims in favor of Microsoft, confidentiality and non-disparagement provisions, and 12-month non-compete/non-solicitation restrictions. Mr. Nadella participates in the Severance Plan on the same terms as our other executive officers, except that under his LTPSA award if Microsoft terminates his employment without cause (as defined in the Severance Plan) during a performance period, he will vest in a pro-rata fraction of the threshold 150,000 shares of Microsoft common stock subject to the award for his actual period of employment during the performance period. This table shows the amounts that would have been payable to our Named Executives upon a termination of employment without cause on June 30, 2017.
Limited post-employment compensation
| Includes amounts payable under the Severance Plan, plus stock vesting under Mr. Nadella’s LTPSA award ($14,992,275).(1) |
Limited post-employment compensation
| Includes $13,754,089 in Severance Plan benefits in addition to Mr. Smith’s retirement-based stock award vesting of $13,665,441.(2) |
Deductibility of executive compensation
| Annual compensation risk assessment | | | We performed an annual assessment for the Compensation and Audit Committees of our Board of Directors to determine whether the risks arising from our fiscal year 2017 compensation policies and practices are reasonably likely to have a material adverse effect on Microsoft. Our assessment reviewed the material elements of executive and non-executive employee compensation. We concluded these policies and practices do not create risk that is reasonably likely to have a material adverse effect on Microsoft. The structure of our compensation program for executive officers does not incentivize unnecessary or excessive risk-taking. The base salary component of compensation does not encourage risk-taking because it is a fixed amount. The Incentive Plan awards have these risk-limiting characteristics: | | | • Annual cash incentive awards to each executive officer are limited to the lesser of a fixed maximum specified in the Incentive Plan or a fixed percentage of an incentive pool. Cash incentive awards under the Incentive Plan are limited to 200% of a target cash incentive award. • Cash incentive awards are structured 50% based on predetermined goals (balance of growth and profitability goals) and 50% based on individual performance as assessed across three performance categories, diversifying the risk associated with any single aspect of performance. • PSA metrics aligned with our three ambitions further diversify the elements of the program, to minimize the incentive to produce any particular outcome. • Overlapping performance periods limit impact of short-term business performance or share price fluctuations on final outcomes. • The majority of incentive plan award value is delivered in shares of Microsoft common stock with a multi-year vesting schedule, which aligns the interests of our executive officers to long-term shareholder interests. | • PSAs use Company-wide measures that are not specific to any one executive officer’s sphere of responsibility and that apply equally to all participants, to encourage a unified and responsible approach to achieving financial and strategic goals. • Equity awards are not made in the form of stock options, which may provide an asymmetrical incentive to take unnecessary or excessive risks to increase the market price of Microsoft common stock. • Members of the Compensation Committee (or for Mr. Nadella, the independent members of our Board of Directors) approve all Incentive Plan awards to executive officers, including performance achievement levels that determine final payout outcomes. |
Summary compensation table
Summary compensation table This table contains information about compensation awarded to our Named Executives for the fiscal years ended June 30, 2017, 2016, and 2015. None of our Named Executives received stock options during those years.
Summary compensation table
| Name and principal position | Year | Salary ($) | Bonus(1) ($) | Stock awards(2) ($) | Non-equity incentive plan compensation(3) ($) | All other compensation(4) ($) | Total ($) | | Satya Nadella Chief Executive Officer and Director | 2017 | 1,450,000 | N/A | 11,434,557 | 7,032,406 | 97,189 | 20,014,152 | | | 2016 | 1,200,000 | 4,464,000 | 12,013,927 | N/A | 14,104 | 17,692,031 | | | 2015 | 1,200,000 | 4,320,000 | 12,761,263 | N/A | 13,007 | 18,294,270 | | Amy E. Hood Executive Vice President and Chief Financial Officer | 2017 | 852,917 | N/A | 7,015,071 | 3,624,896 | 89,260 | 11,582,144 | | | 2016 | 731,250 | 2,304,000 | 7,326,650 | N/A | 12,730 | 10,374,630 | | | 2015 | 675,985 | 1,978,000 | 6,090,606 | N/A | 10,372 | 8,754,963 | | Jean-Philippe Courtois(5) Executive Vice President, President, Global Sales, Marketing and Operations | 2017 | 751,054 | N/A | 14,735,464(6) | 2,762,884 | 45,214 | 18,294,616 | | Margaret L. Johnson Executive Vice President, Business Development | 2017 | 715,000 | N/A | 3,907,922 | 2,168,795 | 89,238 | 6,880,955 | | | 2016 | 704,167 | 1,909,000 | 4,083,212 | N/A | 20,111 | 6,716,490 | | | 2015 | 539,204 | 3,795,000 | 10,180,626 | N/A | 18,765 | 14,533,595 | | Bradford L. Smith President and Chief Legal Officer | 2017 | 785,833 | N/A | 6,193,370 | 3,241,543 | 98,989 | 10,319,735 | | | 2016 | 704,167 | 1,972,000 | 5,915,948 | N/A | 18,497 | 8,610,612 | | | 2015 | 650,000 | 1,300,000 | 4,833,835 | N/A | 16,847 | 6,800,682 |
Summary compensation table
| Includes Incentive Plan discretionary cash incentives for fiscal years 2016 and 2015 and, for Ms. Johnson, a $3,000,000 signing bonus payable over two years – $2,500,000 in fiscal year 2015 and $500,000 in fiscal year 2016.(1) |
Summary compensation table
| Values for SAs and PSAs in this column are calculated using the assumptions set forth in the Grants of plan-based awards table. PSA values are included in this column to the extent the PSAs have a grant date in the fiscal year. Because the grant date occurs when PSA performance targets are set, this column includes values in 2017 of 33.33% of the fiscal year 2017 PSAs and 16.66% of the fiscal year 2016 PSAs, and values in 2016 of 66.68% of the fiscal year 2016 PSAs. The 2016 PSA values reported for fiscal year 2016 include the 50% of the PSAs with 3-year targets and 33.36% of the remainder of the PSAs, which had annual targets. Assuming that the highest level of performance conditions will be achieved, the values of PSAs with a grant date in fiscal year 2017 or 2016 are: for fiscal year 2017, Mr. Nadella, $10,639,556, Ms. Hood $6,274,167, Mr. Courtois, $3,287,828, Ms. Johnson, $3,782,271, and Mr. Smith, $5,556,198; for fiscal year 2016, Mr. Nadella, $13,825,602, Ms. Hood $7,645,994, Ms. Johnson, $5,236,964, and Mr. Smith, $6,808,098.(2) |
Summary compensation table
| Includes Incentive Plan cash incentives for fiscal year 2017.(3) |
Summary compensation table
| 50 | |
Summary compensation table
| Details about the amounts in the “All other compensation” column are set forth in the table below.(4) |
Grants of plan-based awards
Grants of plan-based awards This table provides information on grants of awards under any plan to the Named Executives related to the fiscal year ended June 30, 2017.
Grants of plan-based awards
| Named Executive | Award | Grant Date | Estimated possible payouts under non-equity incentive plan awards(1) | | | Estimated future payouts under equity incentive plan awards(2) | | | All other stock awards (#) | Grant date fair value of stock awards(3) ($) | | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Satya Nadella | 2017 Cash Incentive | | 0 | 4,350,000 | 8,700,000 | | | | | | | | 2017 PSA | 9/20/2016 | | | | 2,393 | 43,509 | 130,526 | | 2,814,310 | | | 2016 PSA | 9/20/2016 | | | | 6,317 | 25,266 | 101,064 | | 1,670,312 | | | 2017 Stock Award | 9/20/2016 | | | | | | | 130,526 | 6,949,935 | | Amy E. Hood | 2017 Cash Incentive | | 0 | 2,132,292 | 4,264,583 | | | | | | | | 2017 PSA | 9/19/2016 | | | | 1,484 | 26,975 | 80,926 | | 1,748,555 | | | 2016 PSA | 9/19/2016 | | | | 3,494 | 13,973 | 55,892 | | 925,686 | | | 2017 Stock Award | 9/19/2016 | | | | | | | 80,926 | 4,340,830 | | Jean-Philippe Courtois | 2017 Cash Incentive | | 0 | 1,674,475 | 3,348,950 | | | | | | | | 2017 PSA | 12/21/2016 | | | | 1,197 | 21,754 | 65,263 | | 1,643,914 | | | 2017 Stock Award | 12/21/2016 | | | | | | | 65,263 | 3,934,080 | | | 2016 Stock Award | 9/19/2016 | | | | | | | 10,443 | 553,826 | | | Promotion Stock Award(4) | 7/26/2016 | | | | | | | 158,563 | 8,603,644 | | Margaret L. Johnson | 2017 Cash Incentive | | 0 | 1,430,000 | 2,860,000 | | | | | | | | 2017 PSA | 9/19/2016 | | | | 798 | 14,503 | 43,509 | | 940,092 | | | 2016 PSA | 9/19/2016 | | | | 2,393 | 9,570 | 38,280 | | 634,029 | | | 2017 Stock Award | 9/19/2016 | | | | | | | 43,509 | 2,333,801 | | Bradford L. Smith | 2017 Cash Incentive | | 0 | 1,964,583 | 3,929,166 | | | | | | | | 2017 PSA | 9/19/2016 | | | | 1,309 | 23,785 | 71,354 | | 1,541,734 | | | 2016 PSA | 9/19/2016 | | | | 3,111 | 12,442 | 49,768 | | 824,243 | | | 2017 Stock Award | 9/19/2016 | | | | | | | 71,354 | 3,827,393 |
Grants of plan-based awards
| These columns represent the threshold, target, and maximum cash incentives for fiscal year 2017. Actual fiscal year 2017 cash incentives are reported in the Summary compensation table.(1) |
Grants of plan-based awards
| These columns represent the threshold, target, and maximum shares for the PSAs with a grant date in fiscal year 2017. Because under FASB Accounting Standards Codification Topic 718 (“ASC 718”), there is no grant date with respect to future periods for which a performance target has not been set, the reported number of shares is calculated as the target shares for the portion of the PSAs for which performance targets were set in fiscal year 2017 (33.33% of the 2017 PSAs and 16.66% of the 2016 PSAs). The threshold is calculated as if the threshold of only the least weighted metric (50% of 11.00% of the 2017 PSAs and 50% of 8.33% of the 2016 PSAs) is met. The maximum is calculated assuming all maximum targets were met and the relative TSR multiplier was fully earned.(2) |
Grants of plan-based awards
| Values for SAs in this column are calculated using the grant date fair value under ASC 718 based on the market price as of the date of grant of common stock awarded, reduced by the present value of estimated future dividends because the awards are not entitled to receive dividends prior to vesting. Values for PSAs in this column are calculated using a Monte Carlo simulation valuation performed as of the date of grant by an independent third party.(3) |
Grants of plan-based awards
| This award was made when Mr. Courtois was appointed President, Microsoft Global Sales, Marketing, and Operations and an executive officer, recognizing the expanded scope of his responsibilities.(4) |
Grants of plan-based awards
| 52 | |
Outstanding equity awards at June 30, 2017
Outstanding equity awards at June 30, 2017 This table provides information about unvested stock awards held by the Named Executives on June 30, 2017.
Outstanding equity awards at June 30, 2017
| | Stock awards | | | | | Named Executive | Number of shares or units of stock that have not vested(1) (#) | Market value of shares or units of stock that have not vested(2) ($) | Equity incentive plan awards: number of unearned shares, units, or other rights that have not vested(1) (#) | Equity incentive plan awards: market or payout value of unearned shares, units, or other rights that have not vested(2) ($) | | Satya Nadella | 681,609 | 46,983,308 | 619,898 | 42,729,569 | | Amy E. Hood | 281,836 | 19,426,955 | 96,872 | 6,677,387 | | Jean-Philippe Courtois | 282,289 | 19,458,181 | 21,754 | 1,499,503 | | Margaret L. Johnson | 134,443 | 9,267,156 | 62,378 | 4,299,716 | | Bradford L. Smith | 377,102 | 25,993,641 | 86,022 | 5,929,496 |
Outstanding equity awards at June 30, 2017
| The following table shows the dates on which the awards in the outstanding equity awards table vest and the corresponding number of shares, subject to continued employment through the vest date (or termination due to eligible retirement, death or disability). PSAs with a grant date in fiscal years 2017 or 2016 are reported, assuming payout at target award levels. Mr. Nadella’s LTPSA is reported at the minimum award level.(1) |
Outstanding equity awards at June 30, 2017
| | Number of shares vesting | | | | | | Vesting date | Satya Nadella | Amy E. Hood | Jean- Philippe Courtois | Margaret L. Johnson | Bradford L. Smith | | 7/26/2017 | 0 | 0 | 26,427 | 0 | 0 | | 8/15/2017 | 117,962 | 0 | 0 | 0 | 78,641 | | 8/29/2017 | 128,777 | 63,113 | 7,352 | 27,515 | 64,941 | | 8/30/2017 | 0 | 0 | 12,157 | 0 | 0 | | 8/31/2017 | 55,380 | 34,909 | 8,444 | 18,058 | 29,040 | | 12/21/2017 | 0 | 0 | 16,315 | 0 | 0 | | 1/26/2018 | 0 | 0 | 26,427 | 0 | 0 | | 2/28/2018 | 39,064 | 24,793 | 22,103 | 12,619 | 20,120 | | 6/25/2018 | 0 | 29,741 | 0 | 0 | 0 | | 7/26/2018 | 0 | 0 | 26,427 | 0 | 0 | | 8/15/2018 | 117,962 | 0 | 0 | 0 | 78,642 | | 8/29/2018 | 72,640 | 34,669 | 5,503 | 27,515 | 27,515 | | 8/30/2018 | 0 | 0 | 4,671 | 0 | 0 | | 8/31/2018 | 165,453 | 94,690 | 16,603 | 60,494 | 82,359 | | 1/26/2019 | 0 | 0 | 26,427 | 0 | 0 | | 2/3/2019 | 150,000(A) | 0 | 0 | 0 | 0 | | 2/28/2019 | 39,063 | 24,792 | 16,600 | 12,620 | 20,121 | | 7/26/2019 | 0 | 0 | 26,428 | 0 | 0 | | 8/31/2019 | 82,574 | 51,769 | 38,356 | 27,122 | 43,906 | | 2/3/2020 | 150,000(A) | 0 | 0 | 0 | 0 | | 2/29/2020 | 16,316 | 10,116 | 10,857 | 5,439 | 8,919 | | 8/31/2020 | 16,316 | 10,116 | 10,857 | 5,439 | 8,920 | | 2/3/2021 | 150,000(A) | 0 | 0 | 0 | 0 | | 2/28/2021 | 0 | 0 | 1,044 | 0 | 0 | | 8/31/2021 | 0 | 0 | 1,045 | 0 | 0 | | Total | 1,301,507 | 378,708 | 304,043 | 196,821 | 463,124 |
Outstanding equity awards at June 30, 2017
| Represents vest of Mr. Nadella’s LTPSA at the minimum award level.(A) |
Outstanding equity awards at June 30, 2017
| The market value is the number of shares shown in the table multiplied by $68.93, the closing market price of Microsoft common stock on June 30, 2017.(2) |
Stock vested
Stock vested This table provides information, on an aggregate basis, about stock awards that vested during the fiscal year ended June 30, 2017 for each of the Named Executives. Microsoft has not granted stock options, other than options substituted in acquisitions, since 2003. No Named Executives held any Microsoft stock options during the fiscal year.
Stock vested
| | Stock awards | | | Named Executive | Number of shares acquired on vesting (#) | Value realized on vesting(1) ($) | | Satya Nadella | 362,031 | 21,126,124 | | Amy E. Hood | 161,289 | 9,835,282 | | Jean-Philippe Courtois | 126,201 | 7,679,949 | | Margaret L. Johnson | 70,403 | 4,260,343 | | Bradford L. Smith | 208,011 | 12,125,801 |
Stock vested
| The value realized on vesting is calculated by multiplying the number of shares shown in the table by the market value of the shares on the vesting date.(1) |
Non-qualified deferred compensation
Non-qualified deferred compensation This table provides information about Named Executives’ earnings and balances under our U.S. non-qualified Deferred Compensation Plan in fiscal year 2017. Microsoft does not contribute to the Deferred Compensation Plan, and in fiscal year 2017 there were no contributions or withdrawals by, or distributions to, any Named Executive.
Non-qualified deferred compensation
| Named Executive | Aggregate earnings in fiscal year 2017(1) ($) | Aggregate balance at June 30, 2017(1) ($) | | Satya Nadella | 21,441 | 182,011 | | Amy E. Hood | 0 | 0 | | Jean-Philippe Courtois | 0 | 0 | | Margaret L. Johnson | 0 | 0 | | Bradford L. Smith | 0 | 0 |
Non-qualified deferred compensation
| These amounts have not been included in the Summary compensation table for fiscal year 2017 or for previous years.(1) |
Non-qualified deferred compensation
Microsoft’s Deferred Compensation Plan is unfunded and unsecured. It allows participants to defer a specified percentage of their base salary (up to 75%), and/or eligible incentive cash payments (up to 100%). Participation in the Deferred Compensation Plan is limited to U.S. senior managers, including our U.S. Named Executives. Microsoft does not contribute to the Deferred Compensation Plan or guarantee any returns on participant contributions. Our Named Executives made no contributions in fiscal year 2017. When an employee elects to participate in the Deferred Compensation Plan, the employee must specify the percentage of base salary and/or cash incentive award to be deferred, and the timing of distributions. No withdrawals are permitted prior to the previously elected distribution date, other than “hardship withdrawals” as permitted by applicable law. Amounts deferred under the Deferred Compensation Plan are credited with hypothetical investment earnings based on participant investment elections made from among investment options available under the plan.
Non-qualified deferred compensation
| 54 | |
New plan benefits
| The number of shares subject to PSAs presented in this table differs from the number of shares in the Summary compensation table, Grants of plan-based awards table, and Outstanding equity awards at June 30, 2017 table (collectively, the “Other Tables”). The Other Tables exclude the portion of PSAs that do not have an accounting grant date because performance targets for future years have not been set. In this proposal, we include the total number of shares subject to the PSAs, including the portion for which there is no accounting grant date.(1) |
Election of directors
Election of directors Fourteen directors are to be elected at the Annual Meeting to hold office until the next Annual Meeting, and until their respective successors are elected and qualified. If, for any reason, the directors are not elected at an Annual Meeting, they may be elected at a special meeting of shareholders called for that purpose in the manner provided by our Bylaws. The accompanying proxy will be voted in favor of the nominees presented in Part 2 – “Board of Directors – Our director nominees” to serve as directors unless the shareholder indicates to the contrary on the proxy. All the nominees except Ms. Pritzker and Mr. Sorenson are current directors. The Board of Directors expects that each of the nominees will be available for election, but if any of them is unable to serve at the time the election occurs, the proxy will be voted for the election of another nominee designated by our Board.
Majority vote standard for election of directors
Majority vote standard for election of directors In an uncontested election, each director will be elected by a majority of the votes cast. A majority of votes cast means the number of shares cast “for” a director’s election exceeds the number of votes cast “against” that director. We will not treat as cast any share (a) whose ballot is marked as withheld, (b) that is otherwise present at the meeting but for which there is an abstention, or (c) that is otherwise present at the meeting as to which a shareholder gives no authority or direction. In a contested election, the directors will be elected by a plurality of the votes cast, meaning the directors receiving the largest number of “for” votes will be elected. A contested election is one in which:
Majority vote standard for election of directors
| • | as of the last day for giving notice of a shareholder nominee, a shareholder has nominated a candidate for director according to the requirements of our Bylaws, and |
Majority vote standard for election of directors
| • | as of the date that notice of the meeting is given, the Board of Directors considers that a shareholder candidacy has created a bona fide election contest. |
Majority vote standard for election of directors
In an uncontested election, a nominee who does not receive a majority vote will not be elected. Except as explained in the next paragraph, an incumbent director who is not elected because he or she does not receive a majority vote will continue to serve as a holdover director until the earliest of: (a) 90 days after the date on which the election inspector determines the voting results as to that director, (b) the date on which the Board of Directors appoints an individual to fill the office held by that director, or (c) the date of that director’s resignation. The Board of Directors may fill any vacancy resulting from the non-election of a director as provided in our Bylaws. The Governance and Nominating Committee will consider promptly whether to fill the office of a nominee who fails to receive a majority vote and make a recommendation to our Board about filling the office. The Board of Directors will act on the Governance and Nominating Committee’s recommendation and within 90 days after certification of the shareholder vote will disclose publicly its decision. Additional details about this process are specified in our Bylaws, which are available on our website at http://aka.ms/policiesandguidelines.