DEF 14A of Microsoft Corp
Filed Oct 16, 2019 · FY20190001193125-19-268531
Our Director Nominees
Our Director Nominees See Part 1 – Governance and our Board of Directors for more information. The following table provides summary information about each of the 13 director nominees. Each director is elected annually by a majority of votes cast. Charles Noski and Helmut Panke are not seeking re-election and their Board service will end on the date of the Annual Meeting. Mr. Noski currently serves as Chair of the Audit Committee and a member of the Governance and Nominating Committee. Mr. Panke currently serves as Chair of the Regulatory and Public Policy Committee and as a member of the Audit Committee. Committee assignments effective immediately following the Annual Meeting are described below. The Board has nominated Emma Walmsley for election as director. If elected, her term will begin on December 4, 2019. The Board has approved a decrease in its size from 14 members to 13 members effective as of December 4, 2019.
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 | 63 | 1981 | No | 1 | | | | | | Reid G. Hoffman Partner, Greylock Partners | 52 | 2017 | Yes | 0 | | | | | | Hugh F. Johnston Vice Chairman and CFO, PepsiCo, Inc. | 58 | 2017 | Yes | 0 | | | | | | Teri L. List-Stoll Executive Vice President and CFO, The Gap, Inc. | 56 | 2014 | Yes | 1 | | | | | | Satya Nadella CEO, Microsoft Corporation | 52 | 2014 | No | 1 | | | | | | Sandra E. Peterson Operating Partner, Clayton, Dubilier & Rice, LLC | 60 | 2015 | Yes | 0 | | | | | | Penny S. Pritzker Chairman, PSP Partners, L.L.C. | 60 | 2017 | Yes | 0 | | | | | | Charles W. Scharf** Former Chairman and CEO, The Bank of New York Mellon Corporation | 54 | 2014 | Yes | 0 | | | | | | Arne M. Sorenson President and CEO, Marriott International, Inc. | 61 | 2017 | Yes | 1 | | | | | | John W. Stanton Chairman, Trilogy Partnerships | 64 | 2014 | Yes | 2 | | | | | | John W. Thompson Independent Chair, Microsoft Corporation; Former CEO, Virtual Instruments Corporation | 70 | 2012 | Yes | 1 | | | | | | Emma N. Walmsley*** CEO and Director, GlaxoSmithKline plc | 50 | New Nominee | Yes | 1 | | | | | | Padmasree Warrior Founder, President, and CEO, Fable Group, Inc. | 58 | 2015 | Yes | 1 | | | | |
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
| * Effective December 1, 2019, changes to the committee chairs will be: Audit Committee, Hugh F. Johnston; Compensation Committee, Sandra E. Peterson; Regulatory and Public Policy Committee, Penny S. Pritzker. If nominees are elected by shareholders, committee composition immediately following the Annual Meeting will be: |
Our Director Nominees
| ● | Audit Committee: Hugh F. Johnston (chair); committee members include Teri L. List-Stoll, Arne M. Sorenson, and John W. Stanton. |
Our Director Nominees
| ● | Compensation Committee: Sandra E. Peterson (chair); committee members include Charles W. Scharf and Padmasree Warrior. |
Our Director Nominees
| ● | Governance and Nominating Committee: John W. Thompson (chair); committee members include Teri L. List-Stoll, Sandra E. Peterson, and Charles W. Scharf. |
Our Director Nominees
| ● | Regulatory and Public Policy Committee: Penny S. Pritzker (chair); committee members include John W. Stanton and John W. Thompson. |
Our Director Nominees
| ** Wells Fargo & Company has announced that effective October 21, 2019, Charles W. Scharf will become its President, CEO, and a member of the Board of Directors. |
Our Director Nominees
| *** The Board will consider committee appointments for Emma N. Walmsley if she is elected to the Board. |
Our Director Nominees
| 2 | |
Our Director Nominees
Our Director Nominees Following are biographies for the 13 directors nominated by the Board for election during the 2019 Annual Meeting.
Our Director Nominees
| | William H. Gates III | | | Age: 63 | 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
| | Reid G. Hoffman | | | Age: 52 | Director Since: 2017 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: Greylock Partners (2009-present) (venture capital firm) • Partner (2009-present) Reinvent Capital (2019-present) • Partner (2019-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: • None Other Public Company Directorships: • None Former Public Company Directorships Held in the Past Five Years: • LinkedIn Corporation |
Our Director Nominees
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Our Director Nominees
| | Hugh F. Johnston | | | Age: 58 | 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
| | Teri L. List-Stoll | | | Age: 56 | Director Since: 2014 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: The 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: • Former Trustee, Financial Accounting Foundation • Former Practice Fellow, Financial Accounting Standards Board |
Our Director Nominees
| 18 | |
Our Director Nominees
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Our Director Nominees
| | Satya Nadella | | | Age: 52 | 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: • None |
Our Director Nominees
| | Sandra E. Peterson | | | Age: 60 | Director Since: 2015 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: Clayton, Dubilier & Rice, LLC (2019-present) (investment firm) • Operating Partner (2019-present) Johnson & Johnson (2012-2018) (medical devices, pharmaceutical and consumer goods manufacturer) • Group Worldwide Chair and member of the Executive Committee (2012-2018) 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
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Our Director Nominees
| | Penny S. Pritzker | | | Age: 60 | Director Since: 2017 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: United States Secretary of Commerce (2013-2017) PSP Partners, L.L.C. (present) (private investment firm) • Founder and Chairman (present) Pritzker Realty Group (present) • Co-founder and Chairman (present) Inspired Capital Partners (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: • Regulatory and Public Policy Other Public Company Directorships: • None Former Public Company Directorships Held in the Past Five Years: • None Other Positions: • Co-founder, Pritzker Traubert Foundation |
Our Director Nominees
| | Charles W. Scharf | | | Age: 54 | Director Since: 2014 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: The Bank of New York Mellon Corporation (2017-2019) (banking and financial services company) • Chairman and Chief Executive Officer (2018-2019) • Chief Executive Officer and Director (2017) 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: • None Former Public Company Directorships Held in the Past Five Years: • The Bank of New York Mellon Corporation • Visa Inc. Other Positions: • Wells Fargo & Company has announced that effective October 21, 2019, Mr. Scharf will become its President, CEO, and a member of the Board of Directors. |
Our Director Nominees
| 20 | |
Our Director Nominees
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Our Director Nominees
| | Arne M. Sorenson | | | Age: 61 | Director Since: 2017 | 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: • Audit Other Public Company Directorships: • Marriott International, Inc. Former Public Company Directorships Held in the Past Five Years: • None |
Our Director Nominees
| | John W. Stanton | | | Age: 64 | 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: • Columbia Sportswear Company Other Positions: • Chairman, First Avenue Entertainment LLLP, owner of Seattle Mariners (2016-present) |
Our Director Nominees
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Our Director Nominees
| | John W. Thompson | | | Age: 70 | Director Since: 2012 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: Microsoft Corporation (2014-present) • Independent Board Chair 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: • None Other Positions: • Partner, Lightspeed Venture Partners |
Our Director Nominees
| | Emma N. Walmsley | | | Age: 50 | Director Since: Nominee | Birthplace: United Kingdom | Independent |
Our Director Nominees
| Experience: GlaxoSmithKline plc (2010-present) (healthcare company) • Chief Executive Officer (2017-present) • Chief Executive Officer, Consumer Healthcare (2015-2016) • President, Consumer Healthcare (2012-2015) • President, Consumer Healthcare Europe (2010-2012) L’Oreal, S.A. (1994-2010) • General Manager, Consumer Products, China (2007-2010) • Global Brand Head, Maybelline, USA (2002-2007) • UK General Manager, Garnier/Maybelline (1999-2002) • Various positions of increasing authority (1994-1999) | Microsoft Committees: • Appointment will be made after election Other Public Company Directorships: • GlaxoSmithKline plc Former Public Company Directorships Held in the Past Five Years: • Diageo plc |
Our Director Nominees
| 22 | |
Our Director Nominees
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Our Director Nominees
| | Padmasree Warrior | | | Age: 58 | Director Since: 2015 | Birthplace: India | Independent |
Our Director Nominees
| Experience: Fable Group, Inc. (2019-present) (curated fiction and non-fiction for mobile devices) • Founder, President, and Chief Executive Officer (2019-present) NIO Inc. (2015-2018) • Chief Development Officer (2015-2018) • Board member (2015-2018) NIO USA, Inc. (2015-2018) • Chief Executive Officer and Director (2015-2018) 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: • Spotify Technology S.A. Former Public Company Directorships Held in the Past Five Years: • Box, Inc. • The Gap, Inc. |
Our Director Nominees
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
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. We have not increased director pay since fiscal year 2015. As our CEO, Mr. Nadella does not receive additional pay for serving as a director. Mr. Gates has waived his cash and stock awards.
Director Compensation
| Fiscal Year 2019 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 | $45,000 | | Annual Audit Committee Non-Chair Member Retainer | $15,000 | | Independent Board Chair Retainer | | | Annual Independent Chair Retainer (TOTAL – in lieu of other retainers) | $537,500 | | Cash | $125,000 | | Stock Award | $412,500 |
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.
Director Compensation
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Director Compensation
Directors may elect to defer and convert to deferred stock awards all or part of their annual cash retainer, and to defer receipt of all or part of their annual stock awards 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, and dividends paid on deemed investment are also deemed to be invested in our common stock. We calculate the number of shares credited by dividing the 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.
Fiscal Year 2019 Director Compensation
Fiscal Year 2019 Director Compensation This table describes the cash and stock award portions of the annual retainer paid to each non-employee director who served in fiscal year 2019. Mr. Nadella received no compensation as a director. He is excluded from the table because we fully describe his compensation in Part 2 – Named Executive Officer Compensation.
Fiscal Year 2019 Director Compensation
| Name | Fees Earned or Paid in Cash¹ ($) | Stock Awards² ($) | All Other Compensation(3) ($) | Total ($) | | William H. Gates III(4) | 0 | 0 | 0 | 0 | | Reid G. Hoffman(5) | 125,000 | 200,000 | 0 | 325,000 | | Hugh F. Johnston | 140,000 | 200,000 | 11,000 | 351,000 | | Teri L. List-Stoll(6) | 140,000 | 200,000 | 15,000 | 355,000 | | Charles H. Noski(7) | 170,000 | 200,000 | 0 | 370,000 | | Helmut Panke | 155,000 | 200,000 | 2,500 | 357,500 | | Sandra E. Peterson(8) | 125,000 | 200,000 | 0 | 325,000 | | Penny S. Pritzker(9) | 125,000 | 200,000 | 15,000 | 340,000 | | Charles W. Scharf | 125,000 | 200,000 | 0 | 325,000 | | Arne M. Sorenson | 140,000 | 200,000 | 15,000 | 355,000 | | John W. Stanton | 140,000 | 200,000 | 15,000 | 355,000 | | John W. Thompson(10) | 125,000 | 412,500 | 15,000 | 552,500 | | Padmasree Warrior(11) | 125,000 | 200,000 | 0 | 325,000 |
Fiscal Year 2019 Director Compensation
| (1) The value of fractional shares is excluded. |
Fiscal Year 2019 Director Compensation
| (2) The aggregate award value in the “Stock awards” column for each director represents four quarterly awards, each with a grant date fair value under Financial Accounting Standards Board Accounting Standards Codification Topic 718 of $50,000, except Mr. Thompson who received three quarterly awards with a grant date fair value of $137,500 each and did not receive a stock award in the last quarter due to a reduction in the Independent Board Chair retainer. |
Fiscal Year 2019 Director Compensation
| (3) Amounts in this column represent matching charitable contributions under our corporate giving program in fiscal year 2019, which matches director gifts up to $15,000 per calendar year. |
Fiscal Year 2019 Director Compensation
| (4) Mr. Gates waived his cash and stock compensation. |
Fiscal Year 2019 Director Compensation
| (5) Mr. Hoffman elected to defer his cash and stock compensation. The compensation deferred converted into 2,905 shares of our common stock. |
Fiscal Year 2019 Director Compensation
| (6) Ms. List-Stoll elected to defer her cash and stock compensation. The compensation deferred converted into 3,037 shares of our common stock. |
Fiscal Year 2019 Director Compensation
| (7) Mr. Noski elected to defer his stock compensation. The compensation deferred converted into 1,786 shares of our common stock. |
Fiscal Year 2019 Director Compensation
| (8) Ms. Peterson elected to defer her cash and stock compensation. The compensation deferred converted into 2,905 shares of our common stock. |
Fiscal Year 2019 Director Compensation
| (9) Ms. Pritzker elected to defer her cash and stock compensation. The compensation deferred converted into 2,905 shares of our common stock. |
Fiscal Year 2019 Director Compensation
| (10) Mr. Thompson elected to defer his stock compensation. The compensation deferred converted into 3,826 shares of our common stock. |
Fiscal Year 2019 Director Compensation
| (11) Ms. Warrior elected to defer a portion of her cash compensation. The compensation deferred converted into 556 shares of our common stock. |
Executive Compensation Philosophy
| • | Focuses on the long term through equity awards with multi-year vesting or performance requirements. |
Competitive Pay
Competitive Pay We compete for senior executive talent with global information technology companies, large market capitalization U.S. companies, and smaller, high-growth technology businesses, depending on the role. The technology labor market is hyper-competitive with demand growing faster than the supply of technical talent, resulting in significant increases in compensation at the companies with whom we compete for this talent. The same conditions exist in the market for executive-level talent that can provide innovative leadership while managing at a global scale across several complex businesses. We expect these trends to continue and will adjust our approach to executive compensation to respond to evolving market conditions. To ensure that our Board and Compensation Committee have current information to set appropriate compensation levels, we conduct an executive compensation market analysis each year that draws from third-party compensation surveys and publicly available data for a group of peer companies. We supplement this analysis with additional market information specific to each executive officer’s role and responsibilities, including information gleaned from our experience recruiting for executive positions at Microsoft. While this market analysis and supplemental data inform the decisions of the independent Board members and our Compensation Committee on the range of compensation opportunities, we do not tie executive officer compensation to specific
Competitive Pay
| 28 | |
Competitive Pay
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Competitive Pay
market percentiles. Because other companies actively recruit our executive officers to fill CEO and other senior leadership positions, we supplement market information with data on external opportunities potentially available to our executive officers. We also consider the relationship of annual target compensation among internal peers. In addition, our Committee is provided with an overview of compensation for our non-executive Microsoft employees and how this compensation relates to Mr. Nadella’s compensation. In setting our fiscal year 2019 executive compensation design and compensation levels, we considered pay practices at the largest technology and general industry companies that were selected after review of three primary screening criteria: market capitalization, revenue, and earnings before interest, taxes, depreciation, and amortization (“EBITDA”). As of June 30, 2019, our market capitalization was at the top of our peer group, our revenue was at the 66th percentile of our peer group, and our EBITDA was at the 91st percentile of our peer group. Our Compensation Committee selected this peer group because it believed these companies are led by executives with similarly complex roles and responsibilities. The Committee 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 2019, this compensation peer group comprised these companies:
Competitive Pay
| Peer Group Used for Fiscal Year 2019 Pay Analysis |
Competitive Pay
| Technology | | General Industry | | | | • Alphabet • Amazon • Apple • Cisco Systems • Facebook | • IBM • Intel • Oracle • Qualcomm | • AT&T • Boeing • Chevron • Coca-Cola • Comcast | • ExxonMobil • Johnson & Johnson • Merck • PepsiCo • Pfizer | • Procter & Gamble • Verizon • Wal-Mart • Walt Disney |
Performance-Based Pay
| • | 50% of the annual cash incentive for our Named Executives was tied to achieving pre-established financial targets. |
Performance-Based Pay
| • | 50% of the annual target equity opportunity for our Named Executives was delivered in the form of a performance-based stock award with payouts based on achievement against pre-established strategic objectives. |
Performance-Based Pay
| • | Metrics under our performance stock awards were reviewed to ensure they reflect key business developments that drive long-term growth. |
Performance-Based Pay
| • | Our performance stock awards included a relative total shareholder return (“TSR”) multiplier to reward significant positive outperformance, thereby strengthening the alignment of the interests of our executive officers with the long-term interests of our shareholders. |
Long-Term Focus Through Multi-Year Vesting and Performance Requirements
Long-Term Focus Through Multi-Year Vesting and Performance Requirements All of the equity-based elements of our compensation program for our Named Executives either vest over a period of years or include long-term performance measures, like three-year relative TSR.
Annual Cash Incentives
Annual Cash Incentives Cash incentives are determined in two performance categories, as follows.
Annual Cash Incentives
| * “Incentive Plan Revenue” and “Incentive Plan Operating Income” are non-GAAP financial measures defined at page 34. |
Annual Cash Incentives
For fiscal year 2019, the financial formulaic portion of the annual cash incentives were determined based on meeting pre-established performance targets for Incentive Plan Revenue and Incentive Plan Operating Income. The fiscal year 2019 Incentive Plan Revenue and Incentive Plan Operating Income performance targets were based on meeting the Company’s internal 2019 operating budget and were higher than our fiscal year 2018 actual performance for both metrics, further reflecting appropriately ambitious performance goals.
Annual Cash Incentives
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Annual Cash Incentives
The qualitative portion of each Named Executive’s fiscal year 2019 annual cash incentives was determined based on assessment of individual 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):
Annual Cash Incentives
| | Product & Strategy | | Customers & Stakeholders | | Culture & Organizational Leadership | | • Efficiency and productivity • Innovation • Product development and implementation of strategic roadmap • Quality • Revenue, consumption, and market share | | • Corporate social responsibility • Customer and partner engagement and outreach • Customer satisfaction • Developer engagement | | • Compliance and integrity • Culture • Diversity and inclusion • Organizational health | |
Annual Cash Incentives
For Mr. Nadella, the independent members of our Board also considered:
Annual Cash Incentives
| • | Input from Microsoft’s senior executives about Mr. Nadella’s leadership. |
Annual Cash Incentives
| • | The scorecard we use to measure performance against Microsoft’s annual business plan. |
Annual Cash Incentives
| • | Mr. Nadella’s evaluation of Microsoft’s and his individual performance over the past fiscal year. |
Performance Stock Awards
Performance Stock Awards Fiscal year 2019 PSA performance metrics are strategic measures that align with our mission and purpose, and that drive long-term performance and value creation. Targets for the PSA metrics are set at the target levels established under Microsoft’s fiscal year business plan, and are intended to be difficult but attainable. The metrics and weights used for fiscal year 2019 are in the table below.
Performance Stock Awards
| Fiscal Year 2019 PSA Metrics |
Performance Stock Awards
| Performance Metrics | Description | Weights | | Commercial Cloud Revenue* | Net revenue for commercial cloud-based solutions, including Office 365 Commercial, Azure, the commercial portion of LinkedIn, Dynamics 365, and other commercial cloud properties | 34% | | Commercial Cloud Subscribers | Paid seats for current or new per-user SaaS cloud services primarily in commercial customer segment | 33% | | Windows 10 Monthly Active Devices | Comprises all Windows 10 monthly active devices, including PCs, tablets, mobile devices, gaming consoles, and Internet of Things devices | 11% | | Consumer Post-Sales Monetization Gross Margin | Includes Search, Store, Display/Homepage, Gaming, and Office Consumer/Services | 11% | | LinkedIn Sessions | Measure of member visits as a leading indicator of the overall quality of the LinkedIn member experience and opportunity for members to realize their economic opportunity. | 6% | | Surface Gross Margin | Gross margin from Surface and first-party accessories, excluding Surface Hub | 5% | | * “Commercial Cloud Revenue” is a non-GAAP financial measure defined at page 39. | | |
Performance Stock Awards
| 32 | |
Performance Stock Awards
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Performance Stock Awards
The fiscal year 2019 PSA metrics were used to establish performance goals for year 3 of the 2017 PSAs, year 2 of the 2018 PSAs, and year 1 of the 2019 PSAs, as shown below.
Performance Stock Awards
| PSA Metrics |
Performance Stock Awards
| | | Our fiscal year 2019 PSA metric results can be found at page 38 below, under “Fiscal Year 2017 PSAs (Completed Performance Period).” |
Fiscal Year 2019 Cash Incentive Awards
Fiscal Year 2019 Cash Incentive Awards We did not change our target percentages for cash incentive awards, which are measured as a percentage of base salary for fiscal year 2019, which were: Satya Nadella – 300%; Amy Hood – 250%; Jean-Philippe Courtois 225%; Margaret Johnson – 200%; and Bradford Smith – 250%.
Fiscal Year 2019 Cash Incentive Awards
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Fiscal Year 2019 Cash Incentive Awards
Our Compensation Committee and, for Mr. Nadella, the independent members of our Board, determined the fiscal year 2019 cash incentive awards. These were based on two performance categories: quantitative financial results and qualitative performance results. Final results under each portion of the cash incentive, and the resulting awards, were as follows:
Fiscal Year 2019 Cash Incentive Awards
| | Nadella | Hood | Courtois | Johnson | Smith | | Quantitative financial results (50%) | 171.81% | 171.81% | 171.81% | 171.81% | 171.81% | | Qualitative performance results (50%) | 136.67% | 150.00% | 150.00% | 120.00% | 145.00% | | Total FY19 cash incentive (% of target) | 154.24% | 160.91% | 160.91% | 145.91% | 158.41% | | Total FY19 cash incentive ($) | $10,796,868 | $3,855,040 | $2,889,049 | $2,086,456 | $3,366,148 |
Quantitative Financial Results
| Formulaic Financial Results (50% weight) ($ in billions) | Threshold | Target | Maximum | Actual | | FY19 Incentive Plan Revenue | $125.06 | $131.50 | $137.30 | $135.25 | | FY19 Incentive Plan Operating Income | $37.43 | $40.46 | $45.31 | $44.29 |
Quantitative Financial Results
| 1 Product & Strategy (33.3% weight) | 130% | | Under Mr. Nadella’s leadership and ongoing commitment to long-term success, the Company saw a strong finish to a record fiscal year delivering more than $125 billion in revenue for the full year with double-digit revenue and net income growth in 2019. The commercial cloud business led the way, surpassing $38 billion in revenue, growing over 40% for the year. The strength in commercial cloud growth was across Azure, Microsoft 365, Dynamics 365, and LinkedIn. The commitment to customer success resulted in deeper partnerships and larger, longer-term cloud agreements. Microsoft continued to make investments across the key strategic areas to build new platforms and enhance and differentiate Microsoft’s technology stack, including application infrastructure, data and artificial intelligence (“AI”) business process, productivity, collaboration, and hardware. Microsoft Teams had a very successful year, with more than 13 million daily active users and 19 million weekly active users. Further, the closing of the GitHub acquisition in October 2018 and its successful integration has created new opportunities to build the developer community. With GitHub, Microsoft now has the opportunity to bring all its resources to better serve this very important community of developers around the world. Microsoft also invested in building a developer toolchain independent of language, framework, or cloud. Visual Studio and Visual Studio Code are now the most popular code-editing tools in the world, and TypeScript is the fastest-growing programming language. Windows 10 momentum was very strong this past year as well, reaching 800 million active devices. While opportunities remain for the Company with consumers, the Company’s Gaming business made new investments to empower the world’s gaming community. However, the Company needs to make progress to strengthen our consumer business and additional work is needed in consumer-facing strategies. | | | 2 Customers & Stakeholders (33.3% weight) | 145% | | Mr. Nadella continued to lead strong efforts to build trust with stakeholders, and his personal engagement with customers, partners, and investors has been exceptional. The fiscal year 2018 reorganization of customer facing organizations into Customer Solutions Areas, which aligned go-to-market activities more closely with customers’ desired business outcomes, directly shaped our fiscal year 2019 results. Mr. Nadella’s ongoing efforts to build trust in technology have also helped with government relationships around the world. In addition, an increased focus on customers by industry helped Microsoft prioritize and secure partnerships with beachhead/influential customers and was successful. Under Mr. Nadella’s leadership and direction, the Company expanded upon its core mission that participation in every community and country leads to local economic and social benefits. Also under Mr. Nadella’s leadership, the Company has continued its purpose-driven mission of enabling people and organizations around the world to achieve more, and helped build trust on complex topics of data privacy, cybersecurity, digital safety, accessibility and artificial intelligence. | | | 3 Culture & Organizational Leadership (33.3% weight) | 135% | | Mr. Nadella continued to demonstrate his commitment to evolve Microsoft culture, where his successes include achieving aspirational goals for diversity goals in hiring and retention. In fiscal year 2019, nearly 80% of employees and managers surveyed indicated they understand how to leverage a new core priority for inclusion to contribute towards building a more diverse and inclusive workplace. Moreover, 90% of employees said their managers created an inclusive environment. Work remains to be done to provide additional training and resources for the Company’s mid-level managers and address the needs of the millennial workforce. Surveys of employee sentiment and Senior Leadership Team feedback show strong support for Mr. Nadella’s cultural push for One Microsoft and Growth Mindset initiatives. | |
Vesting of Mr. Nadella’s Long-Term Performance Stock Award
Vesting of Mr. Nadella’s Long-Term Performance Stock Award Upon Mr. Nadella’s appointment to CEO, he was granted a one-time long-term performance-based stock award (“LTPSA”). LTPSA payouts are tied to Microsoft’s total shareholder return relative to the S&P 500 (“relative TSR”) over three overlapping five-year performance periods. The first of these periods commenced with Mr. Nadella’s appointment as CEO and ended February 3, 2019. Under the LTPSA, target awards are paid if Microsoft’s relative TSR is at the 60% level, and at the maximum 150% of target level if Microsoft’s relative TSR is at or above the 80% level. For each of the three five-year performance periods, the number of shares earned at threshold is 150,000, at target 600,000, and at maximum 900,000. During the first five-year performance period, Microsoft’s market capitalization increased $509 billion (from $302 billion to $811 billion), and Microsoft’s relative TSR was in the 97th percentile, resulting in Mr. Nadella earning and vesting in the maximum 900,000 shares.
(Payouts as Percentage of Target Award)
(Payouts as Percentage of Target Award)
(Payouts as Percentage of Target Award)
| | Commercial Cloud Revenue | Commercial Cloud Subscribers | Windows 10 Monthly Active Devices | Consumer Post-Sales Monetization Gross Margin | Surface Gross Margin | LinkedIn Sessions | Weighted Performance for FY (%) | | | (34% weight per year) | (33% weight per year) | (11% weight per year) | (11% weight per year) | (11% weight FY17, 5% weight FY18, FY19) | (6% weight per year) | | | FY17 | 60.71(1) | 80.55(2) | 92.70(3) | 200(4) | 0(5) | N/A | 79.42% | | FY18 | 200(1) | 200(2) | 200(3) | 200(4) | 200(5) | 200(6) | 200% | | FY19 | 99.16(1) | 114.79(2) | 129.46(3) | 144.33(4) | 105.41(5) | 110.82(6) | 113.63% | | Core Metric Performance (average of FY17, FY18, and FY19 performance): | | | | | | | 131.02% |
(Payouts as Percentage of Target Award)
| (1) Results/targets (in billions) were: FY17 $14.94/$15.82, FY18 $22.89/$22.38, and FY19 $38.63/$38.67. |
(Payouts as Percentage of Target Award)
| (2) Results as percentage of target were: FY17 96.55%, FY18 103.50%, and FY19 101.36%. |
(Payouts as Percentage of Target Award)
| (3) Results/targets (in millions) were: FY17 499.72/506.00, FY18 694.06/608.98, and FY19 860.56/824.15. |
(Payouts as Percentage of Target Award)
| (4) Results as percentage of target were: FY17 110.35%, FY18 114.03%, and FY19 104.86%. |
(Payouts as Percentage of Target Award)
| (5) Results as percentage of target were: FY17 66.30%, FY18 134.21%, and FY19 101.65%. |
(Payouts as Percentage of Target Award)
| (6) Results/targets (in billions) were: FY18 25.61/21.70, and FY19 32.52/32.11. |
(Payouts as Percentage of Target Award)
| 38 | |
(Payouts as Percentage of Target Award)
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
(Payouts as Percentage of Target Award)
“Commercial Cloud Revenue” is a non-GAAP financial measure, calculated by adjusting GAAP results for the effect of foreign currency rate fluctuations. We exclude the effect of foreign currency rate fluctuations on a “constant dollar” basis by converting current period non-GAAP results for entities reporting in currencies other than United States dollars into United States dollars using constant exchange rates, which are determined at the outset of the fiscal year, rather than the actual exchange rates in effect during the respective periods. These metric results differ from certain non-GAAP financial results we report in our quarterly earnings release materials; they should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.
Relative TSR Multiplier
Relative TSR Multiplier The core metric results for the fiscal year 2017 PSAs were then subject to adjustment based on the relative TSR performance multiplier, which compares our TSR for the three-fiscal year performance period to the TSR of the S&P 500. Our TSR for the performance period was positive and ranked in the 97th percentile of the S&P 500. Based on this positioning, the total payment percentage for the fiscal 2017 PSAs was increased by 50%, resulting in the payout to our Named Executives of 196.53% of the target fiscal 2017 PSA shares.
Post-Employment Compensation
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.
Post-Employment Compensation
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Post-Employment Compensation
Our Named Executives may be eligible for additional vesting of their outstanding SAs following termination of employment on the same terms as our other employees. All U.S. employees who retire from Microsoft after (a) age 65 or (b) age 55 with 15 years of service are eligible for the continuation of vesting of outstanding SAs granted at hire or at the time of annual 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, 2019, only Mr. Smith was retirement eligible, and the value of his SAs and PSAs eligible for continued vesting if he retired on that date was $24,131,956 (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 SAs. Our PSAs, and Mr. Nadella’s LTPSA that was granted to him in connection with his appointment as CEO, vest for the target number of shares upon death or total and permanent disability. The value of our Named Executives’ SAs, PSAs, and LTPSAs that would have vested assuming a June 30, 2019 termination of employment due to death or total and permanent disability was: Mr. Nadella, $239,491,545; Ms. Hood, $43,767,545; Mr. Courtois, $37,557,695; Ms. Johnson, $22,217,534; and Mr. Smith, $37,552,069. In addition, our Named Executives are eligible to participate in the Microsoft Senior Executive Severance Benefit Plan (“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 Microsoft. 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, 2019.
Post-Employment Compensation
| Named Executive | Amount Payable ($) | | Satya Nadella | $96,811,443(1) | | Amy E. Hood | $33,784,836 | | Jean-Philippe Courtois | $29,716,897 | | Margaret L. Johnson | $18,090,259 | | Bradford L. Smith | $33,227,724(2) |
Post-Employment Compensation
| (1) Includes $65,330,843 in Severance Plan benefits, in addition to $31,480,600 in stock vesting under Mr. Nadella’s LTPSA award. |
Post-Employment Compensation
| (2) Includes $9,095,768 in Severance Plan benefits, in addition to $24,131,956 in retirement-based stock vesting under Mr. Smith’s SAs and PSAs. |
Deductibility of Executive Compensation
| • | The portion of fiscal year 2018 cash incentives payable based on formulaic financial results. |
Deductibility of Executive Compensation
| 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 2019 compensation policies and practices were 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 our 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: | | | • 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 pre-established 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. • The majority of Incentive Plan award value is delivered in shares of Microsoft common stock with multi-year vesting schedules or performance periods, which aligns the interests of our executive officers to long-term shareholder interests. • PSA metrics further diversify the elements of the program to minimize the incentive to produce any particular outcome. | • 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. • Overlapping performance periods for PSAs limit the impact of short-term business performance or share price fluctuations on final outcomes. • 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 our 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, 2019, 2018, and 2017. None of our Named Executives received stock options during those years.
Summary Compensation Table
| Named Executive and Principal Position | Year | Salary ($) | Stock Awards(1) ($) | Non-equity Incentive Plan Compensation(2) ($) | All Other Compensation(3) ($) | Total ($) | | Satya Nadella Chief Executive Officer and Director | 2019 | 2,333,333 | 29,668,651 | 10,796,868 | 111,363 | 42,910,215 | | | 2018 | 1,500,000 | 16,807,208 | 7,425,000 | 111,055 | 25,843,263 | | | 2017 | 1,450,000 | 11,434,557 | 7,032,406 | 97,189 | 20,014,152 | | Amy E. Hood Executive Vice President and Chief Financial Officer | 2019 | 958,333 | 15,316,653 | 3,855,040 | 97,608 | 20,227,634 | | | 2018 | 875,000 | 10,232,265 | 3,718,750 | 98,442 | 14,924,457 | | | 2017 | 852,917 | 7,015,071 | 3,624,896 | 89,260 | 11,582,144 | | Jean-Philippe Courtois(4) Executive Vice President, President, Global Sales, Marketing and Operations | 2019 | 798,000 | 11,309,474 | 2,889,049 | 88,231 | 15,084,754 | | | 2018 | 833,000 | 7,149,549 | 3,092,513 | 51,187 | 11,126,249 | | | 2017 | 751,054 | 14,735,464(5) | 2,762,884 | 45,214 | 18,294,616 | | Margaret L. Johnson Executive Vice President, Business Development | 2019 | 715,000 | 7,539,668 | 2,086,456 | 91,525 | 10,432,649 | | | 2018 | 715,000 | 5,702,554 | 2,252,236 | 88,225 | 8,758,015 | | | 2017 | 715,000 | 3,907,922 | 2,168,795 | 89,238 | 6,880,955 | | Bradford L. Smith President and Chief Legal Officer | 2019 | 850,000 | 13,045,437 | 3,366,148 | 111,412 | 17,372,997 | | | 2018 | 800,000 | 9,033,868 | 3,566,700 | 111,055 | 13,511,623 | | | 2017 | 785,833 | 6,193,370 | 3,241,543 | 98,989 | 10,319,735 |
Summary Compensation Table
| (1) Includes the grant date fair values for SAs and PSAs calculated in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718 based on the market price of the shares subject to the award on the date of grant. The value of SAs is reduced by the present value of estimated future dividends because dividends are not paid on SA shares until vesting. The value of PSAs is calculated using a Monte-Carlo simulation valuation performed as of the date of grant by an independent third party. Because the grant date for a PSA occurs when performance targets are approved, and we approved performance targets in each of fiscal years 2019, 2018, and 2017, PSA values in this column include: (i) for fiscal year 2019, 33.33% of each of the fiscal year 2019 PSAs, the fiscal year 2018 PSAs, and the fiscal year 2017 PSAs; (ii) for fiscal year 2018, 33.33% of each of the fiscal year 2018 PSAs and fiscal year 2017 PSAs, and 16.66% of the fiscal year 2016 PSAs; and (iii) for fiscal year 2017, 33% of the fiscal year 2017 PSAs and 16.66% of the fiscal year 2016 PSAs. The grant date fair values of included PSAs, assuming at the grant date that the highest level of performance conditions will be achieved for each PSA are: (i) for fiscal year 2019, Mr. Nadella, $35,050,220; Ms. Hood, $19,823,991; Mr. Courtois, $15,380,642; Ms. Johnson, $10,253,798; and Mr. Smith, $17,211,903; (ii) for fiscal year 2018, Mr. Nadella, $21,723,387; Ms. Hood $12,921,957; Mr. Courtois, $7,114,107; Ms. Johnson, $7,551,291; and Mr. Smith, $11,429,189; and (iii) 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, $5,556,198. |
Summary Compensation Table
| (2) Includes Incentive Plan cash incentives. |
Summary Compensation Table
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Summary Compensation Table
| (3) None of our Named Executives received reimbursements for relocation expenses or tax-gross-up payments in the last three fiscal years. Details about the amounts in the “All Other Compensation” column for fiscal year 2019 are set forth in the table below. |
Grants of Plan-Based Awards Table
Grants of Plan-Based Awards Table This table provides information on grants of awards under any plan to the Named Executives in the fiscal year ended June 30, 2019.
Grants of Plan-Based Awards Table
| | Award(1) | Grant Date | Estimated Possible Payouts under Non-Equity Incentive Plan Awards(2) ($) | Estimated Future Payouts under Equity Incentive Plan Awards(3) | | | All Other Stock Awards (#) | Grant Date Fair Value of Stock Awards(4) ($) | | Named Executive | | | | Threshold (#) | Target (#) | Maximum (#) | | | | Satya Nadella | 2019 Cash Incentive | | 10,796,868 | | | | | | | | 2019 PSA | 9/18/2018 | | 928 | 37,093 | 111,279 | | 4,994,272 | | | 2018 PSA | 9/18/2018 | | 836 | 33,436 | 100,308 | | 5,279,344 | | | 2017 PSA | 9/18/2018 | | 1,088 | 43,508 | 130,524 | | 7,251,494 | | | 2019 SA | 9/18/2018 | | | | | 111,280 | 12,143,541 | | Amy E. Hood | 2019 Cash Incentive | | 3,855,040 | | | | | | | | 2019 PSA | 9/17/2018 | | 416 | 16,618 | 49,854 | | 2,216,311 | | | 2018 PSA | 9/17/2018 | | 519 | 20,730 | 62,190 | | 3,242,259 | | | 2017 PSA | 9/17/2018 | | 675 | 26,976 | 80,928 | | 4,453,425 | | | 2019 SA | 9/17/2018 | | | | | 49,854 | 5,404,657 | | Jean-Philippe Courtois | 2019 Cash Incentive | | 2,889,049 | | | | | | | | 2019 PSA | 9/17/2018 | | 279 | 11,128 | 33,384 | | 1,484,120 | | | 2018 PSA | 9/17/2018 | | 418 | 16,718 | 50,154 | | 2,614,724 | | | 2017 PSA | 9/17/2018 | | 544 | 21,755 | 65,265 | | 3,591,477 | | | 2019 SA | 9/17/2018 | | | | | 33,384 | 3,619,153 | | Margaret L. Johnson | 2019 Cash Incentive | | 2,086,456 | | | | | | | | 2019 PSA | 9/17/2018 | | 186 | 7,419 | 22,257 | | 989,413 | | | 2018 PSA | 9/17/2018 | | 279 | 11,145 | 33,435 | | 1,743,149 | | | 2017 PSA | 9/17/2018 | | 363 | 14,503 | 43,509 | | 2,394,337 | | | 2019 SA | 9/17/2018 | | | | | 22,256 | 2,412,769 | | Bradford L. Smith | 2019 Cash Incentive | | 3,366,148 | | | | | | | | 2019 PSA | 9/17/2018 | | 342 | 13,650 | 40,950 | | 1,820,519 | | | 2018 PSA | 9/17/2018 | | 457 | 18,278 | 54,834 | | 2,858,762 | | | 2017 PSA | 9/17/2018 | | 595 | 23,784 | 71,352 | | 3,926,670 | | | 2019 SA | 9/17/2018 | | | | | 40,951 | 4,439,486 |
Grants of Plan-Based Awards Table
| (1) All awards are granted under the Executive Incentive Plan. SAs and PSAs were granted under the 2017 Stock Plan, except that the 2017 and 2018 PSAs were granted under the 2001 Stock Plan. |
Grants of Plan-Based Awards Table
| (2) This column represents fiscal year 2019 cash incentives as reported in the “Non-equity Incentive Plan Compensation” column of the Summary Compensation Table. |
Grants of Plan-Based Awards Table
| (3) These columns represent the threshold, target, and maximum shares for the PSAs with a grant date in fiscal year 2019. Because the grant date for a PSA occurs when PSA performance targets are approved, 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 2019 (33.33% of each of the 2019, 2018, and 2017 PSAs). The threshold is calculated as if the threshold of only the least weighted metric (50% of 5.00% for each of the 2019, 2018, and 2017 PSAs) is met. The maximum is calculated assuming all maximum targets were met and the relative TSR multiplier was fully earned. |
Grants of Plan-Based Awards Table
| (4) Includes the grant date fair values for SAs and PSAs calculated in accordance with FASB ASC Topic 718 based on the market price of the shares subject to the award on the date of grant. The value of SAs is reduced by the present value of estimated future dividends because dividends are not paid on SA shares until 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. |
Grants of Plan-Based Awards Table
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Outstanding Equity Awards at June 30, 2019 Table
Outstanding Equity Awards at June 30, 2019 Table This table provides information about unvested SAs and PSAs held by the Named Executives on June 30, 2019.
Outstanding Equity Awards at June 30, 2019 Table
| | Stock Awards | | | | | | Name | Award Date | 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 | 2/4/2014 | | | 300,000(3) | 40,188,000 | | | 9/15/2015 | 22,749(4) | 3,047,456 | | | | | 9/20/2016 | 48,948(4) | 6,557,074 | | | | | 9/20/2016 | | | 130,526(5) | 17,485,263 | | | 9/19/2017 | 62,693(4) | 8,398,354 | | | | | 9/19/2017 | | | 66,872(5) | 8,958,173 | | | 9/18/2018 | 111,280(4) | 14,907,069 | | | | | 9/18/2018 | | | 37,093(5) | 4,968,978 | | Amy E. Hood | 9/15/2015 | 14,678(4) | 1,966,265 | | | | | 9/19/2016 | 30,348(4) | 4,065,418 | | | | | 9/19/2016 | | | 80,926(5) | 10,840,847 | | | 9/18/2017 | 38,870(4) | 5,207,025 | | | | | 9/18/2017 | | | 41,460(5) | 5,553,982 | | | 9/17/2018 | 49,854(4) | 6,678,442 | | | | | 9/17/2018 | | | 16,618(5) | 2,226,147 | | Jean-Philippe Courtois | 8/31/2015 | 4,964(6) | 664,977 | | | | | 8/31/2015 | 5,745(4) | 769,600 | | | | | 7/26/2016 | 26,428(7) | 3,540,295 | | | | | 9/19/2016 | 5,222(6) | 699,539 | | | | | 12/21/2016 | 24,474(8) | 3,278,537 | | | | | 12/21/2016 | | | 65,263(5) | 8,742,631 | | | 9/18/2017 | 31,347(4) | 4,199,244 | | | | | 9/18/2017 | | | 33,436(5) | 4,479,087 | | | 9/17/2018 | 33,384(4) | 4,472,121 | | | | | 9/17/2018 | | | 11,128(5) | 1,490,707 | | Margaret L. Johnson | 9/15/2015 | 7,181(4) | 961,967 | | | | | 9/19/2016 | 16,316(4) | 2,185,691 | | | | | 9/19/2016 | | | 43,509(5) | 5,828,466 | | | 9/18/2017 | 20,898(4) | 2,799,496 | | | | | 9/18/2017 | | | 22,290(5) | 2,985,968 | | | 9/17/2018 | 22,256(4) | 2,981,414 | | | | | 9/17/2018 | | | 7,419(5) | 993,849 | | Bradford L. Smith | 9/15/2015 | 11,202(4) | 1,500,620 | | | | | 9/19/2016 | 26,758(4) | 3,584,502 | | | | | 9/19/2016 | | | 71,354(5) | 9,558,582 | | | 9/18/2017 | 34,272(4) | 4,591,077 | | | | | 9/18/2017 | | | 36,556(5) | 4,897,042 | | | 9/17/2018 | 40,951(4) | 5,485,796 | | | | | 9/17/2018 | | | 13,650(5) | 1,828,554 |
Outstanding Equity Awards at June 30, 2019 Table
| (1) PSAs with a grant date in fiscal years 2019, 2018, or 2017 are reported assuming payout at target award levels. Mr. Nadella’s LTPSA is reported at the minimum award level. |
Outstanding Equity Awards at June 30, 2019 Table
| (2) The market value is the number of shares shown in the table multiplied by $133.96, the closing market price of Microsoft common stock on June 28, 2019. |
Outstanding Equity Awards at June 30, 2019 Table
| (3) Vests 50%, subject to performance, on each of February 3, 2020 and February 3, 2021. |
Outstanding Equity Awards at June 30, 2019 Table
| 46 | |
Outstanding Equity Awards at June 30, 2019 Table
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Outstanding Equity Awards at June 30, 2019 Table
| (4) Vests 25% on the last day of August following the award date and 12.5% semi-annually thereafter. |
Outstanding Equity Awards at June 30, 2019 Table
| (5) Award shares that are earned vest in full following three-year performance period. |
Outstanding Equity Awards at June 30, 2019 Table
| (6) Vests 10% on the last day of February following the award date and 10% semi-annually thereafter. |
Outstanding Equity Awards at June 30, 2019 Table
| (7) Vests over three years semi-annually from award date. |
Outstanding Equity Awards at June 30, 2019 Table
| (8) Vests 25% on December 21, 2017, 12.5% on February 28, 2018, and 12.5% semi-annually thereafter. |
Option Exercises and Stock Vested Table
Option Exercises and Stock Vested Table This table provides information on an aggregate basis about stock awards that vested during the fiscal year ended June 30, 2019 for each of the Named Executives. Microsoft has not granted stock options, other than options substituted in acquisitions, since 2003. No Named Executives held any Microsoft stock options during the fiscal year.
Option Exercises and Stock Vested Table
| | Stock Awards | | | Named Executive | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(1) ($) | | Satya Nadella | 1,636,089 | 178,509,825 | | Amy E. Hood | 345,238 | 38,597,968 | | Jean-Philippe Courtois | 115,038 | 12,718,643 | | Margaret L. Johnson | 228,074 | 25,490,080 | | Bradford L. Smith | 378,581 | 42,153,623 |
Option Exercises and Stock Vested Table
| (1) 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. |
Nonqualified Deferred Compensation Table
Nonqualified Deferred Compensation Table This table provides information about Named Executives’ earnings and balances under our U.S. nonqualified Deferred Compensation Plan in fiscal year 2019. Microsoft does not contribute to the Deferred Compensation Plan, and in fiscal year 2019 there were no contributions or withdrawals by, or distributions to, any Named Executive.
Nonqualified Deferred Compensation Table
| Name | Executive Contributions in Fiscal Year 2019(1) ($) | Aggregate Earnings in Fiscal Year 2019(1) ($) | Aggregate Balance at June 30, 2019(1) ($) | | Satya Nadella | 0 | 11,521 | 207,291 | | Amy E. Hood | 0 | 0 | 0 | | Jean-Philippe Courtois | 0 | 0 | 0 | | Margaret L. Johnson | 0 | 0 | 0 | | Bradford L. Smith | 0 | 0 | 0 |
Nonqualified Deferred Compensation Table
| (1) These amounts have not been included in the Summary Compensation Table for fiscal year 2019 or for previous years. |
Nonqualified Deferred Compensation Table
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 cash incentives (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. 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 withdrawals for certain severe financial hardships 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 deemed investment options available under the plan.
Nonqualified Deferred Compensation Table
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
CEO Pay Ratio
CEO Pay Ratio For fiscal year 2019, the annual total compensation for the median employee of the Company (other than our CEO) was $172,512 and the annual total compensation of our CEO was $42,910,215. Based on this information, for fiscal year 2019 the ratio of the annual total compensation of our CEO to the annual total compensation of the median employee was 249 to 1. This ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the Securities Exchange Act of 1934. We identified our median employee from among our employees as of June 30, 2019, the last day of our fiscal year, excluding approximately 1,980 employees who became Microsoft employees in fiscal year 2019 in the following business acquisitions: Bonsai AI, Inc., Cordata, Inc., DataSense business from BrightBytes Inc., Citus Data Inc., Compulsion Games Inc. Dependabot Ltd, Drawbridge Inc., Express Logic Corporation, FSLogix, Inc., GitHawk, GitHub Inc., Glint, Inc., Good Software LLC, inXile Entertainment Inc., Lobe Artificial Intelligence, Inc., Ninja Theory Limited, Obsidian Entertainment, Inc., Spectrum business from Space Program, Inc., and Undead Labs LLC. To identify our median employee, we used a “total direct compensation” measure consisting of: (i) fiscal year 2019 annual base pay (salary or gross wages for hourly employees, excluding paid leave), which we annualized for any permanent employees who commenced work during the year, (ii) bonuses and cash incentives payable for fiscal year 2019 (excluding allowances, relocation payments, and profit-sharing), and (iii) the dollar value of SAs granted in fiscal year 2019. Compensation amounts were determined from our human resources and payroll systems of record. Payments not made in U.S. dollars were converted to U.S. dollars using 12-month average exchange rates for the year. To identify our median employee, we then calculated the total direct compensation for our global employee population and excluded employees at the median who had anomalous compensation characteristics. Our Compensation Committee was provided with information on the fiscal year 2018 CEO pay ratio before recommending Mr. Nadella’s fiscal year 2019 target annual compensation.
Election of Directors
Election of Directors Thirteen directors are to be elected during 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 1 – Governance and Our Board of Directors to serve as directors unless the shareholder indicates to the contrary on the proxy. All the nominees except Ms. Walmsley are current directors. The Board 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 during the meeting but for which there is an abstention, or (c) that is otherwise present during 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.
Majority Vote Standard for Election of Directors
| 64 | |
Majority Vote Standard for Election of Directors
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Majority Vote Standard for Election of Directors
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. |
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 https://aka.ms/policiesandguidelines.