DEF 14A of Microsoft Corp
Filed Oct 14, 2021 · FY20210001193125-21-298757
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 12 director nominees. Each director is elected annually by a majority of votes cast. The Board has nominated Carlos Rodriguez for election as director. If elected, his term will begin on November 30, 2021. The Board has approved an increase in its size from 11 members to 12 members effective as of November 30, 2021.
Our Director Nominees
| Name Occupation | Age | Director Since | Independent | Other Public Boards | Committee Memberships | | | | | | | | | | AC | CC | GN | RPP | | Reid G. Hoffman General Partner, Greylock Partners | 54 | 2017 | Yes | 2 | | | | | | Hugh F. Johnston Vice Chairman, Executive Vice President, and CFO, PepsiCo, Inc. | 60 | 2017 | Yes | 1 | | | | | | Teri L. List Former Executive Vice President and CFO, The Gap, Inc. | 58 | 2014 | Yes | 3 | | | | | | Satya Nadella Chairman and CEO, Microsoft Corporation | 54 | 2014 | No | 1 | | | | | | Sandra E. Peterson Operating Partner, Clayton, Dubilier & Rice, LLC | 62 | 2015 | Yes | 2 | | | | | | Penny S. Pritzker Founder and Chairman, PSP Partners, LLC | 62 | 2017 | Yes | 0 | | | | | | Carlos A. Rodriguez President, CEO, and Director, Automatic Data Processing, Inc. | 57 | Nominee | Yes | 1 | | | | | | Charles W. Scharf CEO, President, and Director, Wells Fargo & Company | 56 | 2014 | Yes | 1 | | | | | | John W. Stanton Founder and Chairman, Trilogy Partnerships | 66 | 2014 | Yes | 2 | | | | | | John W. Thompson Lead Independent Director, Microsoft Corporation; Former CEO and Director, Virtual Instruments Corporation | 72 | 2012 | Yes | 1 | | | | | | Emma N. Walmsley CEO and Director, GlaxoSmithKline plc | 52 | 2019 | Yes | 1 | | | | | | Padmasree Warrior Founder, President, and CEO, Fable Group, Inc. | 60 | 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 and Member |
Our Director Nominees
The Board will consider committee appointments for Carlos Rodriguez if he is elected to the Board.
Our Director Nominees
| 2 | |
Our Director Nominees
Our Director Nominees Following are biographies for the 12 directors nominated by the Board for election during the 2021 Annual Meeting.
Our Director Nominees
| | Reid G. Hoffman | | | Age: 54 | Director since: 2017 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: Greylock Partners (2009-present) (venture capital firm) • General Partner (2021-present) • Partner (2009-2021) Reinvent Capital (2019-present) • Advisory Partner (2021-present) • Partner (2019-2021) 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 Holdings, Inc. (2000-2002) • Executive Vice President (2000-2002) | Microsoft committees: • None Other public company directorships: • Reinvent Technology Partners • Reinvent Technology Partners Z Former public company directorships held in the past five years: • LinkedIn Corporation |
Our Director Nominees
| | Hugh F. Johnston | | | Age: 60 | 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 & Co., Inc. (1999-2002) • Vice President, Retail Marketing, Merck-Medco Managed Care LLC (1999-2002) | Microsoft committees: • Audit (Chair) Other public company directorships: • HCA Healthcare, Inc. Former public company directorships held in the past five years: • Twitter Inc. |
Our Director Nominees
| | Board Diversity | | Financial | | Global Business | | Leadership | | Mergers and Acquisitions | | Sales and Marketing | | Technology |
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
| | Teri L. List | | | Age: 58 | Director Since: 2014 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: The Gap, Inc. (2016-2020) (clothing and accessories retailer) • Executive Vice President and Chief Financial Officer (2016-2020) 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) The Procter & Gamble Company (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 • DoubleVerify Holdings, Inc. • Oscar Health, Inc. 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
| | Satya Nadella | | | Age: 54 | Director Since: 2014 | Birthplace: India |
Our Director Nominees
| Experience: Microsoft Corporation (1992-present) • Chairman and Chief Executive Officer (2021 to present) • Chief Executive Officer and Director (2014-2021) • 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
| 2021 PROXY STATEMENT | 23 |
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
| | Sandra E. Peterson | | | Age: 62 | 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) • 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 (Chair) • Governance and Nominating Other Public Company Directorships: • Covetrus, Inc. • Zymergen, Inc. Former Public Company Directorships Held in the Past Five Years: • None |
Our Director Nominees
| | Penny S. Pritzker | | | Age: 62 | Director Since: 2017 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: United States Secretary of Commerce (2013-2017) PSP Partners, LLC (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 (present) • Co-founder (present) 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 (Chair) 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
| | Board Diversity | | Financial | | Global Business | | Leadership | | Mergers and Acquisitions | | Sales and Marketing | | Technology |
Our Director Nominees
| 24 | |
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
| | Carlos A. Rodriguez | | | Age: 57 | Director since: Nominee | Birthplace: Cuba | Independent |
Our Director Nominees
| Experience: Automatic Data Processing, Inc. (1999-present) (human capital management solutions provider) • President, Chief Executive Officer, and Director (2011-present) • President, Chief Operating Officer, and Director (2011) • Various positions of increasing authority (1999-2011) Vincam Group, Inc. (1996-1999) (acquiredby Automatic Data Processing, Inc. in 1999) • Senior Vice President Finance and Chief Financial Officer (1997-1999) • Vice President, Mergers & Acquisitions (1996-1997) • Vice President, Operations (1996) | Microsoft committees: • Appointment will be made after election Other public company directorships: • Automatic Data Processing, Inc. Former public company directorships held in the past five years: • None |
Our Director Nominees
| | Charles W. Scharf | | | Age: 56 | Director Since: 2014 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: Wells Fargo & Company (2019-present) (banking and financial services company) • Chief Executive Officer and President (2019-present) The Bank of New York Mellon Corporation (2017-2019) • 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: • Wells Fargo & Company Former Public Company Directorships Held in the Past Five Years: • The Bank of New York Mellon Corporation • Visa Inc. |
Our Director Nominees
| 2021 PROXY STATEMENT | 25 |
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. Stanton | | | Age: 66 | Director Since: 2014 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: Trilogy Partnerships (2005-present) (investment company) • Founder and Chairman (2005-present) Clearwire Corp. (2008-2013) • 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: • Audit • 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
| | John W. Thompson | | | Age: 72 | Director Since: 2012 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: Microsoft Corporation (2012-present) • Lead Independent Director (2021-present) • Independent Board Chair (2014-2021) • Lead Independent Director (2012-2014) Virtual Instruments Corporation (2010-2016) • Chief Executive Officer and Director (2010-2016) Symantec Corp. (1999-2011) • Chairman of the Board (1999-2011) • Chairman and 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
| | Board Diversity | | Financial | | Global Business | | Leadership | | Mergers and Acquisitions | | Sales and Marketing | | Technology |
Our Director Nominees
| 26 | |
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
| | Emma N. Walmsley | | | Age: 52 | Director Since: 2019 | 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: • Compensation • Regulatory and Public Policy Other Public Company Directorships: • GlaxoSmithKline plc Former Public Company Directorships Held in the Past Five Years: • None |
Our Director Nominees
| | Padmasree Warrior | | | Age: 60 | 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: • None |
Our Director Nominees
| 2021 PROXY STATEMENT | 27 |
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 or as Board Chairman. The independent Board Chair retainer reflects the compensation for Mr. Thompson’s fiscal year 2021 service.
Director Compensation
| Fiscal Year 2021 Compensation Structure for Directors | | | Regular Retainers (all directors except Messrs. 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 (Mr. Thompson) | | | Annual Independent Chair Retainer (TOTAL – in lieu of other retainers) | $485,000 | | Cash | $125,000 | | Stock Award | $360,000 |
Director Compensation
| 2021 PROXY STATEMENT | 29 |
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
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 shareholders 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 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 investments 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.
Director Compensation
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 2021. Mr. Nadella received no compensation as a director or Board Chair. He is excluded from the table because we fully describe his compensation in Part 2 – Named Executive Officer Compensation.
Director Compensation
| Name | Fees Earned or Paid in Cash¹ ($) | Stock Awards² ($) | All Other Compensation(3) ($) | Total ($) | | Reid G. Hoffman(4) | 125,000 | 200,000 | 0 | 325,000 | | Hugh F. Johnston | 170,000 | 200,000 | 5,000 | 375,000 | | Teri L. List(5) | 140,000 | 200,000 | 15,000 | 355,000 | | Sandra E. Peterson(6) | 140,000 | 200,000 | 15,000 | 355,000 | | Penny S. Pritzker(7) | 140,000 | 200,000 | 0 | 340,000 | | Charles W. Scharf | 125,000 | 200,000 | 0 | 325,000 | | Arne M. Sorenson(8) | 116,653 | 150,000 | 0 | 266,653 | | John W. Stanton | 140,000 | 200,000 | 15,000 | 355,000 | | John W. Thompson(9) | 125,000 | 360,000 | 15,000 | 500,000 | | Emma N. Walmsley | 125,000 | 200,000 | 13,422 | 338,422 | | Padmasree Warrior(10) | 125,000 | 200,000 | 0 | 325,000 |
Director Compensation
| The value of fractional shares under stock awards that are paid in cash are reported in the Stock Awards column.(1) |
Director Compensation
| The aggregate award value in the “Stock Awards” column for each director represents four quarterly awards, each with a grant date fair value under FASB ASC Topic 718 of $50,000, with exceptions as follows: Mr. Thompson received four quarterly awards, each with a grant date fair value under FASB ASC Topic 718 of $90,000; Mr. Sorenson received three quarterly awards, each with a grant date fair value under FASB ASC Topic 718 of $50,000.(2) |
Director Compensation
| Amounts in this column represent matching charitable contributions under our corporate giving program in fiscal year 2021, which matches director gifts up to $15,000 per calendar year.(3) |
Director Compensation
| Mr. Hoffman elected to defer his cash and stock compensation. The compensation deferred converted into 1,432 shares of our common stock.(4) |
Director Compensation
| Ms. List elected to defer her cash and stock compensation. The compensation deferred converted into 1,498 shares of our common stock.(5) |
Director Compensation
| Ms. Peterson elected to defer her cash and stock compensation. The compensation deferred converted into 1,498 shares of our common stock.(6) |
Director Compensation
| Ms. Pritzker elected to defer her cash and stock compensation. The compensation deferred converted into 1,498 shares of our common stock.(7) |
Director Compensation
| As Mr. Sorenson passed away in February 2021, his final prorated stock and cash retainers of $11,653 were paid out in cash and are reflected in the “Fees Earned or Paid in Cash” column(8) |
Director Compensation
| Mr. Thompson’s Independent Board Chair compensation continued through June 30, 2021. Mr. Thompson elected to defer his stock compensation. The compensation deferred converted into 1,586 shares of our common stock.(9) |
Director Compensation
| Ms. Warrior elected to defer a portion of her cash compensation. The compensation deferred converted into 274 shares of our common stock.(10) |
Director Compensation
| 30 | |
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 |
Shareholder Engagement
| Our executive compensation program is grounded in a compensation philosophy aimed at achieving strong alignment between our long-term strategic goals and our shareholders’ interests. Feedback received from our shareholders through ongoing engagement discussions informs our Compensation Committee’s deliberations as it reviews the incentive structures in place on an ongoing basis. Our Board and our Compensation Committee deeply value the continued interest of and feedback from our shareholders on our executive compensation program and are committed to maintaining an active dialogue with them to ensure their perspectives are thoughtfully taken into account. We carefully consider both the level of voting support from our shareholders on our say-on-pay vote, as well as comments from shareholders, when evaluating our executive compensation program. At the 2020 Annual Meeting, 94.7% of the votes cast supported our advisory resolution on the compensation of our Named Executives (“say-on-pay” vote). | Shareholder Engagement | | | Engaged with shareholders owning approximately 50% of shares in FY21 | | | Compensation Committee Chair and Independent Board Chair held compensation-focused “Virtual Shareholder Listening Tour” with shareholders owning over 20% of shares in FY21 |
Shareholder Engagement
| Pay Element | FY20 Elements / Metrics / Weightings | | FY21 Elements / Metrics / Weightings | | | Annual Cash Incentives | Financial • Incentive Plan Revenue (25%) • Incentive Plan Operating Income (25%) | 50% | Financial (new) • Incentive Plan Revenue (35%) • Incentive Plan Operating Income (35%) | 70% | | | Operational • Product & Strategy (16.67%) • Customers & Stakeholders (16.67%) • Culture & Organizational Leadership (16.66%) | 50% | Operational (new) • Product & Strategy (10%) • Customers & Stakeholders (10%) • Culture & Organizational Leadership (10%) | 30% | | Long-Term Equity | Performance Stock Award Three, one-year performance periods with the following metrics: • Commercial Cloud Revenue (35%) • Commercial Cloud Subscribers (34%) • Teams Monthly Active Usage (10%) • Xbox Game Pass Subscribers (7%) • Surface Revenue (7%) • LinkedIn Sessions (7%) | 50% | Performance Stock Award (new) Three, one-year performance periods with the following metrics: • Commercial Cloud Revenue (33%) • Commercial Cloud Subscribers (32%) • Teams Monthly Active Usage (20%) • Xbox Game Pass Subscribers (5%) • Surface Revenue (5%) • LinkedIn Sessions (5%) | 70% | | | Relative TSR multiplier (1-1.5x) is triggered only if Microsoft’s TSR is positive and above the 60(th) percentile of the S&P 500 | | Relative TSR modifier has been revised to include a downside adjustment if relative TSR falls below the 40(th) percentile of the S&P 500, beginning with FY21 awards | | | | Stock Award • Four-year ratable vesting | 50% | Stock Award (no change) • Four-year ratable vesting | 30% |
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.
Approach to Compensation Benchmarking
Approach to Compensation Benchmarking 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 members of our Board and our Compensation Committee on the range of compensation opportunities, we do not tie executive officer compensation to specific 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 setting our fiscal year 2021 executive compensation design and compensation levels, we considered pay practices at the largest technology and general industry companies that our Compensation Committee believes are led by executives with similarly complex roles and responsibilities. Our Compensation Committee also screened these companies to ensure they had a significant presence outside the U.S. and excluded companies in the financial services sector because of the different regulatory environment in which they operate.
Peer Group Used for Fiscal Year 2021 Pay Analysis
Peer Group Used for Fiscal Year 2021 Pay Analysis For fiscal year 2021, the Compensation Committee reviewed the evolution of our business against our historical peer group, and as a result approved the use of two peer groups with two components to better reflect the differentiated business, talent and, in some cases, pay models, across sectors:
Peer Group Used for Fiscal Year 2021 Pay Analysis
| • | Primary Peer Group of bellwether technology companies, which reflect Microsoft’s more direct competitors for executive talent |
Peer Group Used for Fiscal Year 2021 Pay Analysis
| • | Secondary Peer Group of “large cap” general industry companies, which reflect the complexities of operating large, global, innovative businesses and Microsoft’s broader competition for executive talent |
Peer Group Used for Fiscal Year 2021 Pay Analysis
| 38 | |
Peer Group Used for Fiscal Year 2021 Pay Analysis
| 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 |
Peer Group Used for Fiscal Year 2021 Pay Analysis
The companies in the fiscal year 2021 peer groups are:
Primary Peer Group – Technology
Primary Peer Group – Technology
Primary Peer Group – Technology
| Adobe Alphabet | Amazon Apple | Cisco Systems Facebook | IBM Intel | Oracle Qualcomm | Salesforce |
Secondary Peer Group – General Industry
Secondary Peer Group – General Industry
Secondary Peer Group – General Industry
| Accenture AT&T | Comcast Honeywell | Johnson & Johnson Merck | Pfizer Procter & Gamble | Tesla Walt Disney | Verizon |
Secondary Peer Group – General Industry
Given Microsoft’s significant scale and growth, Microsoft is larger than the typical company in both peer groups. The following graph shows Microsoft’s position within the peer group on the two screening criteria (in billions), based on each peer company’s most recent publicly reported fiscal year-end data as of August 23, 2021.
Secondary Peer Group – General Industry
| | Min | 25(th) Percentile | 50(th)Percentile | 75(th)Percentile | MSFT | Max | | Annual Revenue | $13 | $41 | $70 | $99 | $168 85th Percentile | $386 | | Market Cap | $131 | $208 | $229 | $408 | $2,040 98th Percentile | $2,286 |
Performance-Based Pay and Goal Setting
| • | 50% of our Named Executives’ annual cash incentive (70% in the case of the CEO) was tied to achieving pre-established financial metric targets |
Performance-Based Pay and Goal Setting
| • | Management and our Compensation Committee discussed in detail the metrics that determine performance stock awards to ensure they are leading indicators that will drive long-term performance and value creation and the Committee establishes rigorous goals to require significant improvement |
Performance-Based Pay and Goal Setting
| • | Performance stock awards include a relative TSR modifier to strengthen the alignment of the interests of our executive officers with the long-term interests of our shareholders |
Performance-Based Pay and Goal Setting
Our Compensation Committee sets cash incentive and PSA metric targets at the levels established, after review and engagement by the Board, for internal budgeting purposes. These targets are intended to be challenging but achievable. Our Compensation Committee then determines thresholds, maximums, and interim payout levels after considering historical data, upside/downside scenarios, sensitivity analysis, and year-over-year growth comparisons, to ensure rigorous alignment of payouts to performance. We set thresholds that we believe are reasonably achievable and maximums that we believe can be reached only with exceptional performance. Our Compensation Committee actively reviews the appropriateness of payout thresholds and maximums for each metric. Our Compensation Committee focuses on ensuring that our challenging goals, when achieved, will result in shareholder value creation and, historically, our performance on these challenging goals has led to substantial returns to our shareholders.
Annual Cash Incentives
Annual Cash Incentives Cash incentives are determined in two performance categories, as follows. For our CEO For other Named Executives
Annual Cash Incentives
| “Incentive Plan Revenue” and “Incentive Plan Operating Income” are non-GAAP financial measures defined on pages 45-46.* |
Annual Cash Incentives
| 2021 PROXY STATEMENT | 41 |
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 |
Equity Compensation
Equity Compensation Under the Incentive Plan, each year our Named Executives receive both PSAs and SAs.
Performance Stock Awards
Performance Stock Awards PSAs are designed to encourage our executives to achieve rigorous goals in key performance metrics to drive long-term performance and value creation. Due to the dynamic nature of our business and the specificity in the performance metrics that are chosen under our PSA program, we believe that measuring performance annually over our three-year performance period and modifying awards based on our three-year relative TSR provides the most accurate assessment of Microsoft’s long-term trajectory and performance achievements.
Performance Stock Awards
| 42 | |
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 |
Fiscal Year 2021 Performance Stock Award Metrics and Weights
Fiscal Year 2021 Performance Stock Award Metrics and Weights Fiscal year 2021 PSA metrics are strategic measures 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, and additional information about our goal-setting process is on page 39. The metrics and weights used for fiscal year 2021 are in the table below.
Fiscal Year 2021 Performance Stock Award Metrics and Weights
| Fiscal Year 2021 PSA Metrics |
Fiscal Year 2021 Performance Stock Award Metrics and Weights
| Performance Metrics | Description | Weights | | Commercial Cloud Revenue* | Revenue from our commercial cloud business, which includes Azure, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other commercial cloud properties | 33% | | Commercial Cloud Subscribers | Paid seats for current or new per-user SaaS cloud services primarily in commercial customer segment | 32% | | Teams Monthly Active Usage | Unique monthly active users of Teams in Enterprise, Corporate, Small and Medium Business, and Education | 20% | | Xbox Game Pass Subscribers | Current number of paid Game Pass Subscriptions (Console, PC, Ultimate) | 5% | | Surface Revenue* | Revenue from Surface devices and accessories | 5% | | 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 | 5% | | * “Commercial Cloud Revenue” and “Surface Revenue”, when used as PSA metrics in this Compensation Discussion and Analysis, are non-GAAP financial measures defined on page 51. | | |
Fiscal Year 2021 Performance Stock Award Metrics and Weights
The fiscal year 2021 PSA metrics were used to establish performance goals for (1) year 3 of the 2019 PSAs, (2) year 2 of the 2020 PSAs, and (3) year 1 of the 2021 PSAs, as shown below.
Fiscal Year 2021 Performance Stock Award Metrics and Weights
| PSA Metrics |
Fiscal Year 2021 Performance Stock Award Metrics and Weights
| | | Our fiscal year 2021 PSA metric results can be found on pages 50-51 below. |
Fiscal Year 2021 Performance Stock Award Metrics and Weights
| 2021 PROXY STATEMENT | 43 |
Fiscal Year 2021 Performance Stock Award Metrics and Weights
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Stock Awards
Stock Awards Stock awards were granted under the Incentive Plan in September 2020 for shares of Microsoft common stock (in November 2020 for Mr. Young). These stock awards vest over four years, with 25% vesting on August 31, 2021 (September 14, 2021 for Mr. Courtois) and 12.5% each six-months thereafter, to support long-term focus and align with shareholders’ interests. Vesting is subject to continued employment except as described on pages 52-53 below.
Fiscal Year 2021 Cash Incentive Awards
Fiscal Year 2021 Cash Incentive Awards We did not increase our target cash incentive opportunities in fiscal year 2021, which are defined as a percentage of base salary. For fiscal year 2021, these opportunities were: Mr. Nadella – 300%; Ms. Hood – 250%; Mr. Courtois – 225%; and Mr. Smith – 250%. In connection with his employment as our Executive Vice President, Business Development, Strategy, and Ventures, the Compensation Committee set Mr. Young’s target percentage for a cash incentive in fiscal year 2021 of 200% of his base salary. In fiscal year 2021, in connection with the disruptions of COVID-19, we made a one-time decision to use semi-annual goals for the financial metrics used in our cash incentive program. This change was consistent with the goal-setting process used for our broad-based sales incentive programs. Our Compensation Committee and, for Mr. Nadella, the independent members of our Board, determined the fiscal year 2021 cash incentive awards. These were based on two performance categories: financial results and operational performance results. Final results under each portion of the cash incentive, and the resulting awards, were as follows:
Fiscal Year 2021 Cash Incentive Awards
| | Nadella | Hood | Courtois | Smith | Young | | Financial results (50%) (70% for the CEO) | 200.00% | 200.00% | 200.00% | 200.00% | 200.00% | | Operational results (50%) (30% for the CEO) | 165.00% | 165.00% | 150.00% | 165.00% | 130.00% | | Total FY21 cash incentive (% of target) | 189.50% | 182.50% | 175.00% | 182.50% | 165.00% | | Total FY21 cash incentive ($) | $14,212,500 | $4,543,490 | $3,670,406(1) | $4,303,958 | $1,788,188 |
Fiscal Year 2021 Cash Incentive Awards
| Amounts paid in Euros have been converted to U.S. dollars using the average daily exchange rates from July 1, 2020 to June 30, 2021 of €1 to $1.19.(1) |
Financial Results
| Financial Results ($ in billions) | FY20 Actual(1) | FY21 Threshold | FY21 Target | FY21 Maximum | FY21 Actual | FY21 Growth Rate | | FY21 H1 Incentive Plan Revenue | $65.49 | $65.19 | $68.55 | $71.57 | $74.12 | 13.18% | | FY21 H2 Incentive Plan Revenue | $83.15 | $85.32 | $90.67 | $95.57 | $96.42 | 15.96% | | FY21 H1 Incentive Plan Operating Income | $26.25 | $25.34 | $27.39 | $30.68 | $32.81 | 24.99% | | FY21 H2 Incentive Plan Operating Income | $26.13 | $27.45 | $30.00 | $33.90 | $34.34 | 31.42% |
Fiscal Year 2019 PSAs (Completed Performance Period)
| Fiscal Year 2019 PSA Core Metric Payout Percentages |
Fiscal Year 2019 PSAs (Completed Performance Period)
| Metric (FY19) | Weight | FY19 Payout (%) | Metric (FY20 and FY21) | Weight | FY20 Payout (%) | Weight | FY21 Payout (%) | | Commercial Cloud Revenue | 34% | 99.16% | Commercial Cloud Revenue | 35% | 98.15% | H1 - 16.5% | 121.69% | | | | | | | | H2 - 16.5% | 157.07% | | Commercial Cloud Subscribers | 33% | 114.79% | Commercial Cloud Subscribers | 34% | 107.35% | 32% | 196.54% | | Windows 10 Monthly Active Devices | 11% | 129.46% | Teams Monthly Active Usage | 10% | 200.00% | 20% | 81.36% | | Consumer Post- Sales Monetization Gross Margin | 11% | 144.33% | Xbox Game Pass Subscribers | 7% | 147.95% | 5% | 82.28% | | Surface Gross Margin | 5% | 105.41% | Surface Revenue | 7% | 90.10% | H1 - 2.5% | 200.00% | | | | | | | | H2 - 2.5% | 0.00% | | LinkedIn Sessions | 6% | 110.82% | LinkedIn Sessions | 7% | 129.64% | 5% | 195.97% | | Weighted Performance for FY | | 113.63% | | | 116.59% | | 144.07% | | Core Metric Performance (average of FY19, FY20, and FY21 performance) | | | | | | | 124.76% |
Relative TSR Modifier
Relative TSR Modifier The core metric results for the fiscal year 2019 PSAs were then subject to adjustment based on the relative TSR performance modifier, which compares our TSR for the three-fiscal year performance period to the TSR of the S&P 500. Our absolute TSR for the performance period satisfied the PSA payout requirement that TSR be positive. Our TSR relative to the S&P 500 was at the 97th percentile of the S&P 500, well in excess of the 80th percentile performance that was a condition to receiving the maximum 150% modifier. Based on this result, the total payment percentage for the fiscal 2019 PSAs was increased by 50%, resulting in the payout to our Named Executives of 187.14% of the target fiscal 2019 PSA shares.
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 on February 4, 2014, 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 third of these periods ended February 3, 2021. 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 third five-year performance period, Microsoft’s market capitalization increased $1,420 billion (from $413 billion to $1,833 billion). Microsoft’s relative TSR over this 5-year period was in the 97th percentile, resulting in Mr. Nadella earning and vesting in the maximum 900,000 shares.
Vesting of Mr. Nadella’s Long-Term Performance Stock Award
| 2021 PROXY STATEMENT | 51 |
Vesting of Mr. Nadella’s Long-Term Performance Stock Award
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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. 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, 2021, 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 $28,786,918 (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 vest for the target number of shares upon death or total and permanent disability. The value of our Named Executives’ SAs and PSAs that would have vested assuming a June 30, 2021 termination of employment due to death or total and permanent disability was: Mr. Nadella, $114,791,437; Ms. Hood, $55,975,525; Mr. Courtois $38,403,326; Mr. Smith, $46,935,050; and Mr. Young, $31,900,642.
Post-Employment Compensation
| 52 | |
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
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 Named 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 Named Executive’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.
Deductibility of Executive Compensation
| We performed an annual assessment for our Compensation and Audit Committees of our Board of Directors to determine whether the risks arising from our fiscal year 2021 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% (70% for CEO) based on pre-established goals (balance of growth and profitability goals) and 50% (30% for CEO) based on operational 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 awards for 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 • We maintain robust executive stock ownership requirements ranging from 5x to 15x annual salary, which reduces incentive for excessive short-term risk taking • 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 • Awards are subject to the Company’s Executive Compensation Recovery policy |
Summary Compensation Table
Summary Compensation Table This table contains information about compensation awarded to our Named Executives for the fiscal years ended June 30, 2021, 2020, and 2019. None of our Named Executives received stock options during those years.
Summary Compensation Table
| Named Executive and Principal Position | Year | Salary ($) | Bonus(1) ($) | Stock Awards(2) ($) | Non-equity Incentive Plan Compensation(3) ($) | All Other Compensation(4) ($) | Total ($) | | Satya Nadella Chairman and Chief Executive Officer | 2021 | 2,500,000 | 0 | 33,036,030 | 14,212,500 | 109,750 | 49,858,280 | | | 2020 | 2,500,000 | 0 | 30,718,608 | 10,992,000 | 111,180 | 44,321,788 | | | 2019 | 2,333,333 | 0 | 29,668,651 | 10,796,868 | 111,363 | 42,910,215 | | Amy E. Hood Executive Vice President and Chief Financial Officer | 2021 | 995,833 | 0 | 17,864,404 | 4,543,490 | 62,414 | 23,466,141 | | | 2020 | 975,000 | 0 | 14,792,679 | 3,734,981 | 123,574 | 19,626,234 | | | 2019 | 958,333 | 0 | 15,316,653 | 3,855,040 | 97,608 | 20,227,634 | | Jean-Philippe Courtois(5) Executive Vice President, President, Global Sales, Marketing and Operations | 2021 | 932,167 | 0 | 12,141,344 | 3,670,406 | 65,948 | 16,809,865 | | | 2020 | 777,000 | 0 | 10,475,186 | 2,591,432 | 105,686 | 13,949,304 | | | 2019 | 798,000 | 0 | 11,309,474 | 2,889,049 | 88,231 | 15,084,754 | | Bradford L. Smith President and Chief Legal Officer(6) | 2021 | 943,333 | 0 | 15,098,855 | 4,303,958 | 109,750 | 20,455,896 | | | 2020 | 860,000 | 0 | 12,402,137 | 3,294,445 | 111,131 | 16,667,713 | | | 2019 | 850,000 | 0 | 13,045,437 | 3,366,148 | 111,412 | 17,372,997 | | Christopher D. Young(7) Executive Vice President, Business Development, Strategy, and Ventures | 2021 | 541,875 | 3,500,000 | 22,594,634 | 1,788,188 | 70,386 | 28,495,083 |
Summary Compensation Table
| Includes on-hire cash bonus made in connection with Mr. Young’s commencement of employment as described on page 44.(1) |
Summary Compensation Table
| 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 2021, 2020, and 2019, PSA values in this column include: (i) for fiscal year 2021, 33.33% of each of the fiscal year 2021 PSAs, the fiscal year 2020 PSAs, and the fiscal year 2019 PSAs; (ii) for fiscal year 2020, 33.33% of each of the fiscal year 2020 PSAs, the fiscal year 2019 PSAs, and the fiscal year 2018 PSAs; and (iii) 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. 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 2021, Mr. Nadella, $52,529,846; Ms. Hood, $22,824,789; Mr. Courtois, $15,383,505; Mr. Smith, $18,984,417; and Mr. Young, $2,775,988; (ii) for fiscal year 2020, Mr. Nadella, $37,150,358; Ms. Hood, $18,704,870; Mr. Courtois, $13,664,213; and Mr. Smith, $15,866,522; (ii) for fiscal year 2019, Mr. Nadella, $35,050,220; Ms. Hood, $19,823,991; Mr. Courtois, $15,380,642; and Mr. Smith, $17,211,903.(2) |
Summary Compensation Table
| Includes Incentive Plan cash incentives.(3) |
Summary Compensation Table
| None of our Named Executives received reimbursements for relocation expenses or tax-gross-up payments in the last three fiscal years. Details about the amounts in the “All Other Compensation” column for fiscal year 2021 are set forth in the table below.(4) |
Grants of Plan-Based Awards
Grants of Plan-Based Awards This table provides information on grants of awards under any plan to the Named Executives in the fiscal year ended June 30, 2021.
Grants of Plan-Based Awards
| | Award(1) | Grant Date | Estimated Possible Payouts under Non-Equity Incentive Plan Awards(2) | | | Estimated Future Payouts under Equity Incentive Plan Awards(3) | | | All Other Stock Awards (#) | Grant Date Fair Value of Stock Awards(4) ($) | | Named Executive | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Satya Nadella | 2021 Cash Incentive | | 0 | 7,500,000 | 15,000,000 | | | | | | | | 2021 PSA | 9/15/2020 | | | | 262 | 20,951 | 62,853 | | 4,893,443 | | | 2021 PSA | 12/1/2020 | | | | 62 | 4,914 | 14,742 | | 1,161,556 | | | 2020 PSA | 9/15/2020 | | | | 857 | 24,481 | 73,443 | | 7,045,514 | | | 2020 PSA | 12/1/2020 | | | | 202 | 5,743 | 17,229 | | 1,687,451 | | | 2019 PSA | 9/15/2020 | | | | 752 | 30,046 | 90,138 | | 9,216,187 | | | 2019 PSA | 12/1/2020 | | | | 177 | 7,048 | 21,144 | | 2,260,772 | | | 2021 SA | 9/15/2020 | | | | | | | 33,255 | 6,771,107 | | Amy E. Hood | 2021 Cash Incentive | | 0 | 2,489,584 | 4,979,167 | | | | | | | | 2021 PSA | 9/14/2020 | | | | 109 | 8,680 | 26,040 | | 1,994,593 | | | 2021 PSA | 12/1/2020 | | | | 26 | 2,036 | 6,108 | | 481,223 | | | 2020 PSA | 9/14/2020 | | | | 384 | 10,968 | 32,904 | | 3,105,496 | | | 2020 PSA | 12/1/2020 | | | | 91 | 2,573 | 7,719 | | 755,977 | | | 2019 PSA | 9/14/2020 | | | | 337 | 13,461 | 40,383 | | 4,062,268 | | | 2019 PSA | 12/1/2020 | | | | 79 | 3,157 | 9,471 | | 1,012,837 | | | 2021 SA | 9/14/2020 | | | | | | | 32,147 | 6,452,009 | | Jean-Philippe Courtois | 2021 Cash Incentive | | 0 | 2,097,375 | 4,194,750 | | | | | | | | 2021 PSA | 9/14/2020 | | | | 75 | 5,986 | 17,958 | | 1,375,560 | | | 2021 PSA | 12/1/2020 | | | | 18 | 1,404 | 4,212 | | 331,873 | | | 2020 PSA | 9/14/2020 | | | | 258 | 7,345 | 22,035 | | 2,079,607 | | | 2020 PSA | 12/1/2020 | | | | 61 | 1,723 | 5,169 | | 506,243 | | | 2019 PSA | 9/14/2020 | | | | 226 | 9,014 | 27,042 | | 2,720,238 | | | 2019 PSA | 12/1/2020 | | | | 53 | 2,114 | 6,342 | | 678,232 | | | 2021 SA | 9/14/2020 | | | | | | | 22,170 | 4,449,592 | | Bradford L. Smith | 2021 Cash Incentive | | 0 | 2,358,333 | 4,716,667 | | | | | | | | 2021 PSA | 9/14/2020 | | | | 95 | 7,542 | 22,626 | | 1,733,255 | | | 2021 PSA | 12/1/2020 | | | | 23 | 1,769 | 5,307 | | 418,172 | | | 2020 PSA | 9/14/2020 | | | | 316 | 9,009 | 27,027 | | 2,551,000 | | | 2020 PSA | 12/1/2020 | | | | 74 | 2,113 | 6,339 | | 620,995 | | | 2019 PSA | 9/14/2020 | | | | 277 | 11,057 | 33,171 | | 3,336,823 | | | 2019 PSA | 12/1/2020 | | | | 65 | 2,594 | 7,782 | | 831,963 | | | 2021 SA | 9/14/2020 | | | | | | | 27,935 | 5,606,647 | | Christopher D. Young | 2021 Cash Incentive | | 0 | 1,083,750 | 2,167,500 | | | | | | | | 2021 PSA | 11/11/2020 | | | | 59 | 4,676 | 14,028 | | 1,128,753 | | | 2021 PSA | 12/1/2020 | | | | 14 | 1,097 | 3,291 | | 259,241 | | | 2021 On-Hire SA | 11/11/2020 | | | | | | | 83,122 | 17,536,215 | | | 2021 SA | 11/11/2020 | | | | | | | 17,318 | 3,670,425 |
Grants of Plan-Based Awards
| All awards are granted under the Executive Incentive Plan. SAs and PSAs were granted under the 2017 Stock Plan (2001 Plan in the case of French-qualified SAs and PSAs granted to Jean-Philippe Courtois).(1) |
Grants of Plan-Based Awards
| This column represents fiscal year 2021 cash incentives as reported in the “Non-equity Incentive Plan Compensation” column of the Summary Compensation Table.(2) |
Grants of Plan-Based Awards
| These columns represent the threshold, target, and maximum shares for PSAs with a grant date in fiscal year 2021. 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 2021 (33.33% of each of the 2021, 2020, and 2019 PSAs). Shares with a 9/14/2020 grant date include the portion of PSAs subject to financial metric performance goals for the semi-annual period from July 1-December 31, 2020, and shares with a 12/1/2020 grant date reflect the portion of PSAs subject to financial metric performance goals for the semi-annual period from January 1-June 30, 2020. The threshold is calculated as if the threshold of only the least weighted metric (50% of 2.5% for 2021 PSAs, 50% of 7% for 2020 PSAs, and 50% of 5% for 2019 PSAs) is met. The maximum is calculated assuming all maximum targets were met and the relative TSR modifier was fully earned.(3) |
Grants of Plan-Based Awards
| 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.(4) |
Grants of Plan-Based Awards
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Grants of Plan-Based Awards
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Outstanding Equity Awards at June 30, 2021
Outstanding Equity Awards at June 30, 2021 This table provides information about unvested SAs and PSAs held by the Named Executives on June 30, 2021.
Outstanding Equity Awards at June 30, 2021
| | Stock Awards | | | | | | Named Executive | 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 | 9/19/2017 | 12,539(3) | 3,396,815 | | | | | 9/18/2018 | 41,730(3) | 11,304,657 | | | | | 9/18/2018 | | | 111,280(4) | 30,145,752 | | | 9/18/2019 | 56,670(3) | 15,351,903 | | | | | 9/18/2019 | | | 60,448(4) | 16,375,363 | | | 9/15/2020 | 33,255(3) | 9,008,780 | | | | | 9/15/2020 | | | 25,865(4) | 7,006,829 | | Amy E. Hood | 9/18/2017 | 7,774(3) | 2,105,977 | | | | | 9/17/2018 | 18,696(3) | 5,064,746 | | | | | 9/17/2018 | | | 49,854(4) | 13,505,449 | | | 9/3/2019 | | | 27,080(4) | 7,335,972 | | | 9/18/2019 | 25,389(3) | 6,877,880 | | | | | 9/14/2020 | | | 10,715(4) | 2,902,964 | | | 9/14/2020 | 32,147(3) | 8,708,622 | | | | Jean-Philippe Courtois | 9/19/2016 | 1,045(5) | 283,091 | | | | | 9/18/2017 | 6,270(3) | 1,698,543 | | | | | 9/17/2018 | 12,519(3) | 3,391,397 | | | | | 9/17/2018 | | | 33,384(4) | 9,043,726 | | | 9/3/2019 | | | 18,134(4) | 4,912,501 | | | 9/18/2019 | 17,002(6) | 4,605,842 | | | | | 9/14/2020 | 22,170(7) | 6,005,853 | | | | | 9/14/2020 | | | 7,390(4) | 2,001,951 | | Bradford L. Smith | 9/18/2017 | 6,855(3) | 1,857,020 | | | | | 9/17/2018 | 15,357(3) | 4,160,211 | | | | | 9/17/2018 | | | 40,951(4) | 11,093,626 | | | 9/3/2019 | | | 22,246(4) | 6,026,441 | | | 9/18/2019 | 20,855(3) | 5,649,620 | | | | | 9/14/2020 | 27,935(3) | 7,567,592 | | | | | 9/14/2020 | | | 9,312(4) | 2,552,621 | | Christopher D. Young | 11/11/2020 | 83,122(8) | 22,517,750 | | | | | 11/11/2020 | 17,318(3) | 4,691,446 | | | | | 11/11/2020 | | | 5,772(4) | 1,563,906 |
Outstanding Equity Awards at June 30, 2021
| PSAs with a grant date in fiscal years 2021, 2020 or 2019 are reported assuming payout at target award levels.(1) |
Outstanding Equity Awards at June 30, 2021
| The market value is the number of shares shown in the table multiplied by $270.90, the closing market price of Microsoft common stock on June 30, 2021.(2) |
Outstanding Equity Awards at June 30, 2021
| Vests 25% one year from the last business day of August preceding the award date and 12.5% semi-annually thereafter.(3) |
Outstanding Equity Awards at June 30, 2021
| Award shares that are earned vest in full following the three-year performance period.(4) |
Outstanding Equity Awards at June 30, 2021
| Vests 10% on the last day of February following the award date and 10% semi-annually thereafter.(5) |
Outstanding Equity Awards at June 30, 2021
| Vests 12.5% on September 18, 2021, 12.5% on March 18, 2022, and 12.5% semi-annually thereafter.(6) |
Outstanding Equity Awards at June 30, 2021
| Vests 25% on September 14, 2021, 12.5% on March 18, 2021, and 12.5% semi-annually thereafter.(7) |
Outstanding Equity Awards at June 30, 2021
| Vests 25% on November 11, 2021 and 25% annually thereafter.(8) |
Outstanding Equity Awards at June 30, 2021
| 2021 PROXY STATEMENT | 57 |
Outstanding Equity Awards at June 30, 2021
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Option Exercises and Stock Vested
Option Exercises and Stock Vested This table provides information on an aggregate basis about stock awards that vested during the fiscal year ended June 30, 2021 for each of the Named Executives. Microsoft has not granted stock options, other than options substituted in acquisitions, since 2003. No Named Executives held any Microsoft stock options during the fiscal year.
Option Exercises and Stock Vested
| | Stock Awards | | | Named Executive | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(1) ($) | | Satya Nadella | 1,218,998 | 292,545,936 | | Amy E. Hood | 187,145 | 42,905,576 | | Jean-Philippe Courtois | 150,877 | 34,427,952 | | Bradford L. Smith | 163,342 | 37,446,637 | | Christopher D. Young | 0 | 0 |
Option Exercises and 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) |
Nonqualified Deferred Compensation
Nonqualified Deferred Compensation This table provides information about the Named Executives’ earnings and balances under our U.S. nonqualified Deferred Compensation Plan in fiscal year 2021. Microsoft does not contribute to the Deferred Compensation Plan. At the end of fiscal year 2021, only Mr. Young had an account balance under the Plan.
Nonqualified Deferred Compensation
| Named Executive | Executive Contributions in Fiscal Year 2021(1) ($) | Aggregate Earnings in Fiscal Year 2021(2) ($) | Aggregate Balance at June 30, 2021 ($) | | Satya Nadella | 0 | 0 | 0 | | Amy E. Hood | 0 | 0 | 0 | | Jean-Philippe Courtois | 0 | 0 | 0 | | Bradford L. Smith | 0 | 0 | 0 | | Christopher D. Young | 1,750,000 | 260,247 | 2,010,247 |
Nonqualified Deferred Compensation
| These amounts are included in the Summary Compensation Table for fiscal year 2021.(1) |
Nonqualified Deferred Compensation
| These amounts have not been included in the Summary Compensation Table for fiscal year 2021 or for previous years.(2) |
Nonqualified 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 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
| 58 | |
Nonqualified Deferred 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 |
Nonqualified Deferred Compensation
This table shows the amounts that would have been payable to our Named Executives upon a termination of employment without cause on June 30, 2021.
Nonqualified Deferred Compensation
| Named Executive | Amount Payable ($) | | Satya Nadella | $91,530,656 | | Amy E. Hood | $41,294,665 | | Jean-Philippe Courtois | $29,571,396 | | Bradford L. Smith | $39,957,792(1) | | Christopher D. Young | $12,686,341 |
Nonqualified Deferred Compensation
| Includes $11,170,874 in Severance Plan benefits and $28,786,918 in retirement-based stock vesting under Mr. Smith’s SAs and PSAs.(1) |
CEO Pay Ratio
CEO Pay Ratio For fiscal year 2021, the annual total compensation for the median employee of the Company (other than our CEO) was $176,858 and the annual total compensation of our CEO was $49,858,280. Based on this information, for fiscal year 2021 the ratio of the annual total compensation of our CEO to the annual total compensation of the median employee was 282 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, 2021, the last day of our fiscal year, excluding approximately 3,430 employees who became Microsoft employees in fiscal year 2021 in the following business acquisitions: Kinvolk GmbH, The Marsden Group, Inc., Metaswitch Networks Ltd, Orions Digital Systems, Inc., ReFirm Labs, Inc., smashgg, Inc., and ZeniMax Media Inc. To identify our median employee, we used a “total direct compensation” measure consisting of: (i) fiscal year 2021 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 2021 (excluding allowances, relocation payments, and profit-sharing), and (iii) the dollar value of SAs granted in fiscal year 2021. 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.
Management Proposals
Management Proposals
Management Proposals
| Management Proposal 1: Election of 12 Directors |
Management Proposals
| The Board of Directors has nominated 12 directors for election during the 2021 annual shareholders meeting (“Annual Meeting”) to hold office until the 2022 annual shareholders meeting. The Board has nominated Carlos Rodriguez for election as director. If elected, his term will begin on November 30, 2021. The Board has approved an increase in its size from 11 members to 12 members effective as of November 30, 2021. The Governance and Nominating Committee evaluated and recommended the nominees in accordance with its charter and our Corporate Governance Guidelines. To be elected, a director must receive a vote of the majority of the votes cast. |
Management Proposals
Our Board of Directors recommends a vote FOR the election to the Board for each of the nominees listed below.
Management Proposals
| Reid G. Hoffman Age: 54 Director Since: 2017 Occupation: General Partner, Greylock Partners | Hugh F. Johnston Age: 60 Director Since: 2017 Occupation: Vice Chairman, Executive Vice President, and CFO, PepsiCo, Inc. | Teri L. List Age: 58 Director Since: 2014 Occupation: Former Executive Vice President and CFO, The Gap, Inc. | Satya Nadella (Board Chair) Age: 54 Director Since: 2014 Occupation: Chairman and CEO, Microsoft Corporation | | Sandra E. Peterson Age: 62 Director Since: 2015 Occupation: Operating Partner, Clayton, Dubilier & Rice, LLC | Penny S. Pritzker Age: 62 Director Since: 2017 Occupation: Founder and Chairman, PSP Partners, LLC | Carlos A. Rodriguez Age: 57 Director Since: Nominee Occupation: President, CEO, and Director, Automatic Data Processing, Inc. | . Charles W. Scharf Age: 56 Director Since: 2014 Occupation: CEO, President, and Director, Wells Fargo & Company | | John W. Stanton Age: 66 Director Since: 2014 Occupation: Founder and Chairman, Trilogy Partnerships | John W. Thompson Age: 72 Director Since: 2012 Occupation: Lead Independent Director, Microsoft Corporation; Former CEO and Director, Virtual Instruments Corporation | Emma N. Walmsley Age: 52 Director Since: 2019 Occupation: CEO and Director, GlaxoSmithKline plc | Padmasree Warrior Age: 60 Director Since: 2015 Occupation: Founder, President, and CEO, Fable Group, Inc. |
Management Proposals
| 66 | |
Management Proposals
| 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 |
Management Proposals
| Management Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation |
Management Proposals
| As required by Securities and Exchange Commission rules, we are asking for your advisory vote on the following resolution (“say-on-pay vote” resolution): Resolved, that the shareholders approve, in a nonbinding vote, the compensation paid to the Company’s Named Executive Officers, as disclosed in Part 2 – Named Executive Officer Compensation. Receipt of a majority of the votes cast is required to approve this proposal. We hold our say-on-pay vote every year. |
Management Proposals
Our Board of Directors recommends a vote FOR approval, on a non-binding, advisory basis, of the compensation paid to our Named Executive Officers.
Election of Directors
Election of Directors Twelve 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, no directors are elected at an annual meeting, a slate of directors 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 of this year’s nominees are current directors, except Mr. Rodriguez. 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.
Election of Directors
| Majority Vote Standard |
Election of Directors
| 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, or fill the office held by a holdover 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 aka.ms/policiesandguidelines. |
Election of Directors
| 84 | |
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 |