DEF 14A of Microsoft Corp
Filed Oct 27, 2022 · FY20220001193125-22-270484
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.
Our Director Nominees
| Name Occupation | Age | Director Since | Independent | Other Public Boards | Committee Memberships | | | | | | | | | | AC | CC | ESPP | GN | | Reid G. Hoffman General Partner, Greylock Partners | 55 | 2017 | Yes | 2 | | | | | | Hugh F. Johnston Vice Chairman, Executive Vice President, and CFO, PepsiCo, Inc. | 61 | 2017 | Yes | 1 | | | | | | Teri L. List Former Executive Vice President and CFO, The Gap, Inc. | 59 | 2014 | Yes | 3 | | | | | | Satya Nadella Chairman and CEO, Microsoft Corporation | 55 | 2014 | No | 1 | | | | | | Sandra E. Peterson Operating Partner, Clayton, Dubilier & Rice, LLC | 63 | 2015 | Yes | 1 | | | | | | Penny S. Pritzker Founder and Chairman, PSP Partners, LLC | 63 | 2017 | Yes | 0 | | | | | | Carlos A. Rodriguez CEO and Director, Automatic Data Processing, Inc. | 58 | 2021 | Yes | 1 | | | | | | Charles W. Scharf CEO, President, and Director, Wells Fargo & Company | 57 | 2014 | Yes | 1 | | | | | | John W. Stanton Founder and Chairman, Trilogy Partnerships | 67 | 2014 | Yes | 2 | | | | | | John W. Thompson Lead Independent Director, Microsoft Corporation; Former CEO and Director, Virtual Instruments Corporation | 73 | 2012 | Yes | 1 | | | | | | Emma N. Walmsley CEO and Director, GSK plc | 53 | 2019 | Yes | 1 | | | | | | Padmasree Warrior Founder, President, and CEO, Fable Group, Inc. | 62 | 2015 | Yes | 1 | | | | |
Our Director Nominees
| AC: Audit Committee CC: Compensation Committee ESPP: Environmental, Social, and Public Policy Committee (formerly the Regulatory and Public Policy Committee) GN: Governance and Nominating Committee | Chair Member Financial Expert and Member |
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 2022 Annual Meeting.
Our Director Nominees
| | Reid G. Hoffman | | | Age: 55 | Director since: 2017 | Birthplace: United States | Independent |
Our Director Nominees
| Experience: Greylock Partners (2009-present) (venture capital firm) • General Partner (2009-present) Reinvent Capital (2019-present) • Advisory 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 Holdings, Inc. (2000-2002) • Executive Vice President (2000-2002) | Microsoft Committees: • Environmental, Social, and Public Policy Other Public Company Directorships: • Joby Aviation, Inc. • Aurora Innovation, Inc. Former Public Company Directorships Held in the Past Five Years: • Reinvent Technology Partners Z |
Our Director Nominees
| | Hugh F. Johnston | | | Age: 61 | 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: • None |
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: 59 | 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. • Visa Inc. Former Public Company Directorships Held in the Past Five Years: • Oscar Health, Inc. Other Positions: • Former Trustee, Financial Accounting Foundation • Former Practice Fellow, Financial Accounting Standards Board |
Our Director Nominees
| | Satya Nadella | | | Age: 55 | 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
| 2022 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: 63 | 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: • Zymergen, Inc. Former Public Company Directorships Held in the Past Five Years: • Covetrus, Inc. |
Our Director Nominees
| | Penny S. Pritzker | | | Age: 63 | 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: • Environmental, Social, 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: 58 | Director since: 2021 | Birthplace: Cuba | Independent |
Our Director Nominees
| Experience: Automatic Data Processing, Inc. (1999-present) (human capital management solutions provider) • 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: • Audit 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: 57 | 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
| 2022 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: 67 | 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 • Environmental, Social, and Public Policy Other Public Company Directorships: • Costco Wholesale Corporation • Trilogy International Partners, Inc. Former Public Company Directorships Held in the Past Five Years: • None Other Positions: • Chairman, First Avenue Entertainment LLLP, owner of Seattle Mariners (2016-present) |
Our Director Nominees
| | John W. Thompson | | | Age: 73 | 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) • Environmental, Social, 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: 53 | Director Since: 2019 | Birthplace: United Kingdom | Independent |
Our Director Nominees
| Experience: GSK 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 • Environmental, Social, and Public Policy Other Public Company Directorships: • GSK plc Former Public Company Directorships Held in the Past Five Years: • None |
Our Director Nominees
| | Padmasree Warrior | | | Age: 62 | 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
| 2022 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 full Board. Our objective for compensation to non-employee directors is to award the majority of compensation in equity and to make meaningful adjustments every few years, rather than smaller adjustments that are more frequent. In fiscal year 2022, we increased director compensation for the first time since fiscal year 2015, as shown below. At the same time, without changing the total retainers paid to Mr. Thompson, we determined that he should receive the annual Base Retainer and Committee-based retainer in his capacity as a non-employee director, and the Lead Independent Director retainer was reduced so that the aggregate payments to Mr. Thompson did not change. Our CEO, Mr. Nadella does not receive pay for serving as a director or as Board Chairman.
Director Compensation
| 2022 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
| Fiscal Year 2022 Compensation Structure for Non-Employee Directors through November 29, 2021 | | | Regular Retainers | | | Annual Base Retainer (TOTAL) | $325,000 | | Cash | $125,000 | | Stock Award | $200,000 | | Committee Retainers (cash) | | | Annual Committee Chair Retainer | $15,000 | | Annual Audit Committee Chair Retainer | $45,000 | | Annual Audit Committee Non-Chair Member Retainer | $15,000 | | Lead Independent Director Retainer | | | Annual Lead Independent Director Retainer (TOTAL – Board and Committee service) | $425,000 | | Cash | $125,000 | | Stock Award | $300,000 |
Director Compensation
| Fiscal Year 2022 Compensation Structure for Non-Employee Directors from November 30, 2021 | | | Regular Retainers | | | Annual Base Retainer (TOTAL) | $360,000 | | Cash | $125,000 | | Stock Award | $235,000 | | Committee Retainers (cash except stock award for Governance and Nominating Committee) | | | Annual Audit Committee Chair Retainer | $45,000 | | Annual Audit Committee Non-Chair Member Retainer | $15,000 | | Annual Compensation Committee Chair Retainer | $35,000 | | Annual Environmental, Social, and Public Policy Committee Chair Retainer | $25,000 | | Annual Governance and Nominating Committee Chair Retainer | $25,000 | | Lead Independent Director Retainer (stock award in addition to other retainers) | $40,000 |
Director Compensation
The Company reimburses reasonable expenses incurred for Board-related activities. Directors may participate in our corporate matching gift program for charitable donations. Director retainers are paid quarterly in arrears. Quarterly periods are measured beginning with the annual 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
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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
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 2022. Mr. Nadella received no compensation as a director or Board Chairman. 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 | 217,500 | 0 | 342,500 | | Hugh F. Johnston | 170,000 | 217,500 | 15,000 | 402,500 | | Teri L. List(5) | 140,000 | 217,500 | 15,000 | 372,500 | | Sandra E. Peterson(6) | 150,000 | 217,500 | 15,000 | 382,500 | | Penny S. Pritzker(7) | 145,000 | 217,500 | 15,000 | 377,500 | | Carlos A. Rodriguez(8) | 69,524 | 117,500 | 0 | 187,024 | | Charles W. Scharf | 125,000 | 217,500 | 0 | 342,500 | | John W. Stanton | 140,000 | 217,500 | 15,000 | 372,500 | | John W. Thompson(9) | 125,000 | 304,565 | 15,000 | 444,565 | | Emma N. Walmsley | 125,000 | 217,500 | 12,363 | 354,863 | | Padmasree Warrior(10) | 125,000 | 217,500 | 0 | 342,500 |
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. The first two quarters representing a grant date fair value under FASB ASC Topic 718 of $50,000 and $58,750 for the final two quarters, with exceptions as follows: Mr. Thompson received a prorated award with a grant date fair value under FASB ASC Topic 718 of $79,565 for the first quarter and $75,000 for the last three quarters. Mr. Rodriguez joined the Board effective November 30, 2021, so was not eligible to receive a stock award for the first two quarters.(2) |
Director Compensation
| Amounts in this column represent matching charitable contributions under our corporate giving program in fiscal year 2022, 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 1,128 shares of our common stock.(4) |
Director Compensation
| Ms. List elected to defer her cash and stock compensation for the first three quarters. The compensation deferred converted into 835 shares of our common stock.(5) |
Director Compensation
| Ms. Peterson elected to defer her cash and stock compensation. The compensation deferred converted into 1,212 shares of our common stock.(6) |
Director Compensation
| Ms. Pritzker elected to defer her cash and stock compensation. The compensation deferred converted into 1,195 shares of our common stock.(7) |
Director Compensation
| Mr. Rodriguez joined the Board effective as of the shareholder meeting on November 30, 2021. He became a member of the Audit Committee on December 8, 2021 and received prorated Audit Committee retainer as a result. He elected to defer his cash and stock compensation. The compensation deferred converted into 642 shares of our common stock.(8) |
Director Compensation
| Mr. Thompson elected to defer his stock compensation. The compensation deferred converted into 1,001 shares of our common stock.(9) |
Director Compensation
| Ms. Warrior elected to defer a portion of her cash compensation. The compensation deferred converted into 204 shares of our common stock.(10) |
Lead Independent Director Compensation
Lead Independent Director Compensation Mr. Thompson served as Lead Independent Director during fiscal year 2022. Mr. Thompson’s compensation reflects the additional time commitment for the Lead Independent Director role compared to other independent directors, which includes:
Lead Independent Director Compensation
| • | Leads the Board meetings when the Chairman and CEO is not present |
Lead Independent Director Compensation
| • | Reviews and approves the agenda and schedule for Board meetings |
Lead Independent Director Compensation
| • | Calls meetings of the independent directors |
Lead Independent Director Compensation
| • | Chairs executive sessions and coordinates activities of the independent directors |
Lead Independent Director Compensation
| • | Leads the Board’s annual CEO performance evaluation |
Lead Independent Director Compensation
| • | Coordinates Board oversight of CEO succession planning, including maintenance of an emergency succession plan |
Lead Independent Director Compensation
| • | Chairs the annual shareholders meeting |
Lead Independent Director Compensation
| • | Acts as liaison between the independent directors and the Chairman and CEO |
Lead Independent Director Compensation
| • | Authorizes retention of outside counsel, advisors, or other consultants who report directly to the Board |
Lead Independent Director Compensation
| • | When requested, represents the Board with internal and external audiences including shareholders |
Lead Independent Director Compensation
| 2022 PROXY STATEMENT | 31 |
Lead Independent 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 | Shareholder Engagement | | | Engaged with shareholders owning approximately 50% of shares in FY22 | | | Compensation Committee Chair and Lead Independent Director annually engage with large shareholders |
CEO Compensation
| Pay Element | FY21 Elements / Metrics / Weightings | | FY22 Elements / Metrics / Weightings | | | Annual Cash Incentives | Financial • Incentive Plan Revenue (35%) • Incentive Plan Operating Income (35%) | 70% | Financial (no change) • Incentive Plan Revenue (35%) • Incentive Plan Operating Income (35%) | 70% | | | Operational • Product & Strategy (10%) • Customers & Stakeholders (10%) • Culture & Organizational Leadership (10%) | 30% | Operational (new) • Product & Strategy (10%) • Customers & Stakeholders (10%) • Culture, Diversity & Sustainability* (10%) * New name for fiscal year 2022 | 30% | | Long-Term Equity | Performance Stock Award Three, one-year performance periods with 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% | Performance Stock Award (new) Three, one-year performance periods with following metrics: • Microsoft Cloud Revenue* (30%) • Microsoft Cloud Subscribers Growth* (20%) • Teams Monthly Active Usage Growth (20%) • Xbox Game Pass Subscribers Growth (10%) • Windows OEM Revenue Growth (10%) • LinkedIn Sessions (10%) * New name for fiscal year 2022 | 100% | | | Relative TSR Modifier: • 3-Year Relative TSR modifier (0.75– 1.5x) as compared to the S&P 500 • If Microsoft’s TSR is positive and above the 60(th) percentile, payout modifier is above 1x, with up to 50% upside at the 80(th) percentile or above • If Microsoft’s TSR is below the 40(th) percentile, payout modifier is below 1x, with up to 25% downside at 20(th) percentile or below | | | | | | Stock Award • Four-year ratable vesting | 30% | Stock Award (new) • Four-year ratable vesting | 0% |
ESG Role in Annual Cash Incentive
ESG Role in Annual Cash Incentive In our meetings with investors, we heard requests for additional clarity on our approach to including ESG commitments in our executive compensation program. Our annual cash incentive has included an assessment of CEO and SLT progress on culture and diversity and inclusion since 2016, signaling Microsoft’s early leadership in linking ESG measures to executive compensation. With senior management’s focus on achieving Microsoft’s ambitious carbon reduction commitments, our annual cash incentive also includes an assessment of progress on sustainability. Beginning with fiscal year 2022, we renamed the Culture & Organizational Leadership category of the operational assessment component of the annual cash incentive as the Culture, Diversity & Sustainability category to enhance clarity on how ESG results affect the pay of our named executives. Now, all ESG results are considered under this category. We continue to seek feedback from shareholders and compensation experts as we thoughtfully consider future enhancements that connect executive compensation to Microsoft’s environmental and social commitments.
Executive Compensation Philosophy
| • | Focuses on the long-term through equity awards with multi-year vesting or performance requirements |
Executive Compensation Philosophy
| What We Do | What We Don’t Do | | • Maintain a stock ownership policy that reinforces the alignment of executive officer and shareholder interests (including requiring stock ownership of 15x base salary for the CEO) • Have a strong executive compensation recovery (“clawback”) policy to ensure accountability • Promote long-term focus through multi-year vesting and performance requirements • Prohibit pledging, hedging, and trading in derivatives of Microsoft securities • Retain an independent compensation consultant • Solicit investor feedback on our compensation program and potential enhancements through an extensive shareholder engagement program • Settle all long-term incentives in Microsoft stock | • No excessive perquisites (e.g., no executive-only club memberships or medical benefits), and no tax gross-ups • No employment agreements • No change in control payments or benefits • No executive-only retirement programs • No guaranteed bonuses • No dividends paid on unvested stock awards • No encouragement of unnecessary and excessive risk taking |
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 current technology labor market is hyper-competitive with demand growing faster than the supply of specialized technical talent, resulting in significant increases in compensation at many of the companies with which 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 work to ensure our approach to executive compensation is responsive 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’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 Named Executive compensation to specific market percentiles. Because other companies actively recruit our executives to fill CEO and other senior leadership positions, we supplement market information with data on external opportunities potentially available to our executives. We also consider the relationship of annual target compensation among internal peers. In setting our fiscal year 2022 executive compensation program 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.
Approach to Compensation Benchmarking
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Approach to Compensation Benchmarking
| 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 2022 Pay Analysis
Peer Group Used for Fiscal Year 2022 Pay Analysis For fiscal year 2022, 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 to better reflect the differentiated business, talent and, in some cases, pay models, across sectors:
Peer Group Used for Fiscal Year 2022 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 2022 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 2022 Pay Analysis
The companies in the fiscal year 2022 peer groups are:
Primary Peer Group – Technology
Primary Peer Group – Technology
Primary Peer Group – Technology
| Adobe Alphabet | Amazon Apple | Cisco Systems IBM | Intel Meta | 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, which is a factor when we set executive pay. The following charts show Microsoft’s position within the combined peer groups on the two screening criteria. Data is presented in billions as of August 12, 2022, with annual revenue based on the most recent publicly reported fiscal year-end data.
Performance-Based Pay and Goal Setting
| • | 70% of our CEO’s annual cash incentive was tied to achieving pre-established financial metric targets (50% for our other Named Executives) |
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. The Committee establishes rigorous goals for each metric that require significant year-over-year improvement in order for target awards to be earned |
Performance-Based Pay and Goal Setting
| • | Performance stock awards include a relative TSR modifier to strengthen the alignment of the interests of our Named Executives with the long-term interests of our shareholders; in order for the TSR modifier to affect the performance stock awards positively, our relative TSR must be above the peer company 60(th) percentile |
Performance-Based Pay and Goal Setting
Our Compensation Committee sets cash incentive and performance stock award (“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 for our CEO and other Named Executives (“NEOs”), as follows:
Annual Cash Incentives
| “Incentive Plan Revenue” and “Incentive Plan Operating Income” are non-GAAP financial measures defined on page 46.* |
Equity Compensation
Equity Compensation Under the Incentive Plan, each year our Named Executives receive PSAs and our Named Executives, other than Mr. Nadella, receive 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.
Fiscal Year 2022 Performance Stock Award Metrics and Weights
Fiscal Year 2022 Performance Stock Award Metrics and Weights Fiscal year 2022 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 pages 41-42. The metrics and weights used for fiscal year 2022 are in the table below.
Fiscal Year 2022 Performance Stock Award Metrics and Weights
| Fiscal Year 2022 PSA Metrics |
Fiscal Year 2022 Performance Stock Award Metrics and Weights
| Performance Metrics | Description | Weights | | Microsoft Cloud Revenue* | Revenue from Azure and other cloud services, Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365, and other commercial cloud properties | 30% | | Microsoft Cloud Subscribers Growth | Paid seats for current or new per-user SaaS cloud services primarily in commercial customer segment | 20% | | Teams Monthly Active Usage Growth | Unique monthly active users of Teams in Enterprise, Corporate, Small and Medium Business, Education, and Consumer | 20% | | Xbox Game Pass Subscribers Growth | Current number of paid Game Pass Subscriptions (Console, PC, Ultimate) | 10% | | Windows OEM Revenue* Growth | Revenue from sales of Windows Pro and non-Pro licenses sold through the OEM channel | 10% | | 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 | 10% | | * “Microsoft Cloud Revenue” and “Windows OEM Revenue Growth”, when used as PSA metrics in this Compensation Discussion and Analysis, are non-GAAP financial measures defined on page 51. | | |
Fiscal Year 2022 Performance Stock Award Metrics and Weights
| 44 | |
Fiscal Year 2022 Performance Stock Award Metrics and Weights
| 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 2022 Performance Stock Award Metrics and Weights
The fiscal year 2022 PSA metrics were used to establish performance goals for (i) year 3 of the 2020 PSAs, (ii) year 2 of the 2021 PSAs, and (iii) year 1 of the 2022 PSAs, as shown below.
Fiscal Year 2022 Performance Stock Award Metrics and Weights
| PSA Metrics | | | | Our fiscal year 2022 PSA metric results can be found on pages 51-52 below. |
Stock Awards
Stock Awards Stock awards were granted under the Incentive Plan in September 2021 for shares of Microsoft common stock. These stock awards vest over four years, with 25% vesting on August 31, 2022 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 2022 Cash Incentive Awards
Fiscal Year 2022 Cash Incentive Awards We did not increase our target cash incentive opportunities in fiscal year 2022 as a percentage of base salary. For fiscal year 2022, these opportunities were: Mr. Nadella – 300%; Ms. Hood – 250%; Mr. Smith – 250%; and Mr. Young – 200%. In connection with Mr. Althoff’s appointment to Chief Commercial Officer the Compensation Committee set Mr. Althoff’s target cash incentive opportunity at 250%. Our Compensation Committee and, for Mr. Nadella, the independent members of our Board, determined the fiscal year 2022 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 2022 Cash Incentive Awards
| | Nadella | Hood | Althoff | Smith | Young | | Financial results (70% CEO / 50% other NEOs) | 121.03% | 121.03% | 121.03% | 121.03% | 121.03% | | Operational results (30% CEO / 50% other NEOs) | 165.00% | 165.00% | 163.34% | 165.00% | 130.00% | | Total FY22 cash incentive (% of target) | 134.22% | 143.02% | 142.19% | 143.02% | 125.52% | | Total FY22 cash incentive ($) | $10,066,500 | $3,575,500 | $3,412,560 | $3,551,664 | $2,133,840 |
Financial Results
| Financial Results ($ in billions) | FY21 Actual | FY22 Threshold | FY22 Target | FY22 Maximum | FY22 Actual | FY22 Growth Rate | | FY22 Incentive Plan Revenue | $174.59 | $194.78 | $207.21 | $218.61 | $206.67 | 18.37% | | FY22 Incentive Plan Operating Income | $71.53 | $75.08 | $82.02 | $92.67 | $86.73 | 21.25% |
Satya Nadella
| Average Financial: 121.03% | + | Average Operational: 165% | = | Overall Bonus: 134.22% |
Fiscal Year 2020 PSAs (Completed Performance Period)
| Fiscal Year 2020 PSA Core Metric Payout Percentages |
Fiscal Year 2020 PSAs (Completed Performance Period)
| Metric (FY20-FY22) | Weight | FY20 Payout | Weight | FY21 Payout | Weight | FY22 Payout | | Microsoft Cloud Revenue(1) | 35% | 98.15% | H1 - 16.5% | 121.69% | 30% | 126.39% | | | | | H2 - 16.5% | 157.07% | | | | Microsoft Cloud Subscribers Growth(2)(3) | 34% | 107.35% | 32% | 196.54% | 20% | 68.91% | | Teams Monthly Active Usage Growth(3) | 10% | 200.00% | 20% | 81.36% | 20% | 50.92% | | Xbox Game Pass Subscribers Growth(3) | 7% | 147.95% | 5% | 82.28% | 10% | 56.80% | | Surface Revenue | 7% | 90.10% | H1 - 2.5% | 200% | N/A | N/A | | | | | H2 - 2.5% | 0% | | | | Windows OEM Revenue Growth(3) | N/A | N/A | N/A | N/A | 10% | 191.15% | | LinkedIn Sessions | 7% | 129.64% | 5% | 195.97% | 10% | 90.66% | | Weighted Performance for FY | | 116.59% | | 144.07% | | 95.75% | | Core Metric Performance (average of FY20, FY21, and FY22 performance) | | | | | | 118.80% | | (1) Known as Commercial Cloud Revenue before FY22. (2) Known as Commercial Cloud Subscribers before FY22. (3) Metrics were established as unit of measure or dollar value before FY22. For competitive reasons, results for those years are expressed in terms of year-over-year growth. Beginning in FY22 metrics were defined as a growth percentage. | | | | | | |
Relative TSR Modifier
Relative TSR Modifier The core metric results for the fiscal year 2020 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 94th percentile of the S&P 500, well in excess of the 80th percentile performance that was a condition to receiving the maximum 150% multiplier. Based on this result, the total payment percentage for the fiscal 2020 PSAs was increased by 50%, resulting in the payout to our Named Executives of 178.20% of the target fiscal 2020 PSA shares.
Fiscal Year 2021 and 2022 PSAs (Open Performance Periods)
Fiscal Year 2021 and 2022 PSAs (Open Performance Periods) Performance under the fiscal year 2021 and 2022 PSAs will be determined following the end of the three-year performance periods ending June 30, 2023 and 2024, respectively. The number of shares of common stock to be earned will be based on an assessment of (1) performance against the metric goals during the applicable performance period, and (2) Microsoft’s relative TSR during the period. Microsoft’s relative TSR will not increase the shares earned for a performance period unless Microsoft’s absolute TSR for the performance period is positive. The metrics and relative weights under the fiscal year 2021 and 2022 PSAs are set forth on page 51 above in the table labeled Fiscal Year 2020 PSA Core Metric Performance Results.
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, 2022, only Mr. Smith was retirement eligible. 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, 2022 termination of employment due to death or total and permanent disability, or due to retirement on that date, are set forth in the table at page 59. 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.
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
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. Our Named Executives’ Severance Plan benefits assuming a termination of employment without cause on June 30, 2022, are set forth in the table at page 59. 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 2022 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, 2022, 2021, and 2020. None of our Named Executives received stock options, or reimbursements for relocation expenses or tax-gross-up payments, 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 | 2022 | 2,500,000 | 0 | 42,269,560 | 10,066,500 | 110,250 | 54,946,310 | | | 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 | | Amy E. Hood Executive Vice President and Chief Financial Officer | 2022 | 1,000,000 | 0 | 21,681,666 | 3,575,500 | 62,415 | 26,319,581 | | | 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 | | Judson B. Althoff Executive Vice President and Chief Commercial Officer | 2022 | 960,000 | 0 | 14,420,730 | 3,412,560 | 55,708 | 18,848,998 | | Bradford L. Smith Vice Chair and President | 2022 | 993,333 | 0 | 18,753,465 | 3,551,664 | 110,277 | 23,408,739 | | | 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 | | Christopher D. Young(5) | 2022 | 850,000 | 1,500,000 | 7,131,582 | 2,133,840 | 105,036 | 11,720,458 | | 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 installments of on-hire bonus payable to Mr. Young in fiscal years 2022 and 2021.(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 2022, 2021, and 2020, PSA values in this column include: (i) for fiscal year 2022 - 33.33% of each of the fiscal year 2022 PSAs, the fiscal year 2021 PSAs, and the fiscal year 2020 PSAs; (ii) 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; and (iii) 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. 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 2022, Mr. Nadella, $84,539,120; Ms. Hood, $26,445,265; Mr. Althoff, $16,660,404; Mr. Smith, $22,522,540; and Mr. Young, $3,506,158. (ii) for fiscal year 2021, Mr. Nadella, $52,529,846; Ms. Hood, $22,824,789; Mr. Smith, $18,984,417; and Mr. Young, $2,775,988; (iii) for fiscal year 2020, Mr. Nadella, $37,150,358; Ms. Hood, $18,704,870; and Mr. Smith, $15,866,522.(2) |
Summary Compensation Table
| Includes Incentive Plan cash incentives.(3) |
Summary Compensation Table
| Details about the amounts in the “All Other Compensation” column for fiscal year 2022 are set forth in the table below.(4) |
Grants of Plan-Based Awards
Grants of Plan-Based Awards This table provides information on grants of awards under any plan to the Named Executives in the fiscal year ended June 30, 2022.
Grants of Plan-Based Awards
| | Award(1) | Grant Date | Estimated Possible Payouts under Non-Equity Incentive Plan Awards(2) | | | Estimated Future Payouts under Equity Incentive Plan Awards(3) | | | All Other Stock Awards (#) | Grant Date Fair Value of Stock Awards(4) ($) | | Named Executive | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Satya Nadella | 2022 Cash Incentive | | 0 | 7,500,000 | 15,000,000 | | | | | | | | 2022 PSA | 9/14/2021 | | | | 2,071 | 55,210 | 165,630 | | 19,682,798 | | | 2021 PSA | 9/2/2021 | | | | 970 | 25,865 | 77,595 | | 9,156,727 | | | 2020 PSA | 9/2/2021 | | | | 1,134 | 30,224 | 90,672 | | 13,430,034 | | Amy E. Hood | 2022 Cash Incentive | | 0 | 2,500,000 | 5,000,000 | | | | | | | | 2022 PSA | 9/13/2021 | | | | 363 | 9,662 | 28,986 | | 3,412,425 | | | 2021 PSA | 9/2/2021 | | | | 402 | 10,716 | 32,148 | | 3,793,560 | | | 2020 PSA | 9/2/2021 | | | | 508 | 13,540 | 40,620 | | 6,016,647 | | | 2022 SA | 9/13/2021 | | | | | | | 28,986 | 8,459,034 | | Judson B. Althoff | 2022 Cash Incentive | | 0 | 2,400,000 | 4,800,000 | | | | | | | | 2022 PSA | 9/13/2021 | | | | 261 | 6,957 | 20,871 | | 2,456,956 | | | 2021 PSA | 9/2/2021 | | | | 250 | 6,651 | 19,953 | | 2,354,587 | | | 2020 PSA | 9/2/2021 | | | | 297 | 7,918 | 23,754 | | 3,518,660 | | | 2022 SA | 9/13/2021 | | | | | | | 20,870 | 6,090,528 | | Bradford L. Smith | 2022 Cash Incentive | | 0 | 2,483,334 | 4,966,667 | | | | | | | | 2022 PSA | 9/13/2021 | | | | 321 | 8,558 | 25,674 | | 3,022,397 | | | 2021 PSA | 9/2/2021 | | | | 350 | 9,312 | 27,936 | | 3,296,516 | | | 2020 PSA | 9/2/2021 | | | | 418 | 11,123 | 33,369 | | 4,942,357 | | | 2022 SA | 9/13/2021 | | | | | | | 25,673 | 7,492,195 | | Christopher D. Young | 2022 Cash Incentive | | 0 | 1,700,000 | 3,400,000 | | | | | | | | 2022 PSA | 9/13/2021 | | | | 156 | 4,141 | 12,423 | | 1,462,518 | | | 2021 PSA | 9/2/2021 | | | | 217 | 5,773 | 17,319 | | 2,043,639 | | | 2022 SA | 9/13/2021 | | | | | | | 12,423 | 3,625,424 |
Grants of Plan-Based Awards
| All awards are granted under the Executive Incentive Plan. SAs and PSAs were granted under the 2017 Stock Plan.(1) |
Grants of Plan-Based Awards
| This column represents fiscal year 2022 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 the PSAs with a grant date in fiscal year 2022. 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 2022 (33.33% of each of the 2022, 2021, and 2020 PSAs). The threshold is calculated as if the threshold of only the least weighted metric (10% weight for fiscal year 2022) is met, and this amount is then reduced by 25% based on assumption that the maximum adjustment for Microsoft’s total shareholder return underperforming the S&P500 is applied. The maximum is calculated assuming all maximum targets were met and the relative TSR multiplier 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. Because the grant date for a PSA occurs when PSA performance targets are approved, the grant date fair value is calculated for the portion of the PSA for which performance targets were set in fiscal year 2022 (33.33% of each of the 2022, 2021, and 2020 PSAs).(4) |
Grants of Plan-Based Awards
| 56 | |
Grants of Plan-Based 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 |
Outstanding Equity Awards at June 30, 2022
Outstanding Equity Awards at June 30, 2022 This table provides information about unvested SAs and PSAs held by the Named Executives on June 30, 2022.
Outstanding Equity Awards at June 30, 2022
| | 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(3) (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units, or Other Rights That Have Not Vested(2) ($) | | Satya Nadella | 9/18/2018 | 13,910 | 3,572,505 | | | | | 9/18/2019 | 34,002 | 8,732,734 | | | | | 9/18/2019 | | | 90,672 | 23,287,290 | | | 9/15/2020 | 20,785 | 5,338,212 | | | | | 9/15/2020 | | | 51,730 | 13,285,816 | | | 9/14/2021 | | | 55,210 | 14,179,584 | | Amy E. Hood | 9/17/2018 | 6,232 | 1,600,565 | | | | | 9/3/2019 | | | 40,621 | 10,432,691 | | | 9/18/2019 | 15,233 | 3,912,291 | | | | | 9/14/2020 | 20,092 | 5,160,228 | | | | | 9/14/2020 | | | 21,432 | 5,504,381 | | | 9/13/2021 | 28,986 | 7,444,474 | | | | | 9/13/2021 | | | 9,662 | 2,481,491 | | Judson B. Althoff | 9/17/2018 | 2,727 | 700,375 | | | | | 9/3/2019 | 8,909 | 2,288,098 | | | | | 9/3/2019 | | | 23,756 | 6,101,253 | | | 9/14/2020 | 12,471 | 3,202,927 | | | | | 9/14/2020 | | | 13,302 | 3,416,353 | | | 9/13/2021 | 20,870 | 5,360,042 | | | | | 9/13/2021 | | | 6,957 | 1,786,766 | | Bradford L. Smith | 9/17/2018 | 5,119 | 1,314,713 | | | | | 9/3/2019 | | | 33,368 | 8,569,903 | | | 9/18/2019 | 12,513 | 3,213,714 | | | | | 9/14/2020 | 17,460 | 4,484,252 | | | | | 9/14/2020 | | | 18,624 | 4,783,202 | | | 9/13/2021 | 25,673 | 6,593,597 | | | | | 9/13/2021 | | | 8,558 | 2,197,951 | | Christopher D. Young | 11/11/2020 | 62,342(4) | 16,011,296 | | | | | 11/11/2020 | 10,824 | 2,779,928 | | | | | 11/11/2020 | | | 11,546 | 2,965,359 | | | 9/13/2021 | 12,423 | 3,190,599 | | | | | 9/13/2021 | | | 4,141 | 1,063,533 |
Outstanding Equity Awards at June 30, 2022
| Vests 25% one year from the last business day of August preceding the award date and 12.5% semi-annually thereafter.(1) |
Outstanding Equity Awards at June 30, 2022
| The market value is the number of shares shown in the table multiplied by $256.83, the closing market price of Microsoft common stock on June 30, 2022.(2) |
Outstanding Equity Awards at June 30, 2022
| PSAs with a grant date in fiscal years 2022, 2021 or 2020 are reported assuming payout at target award levels. Award shares that are earned vest in full following the three-year performance period.(3) |
Outstanding Equity Awards at June 30, 2022
| Vests 25% on each November 11 following the award date.(4) |
Outstanding Equity Awards at June 30, 2022
| 2022 PROXY STATEMENT | 57 |
Outstanding Equity Awards at June 30, 2022
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Option Exercises and Stock Vested
Option Exercises and Stock Vested This table provides information on an aggregate basis about stock awards that vested during the fiscal year ended June 30, 2022 for each of the Named Executives. Microsoft has not granted stock options, other than options substituted in acquisitions, since 2003. No Named Executives held any Microsoft stock options during the fiscal year.
Option Exercises and Stock Vested
| | Stock Awards | | | Named Executive | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(1) ($) | | Satya Nadella | 283,747 | 85,914,251 | | Amy E. Hood | 135,746 | 41,095,210 | | Judson B. Althoff | 92,744 | 28,095,745 | | Bradford L. Smith | 112,546 | 34,071,427 | | Christopher D. Young | 27,274 | 8,831,941 |
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 2022. Microsoft does not contribute to the Deferred Compensation Plan.
Nonqualified Deferred Compensation
| Named Executive | Executive Contributions in Fiscal Year 2022(1) ($) | Aggregate Earnings in Fiscal Year 2022(2) ($) | Aggregate Balance at June 30, 2022 ($) | | Satya Nadella | 0 | 0 | 0 | | Amy E. Hood | 0 | 0 | 0 | | Judson B. Althoff | 0 | 0 | 0 | | Bradford L. Smith | 0 | 0 | 0 | | Christopher D. Young | 750,000 | (326,149) | 2,434,098 |
Nonqualified Deferred Compensation
| These amounts are included in the Summary Compensation Table for fiscal year 2022.(1) |
Nonqualified Deferred Compensation
| These amounts have not been reflected in the Summary Compensation Table for fiscal year 2022 or prior 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 |
CEO Pay Ratio
CEO Pay Ratio For fiscal year 2022, the annual total compensation for the median employee of the Company (other than our CEO) was $190,302 and the annual total compensation of our CEO was $54,946,310. Based on this information, for fiscal year 2022 the ratio of the annual total compensation of our CEO to the annual total compensation of the median employee was 289 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, 2022, the last day of our fiscal year, excluding approximately 11,024 employees who became Microsoft employees in fiscal year 2022 in the following business acquisitions: Ally Technologies Inc; Clear Software, Inc.; Clipchamp; CloudKnox Security Inc.; Jumprope, Inc.; Minit; Nuance Communications, Inc; Oribi Systems Ltd.; Paddle Inc; Peer5, Inc.; RiskIQ, Inc.; Skills Seminar, Inc; Suplari, Inc.; TakeLessons, Inc.; Two Hat; and Xandr Inc. To identify our median employee, we used a “total direct compensation” measure consisting of: (i) fiscal year 2022 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) target bonuses and cash incentives payable for fiscal year 2022 (excluding allowances, relocation payments, and profit-sharing), and (iii) the dollar value of SAs granted in fiscal year 2022. 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 2022 annual shareholders meeting (“Annual Meeting”) to hold office until the 2023 annual shareholders meeting. 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: 55 Director Since: 2017 Occupation: General Partner, Greylock Partners | Hugh F. Johnston Age: 61 Director Since: 2017 Occupation: Vice Chairman, Executive Vice President, and CFO, PepsiCo, Inc. | Teri L. List Age: 59 Director Since: 2014 Occupation: Former Executive Vice President and CFO, The Gap, Inc. | Satya Nadella (Board Chair) Age: 55 Director Since: 2014 Occupation: Chairman and CEO, Microsoft Corporation | | Sandra E. Peterson Age: 63 Director Since: 2015 Occupation: Operating Partner, Clayton, Dubilier & Rice, LLC | Penny S. Pritzker Age: 63 Director Since: 2017 Occupation: Founder and Chairman, PSP Partners, LLC | Carlos A. Rodriguez Age: 58 Director Since: 2021 Occupation: CEO and Director, Automatic Data Processing, Inc. | . Charles W. Scharf Age: 57 Director Since: 2014 Occupation: CEO, President, and Director, Wells Fargo & Company | | John W. Stanton Age: 67 Director Since: 2014 Occupation: Founder and Chairman, Trilogy Partnerships | John W. Thompson Age: 73 Director Since: 2012 Occupation: Lead Independent Director, Microsoft Corporation; Former CEO and Director, Virtual Instruments Corporation | Emma N. Walmsley Age: 53 Director Since: 2019 Occupation: CEO and Director, GSK plc | Padmasree Warrior Age: 62 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. 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. A nominee who does not receive a majority of the votes cast 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.