DEF 14A of Microsoft Corp
Filed Oct 19, 2023 · FY20230001193125-23-259247
Our Director Nominees
Our Director Nominees
Our Director Nominees
| | Board Diversity | | | | | | | | | | 8 | | | | | | Financial | | | | | | | | | 6 | | | | | | | Global Business | | | | | | | | | | | 11 | | | | | Leadership | | | | | | | | | | | | 12 | | | | Mergers and Acquisitions | | | | | | | | | | | | 12 | | | | Sales and Marketing | | | | | | | | | 6 | | | | | | | Technology | | | | | | | | 5 | | | | | |
Board Composition and Diversity
Board Composition and Diversity Our Board of Directors believes that having a diverse mix of directors with complementary qualifications, expertise, and attributes is essential to meeting its oversight responsibility. A mark indicates a specific area of focus or expertise on which the Board particularly relies. Not having a mark does not mean the director does not possess that qualification or skill. Our director nominees’ biographies describe each director’s background and relevant experience in more detail.
Board Composition and Diversity
| 2023 PROXY STATEMENT | 19 |
Board Composition and Diversity
| 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 |
Board Composition and Diversity
Following are biographies for the 12 directors nominated by the Board for election during the 2023 Annual Meeting.
Board Composition and Diversity
| | Reid G. Hoffman | | | Age: 56 | Director since: 2017 | Birthplace: United States | Independent |
Board Composition and Diversity
| Experience: Greylock Partners (2009-present) (venture capital firm) • Partner (2023-present) • General Partner (2009-2023) 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 |
Board Composition and Diversity
| | Hugh F. Johnston | | | Age: 62 | Director since: 2017 | Birthplace: United States | Independent |
Board Composition and Diversity
| 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 |
Board Composition and Diversity
| | Board Diversity | | Financial | | Global Business | | Leadership | | Mergers and Acquisitions | | Sales and Marketing | | Technology |
Board Composition and Diversity
| 20 | |
Board Composition and Diversity
| 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 |
Board Composition and Diversity
| | Teri L. List | | | Age: 60 | Director Since: 2014 | Birthplace: United States | Independent |
Board Composition and Diversity
| 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 |
Board Composition and Diversity
| | Catherine MacGregor | | | Age: 51 | Director Since: New Nominee | Birthplace: Morocco | Independent |
Board Composition and Diversity
| Experience: Engie S.A. (2021-present) (energy company) • Group Chief Executive Officer and Director (2021-present) TechnipFMC plc (2019-2020) • President, Technip Energies (2019-2020) Schlumberger N.V. (1995-2018) • President, Drilling Group (London) (2017) • President, Reservoir Characterization Group (France) (2016) • President, Europe & Africa, La Defense (France) (2013) • President, Wireline, Schlumberger Wireline (France) (2009) • Group Human Resource Director (France) (2007) • Various positions of increasing authority (Congo, UK, Malaysia, US, and France) (1995-2007) | Microsoft Committees: • Appointment will be made after election Other Public Company Directorships: • Engie S.A. Former Public Company Directorships Held in the Past Five Years: • None |
Board Composition and Diversity
| 2023 PROXY STATEMENT | 21 |
Board Composition and Diversity
| 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 |
Board Composition and Diversity
| | Mark A. L. Mason | | | Age: 54 | Director Since: New Nominee | Birthplace: United States | Independent |
Board Composition and Diversity
| Experience: Citigroup Inc. (2001-present) (banking and financial services company) • Chief Financial Officer (2019-present) • Chief Financial Officer, Institutional Clients Group (2014) • Chief Executive Officer, Citi Private Bank (2013) • Chief Executive Officer, Citi Holdings (2012) • Chief Operating Officer, Citi Holdings (2009) • Chief Financial Officer and Head of Strategy and M&A, Global Wealth Management (2006) • Various positions of increasing authority (2001-2006) | Microsoft Committees: • Appointment will be made after election Other Public Company Directorships: • None Former Public Company Directorships Held in the Past Five Years: • Primerica, Inc. |
Board Composition and Diversity
| | Satya Nadella | | | Age: 56 | Director Since: 2014 | Birthplace: India |
Board Composition and Diversity
| Experience: Microsoft Corporation (1992-present) • Chairman and Chief Executive Officer (2021-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 |
Board Composition and Diversity
| | Board Diversity | | Financial | | Global Business | | Leadership | | Mergers and Acquisitions | | Sales and Marketing | | Technology |
Board Composition and Diversity
| 22 | |
Board Composition and Diversity
| 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 |
Board Composition and Diversity
| | Sandra E. Peterson | | | Age: 64 | Director Since: 2015 | Birthplace: United States | Independent |
Board Composition and Diversity
| Experience: Microsoft Corporation (2015-present) • Lead Independent Director (2023-present) 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) • Chief Executive Officer and 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 • Governance and Nominating (Chair) Other Public Company Directorships: • None Former Public Company Directorships Held in the Past Five Years: • Covetrus, Inc. • Zymergen, Inc. |
Board Composition and Diversity
| | Penny S. Pritzker | | | Age: 64 | Director Since: 2017 | Birthplace: United States | Independent |
Board Composition and Diversity
| 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 |
Board Composition and Diversity
| 2023 PROXY STATEMENT | 23 |
Board Composition and Diversity
| 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 |
Board Composition and Diversity
| | Carlos A. Rodriguez | | | Age: 59 | Director since: 2021 | Birthplace: Cuba | Independent |
Board Composition and Diversity
| Experience: Automatic Data Processing, Inc. (1999-present) (human capital management solutions provider) • Executive Chair (2023-present) • Chief Executive Officer and Director (2011-2022) • 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 • Compensation (Chair) Other Public Company Directorships: • Automatic Data Processing, Inc. Former Public Company Directorships Held in the Past Five Years: • None |
Board Composition and Diversity
| | Charles W. Scharf | | | Age: 58 | Director Since: 2014 | Birthplace: United States | Independent |
Board Composition and Diversity
| Experience: Wells Fargo & Company (2019-present) (banking and financial services company) • Chief Executive Officer, President, and Director (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 |
Board Composition and Diversity
| | Board Diversity | | Financial | | Global Business | | Leadership | | Mergers and Acquisitions | | Sales and Marketing | | Technology |
Board Composition and Diversity
| 24 | |
Board Composition and Diversity
| 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 |
Board Composition and Diversity
| | John W. Stanton | | | Age: 68 | Director Since: 2014 | Birthplace: United States | Independent |
Board Composition and Diversity
| 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) |
Board Composition and Diversity
| | Emma N. Walmsley | | | Age: 54 | Director Since: 2019 | Birthplace: United Kingdom | Independent |
Board Composition and Diversity
| Experience: GSK plc (2010-present) (healthcare company) • Chief Executive Officer and Director (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 |
Board Composition and Diversity
| 2023 PROXY STATEMENT | 25 |
Board Composition and Diversity
| 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. There was no change in fiscal year 2023. Our CEO, Mr. Nadella does not receive pay for serving as a director or as Board Chairman.
Director Compensation
| Fiscal Year 2023 Compensation Structure for Non-Employee Directors | | | 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 Compensation
| 2023 PROXY STATEMENT | 27 |
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 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 2023. 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 | 235,000 | | 360,000 | | Hugh F. Johnston | 170,000 | 235,000 | 12,500 | 417,500 | | Teri L. List | 140,000 | 235,000 | 15,000 | 390,000 | | Sandra E. Peterson(5) | 154,013 | 246,118 | 15,000 | 415,131 | | Penny S. Pritzker(6) | 150,000 | 235,000 | 15,000 | 400,000 | | Carlos A. Rodriguez(7) | 145,987 | 235,000 | | 380,987 | | Charles W. Scharf | 125,000 | 235,000 | | 360,000 | | John W. Stanton | 140,000 | 235,000 | 15,000 | 390,000 | | John W. Thompson(8) | 125,000 | 288,882 | 15,000 | 428,882 | | Emma N. Walmsley | 125,000 | 235,000 | 13,368 | 373,368 | | Padmasree Warrior(9) | 125,000 | 235,000 | | 360,000 |
Director Compensation
| (1) The value of fractional shares under stock awards that are paid in cash are reported in the Stock Awards column. |
Director Compensation
| (2) The aggregate award value in the “Stock Awards” column for each director represents four quarterly awards representing a grant date fair value under FASB ASC Topic 718 of $58,750, with exceptions as follows: Ms. Peterson was appointed lead independent director on March 15, 2023 succeeding Mr. Thompson. Mr. Thompson received awards with a grant date fair value of $75,000 for the first three quarters and a prorated award with a grant date fair value of $63,882 for the final quarter. Ms. Peterson received awards with a grant date fair value of $58,750 for the first three quarters and a prorated award with a grant date fair value of $69,868 for the final quarter. |
Director Compensation
| (3) Amounts in this column represent matching charitable contributions under our corporate giving program in fiscal year 2023, which matches director gifts up to $15,000 per calendar year. |
Director Compensation
| (4) Mr. Hoffman elected to defer his cash and stock compensation. The compensation deferred converted into 1,330 shares of our common stock. |
Director Compensation
| (5) Ms. Peterson stepped away from her role as chair of the Compensation Committee and was appointed Lead Independent Director and chair of the Governance and Nominating Committee effective March 15, 2023. The Compensation Committee chair retainer no longer applies and she received a prorated cash retainer of $34,013 for the final quarter. Ms. Peterson elected to defer her cash and stock compensation. The compensation deferred converted into 1,474 shares of our common stock. |
Director Compensation
| (6) Ms. Pritzker elected to defer her cash and stock compensation. The compensation deferred converted into 1,422 shares of our common stock. |
Director Compensation
| (7) Mr. Rodriguez was appointed to chair of the Compensation Committee on March 15, 2023 and received a prorated cash retainer of $40,987 for the final quarter. He elected to defer his cash and stock compensation. The compensation deferred converted into 1,403 shares of our common stock. |
Director Compensation
| (8) Mr. Thompson stepped away from his role of Lead Independent Director and chair of the Governance and Nominating Committee on March 15, 2023 and received prorated stock retainers applicable to those roles for the final quarter. He elected to defer his stock compensation. The compensation deferred converted into 1,075 shares of our common stock. |
Director Compensation
| (9) Ms. Warrior elected to defer a portion of her cash compensation. The compensation deferred converted into 229 shares of our common stock. |
Director Compensation
| 28 | |
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 |
Lead Independent Director Compensation
Lead Independent Director Compensation In March 2023, the independent directors elected Sandra Peterson as Lead Independent Director. She succeeds John Thompson, who had served in the roles of Lead Independent Director or Board Chair since 2012. The Lead Independent Director Retainer reflects the additional time commitment for the Lead Independent Director role given the unique responsibilities of the Lead Independent Director detailed in Section 1 of this Proxy Statement on page 14, 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
| 2023 PROXY STATEMENT | 29 |
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 |
Executive Compensation Philosophy
| • | Focuses on the long-term through equity awards with multi-year vesting or performance requirements |
Compensation Best Practices
| 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 • Annual assessment of compensation-related risks • 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 2023 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.
Peer Group Used for Fiscal Year 2023 Pay Analysis
Peer Group Used for Fiscal Year 2023 Pay Analysis For fiscal year 2023, 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 2023 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 2023 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 2023 Pay Analysis
| 2023 PROXY STATEMENT | 37 |
Peer Group Used for Fiscal Year 2023 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 2023 Pay Analysis
The companies in the fiscal year 2023 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 | Netflix Pfizer | Procter & Gamble Tesla | Verizon Walt Disney |
Secondary Peer Group – General Industry
Given Microsoft’s significant size, 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 are presented in billions as of August 1, 2023, 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 60th percentile of the S&P 500 |
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 long-term shareholder value creation and, historically, our performance against 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 NEOs, as follows:
Annual Cash Incentives
| * “Incentive Plan Revenue” and “Incentive Plan Operating Income” are non-GAAP financial measures defined on page 43. |
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 of the performance metrics that are chosen under our PSA program, we believe that measuring performance annually over our three-year performance period and modifying the actual awards eligible to be earned based on our three-year relative TSR provides the most accurate and holistic assessment of Microsoft’s long-term trajectory and performance achievements.
Fiscal Year 2023 Performance Stock Award Metrics and Weights
Fiscal Year 2023 Performance Stock Award Metrics and Weights Fiscal year 2023 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 47. The metrics and weights used for fiscal year 2023 are in the table below.
Fiscal Year 2023 PSA Metrics
| 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 Content & Services Revenue Growth* | Revenue from Xbox content and services, comprising first- and third-party content (including games and in-game content), Xbox Game Pass and other subscriptions, Xbox Cloud Gaming, advertising, third-party disc royalties, and other cloud services | 10% | | Windows 10/11 MAD Growth | Windows monthly active devices (“MAD”) growth is defined as the count of Windows 10 and Windows 11 devices that were active in the last 28 days from a given date. The term device refers to Windows PCs and Tablets. | 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 “Xbox Content & Services Revenue Growth”, when used as PSA metrics in this Compensation Discussion and Analysis, are non-GAAP financial measures defined on page 47. | | |
Fiscal Year 2023 PSA Metrics
| 3-year Relative TSR Ranking(1) | Modifier | | 20th Percentile & Below | 75.00% | | 30th Percentile | 87.50% | | 40th to 60th Percentile | 100.00% | | 70th Percentile | 125.00% | | 80th Percentile & Above | 150.00% |
Fiscal Year 2023 PSA Metrics
| (1) Relative TSR percentile ranking as compared to the S&P 500 results in the above payout modifiers |
Stock Awards
Stock Awards Stock awards were granted under the Incentive Plan in September 2022 for shares of Microsoft common stock to Named Executives other than Mr. Nadella. These stock awards vest over four years, with 25% vesting on August 31, 2023 and 12.5% each six-months thereafter, to support long-term focus and align with shareholders’ interests as the value of such awards is dependent on our stock price and vesting is subject to continued employment except as described on pages 48-49 below.
Fiscal Year 2023 Cash Incentive Awards
Fiscal Year 2023 Cash Incentive Awards We did not increase our target cash incentive opportunities in fiscal year 2023 as a percentage of base salary for the same reasons that we did not increase base salaries. For fiscal year 2023, these opportunities were: Mr. Nadella – 300%; Ms. Hood – 250%; Mr. Althoff – 250%; Mr. Smith – 250%; and Mr. Young – 200%. Our Compensation Committee and, for Mr. Nadella, the independent members of our Board, determined the fiscal year 2023 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 2023 Cash Incentive Awards
| | Nadella | Hood | Althoff | Smith | Young | | Financial results (70% CEO / 50% other NEOs) | 63.61% | 63.61% | 63.61% | 63.61% | 63.61% | | Operational results (30% CEO / 50% other NEOs) | 136.67% | 120.00% | 123.34% | 126.67% | 106.66% | | Total FY23 cash incentive (% of target) | 85.53% | 91.81% | 93.48% | 95.14% | 85.14% | | Total FY23 cash incentive ($) | 6,414,750 | 2,295,250 | 2,243,520 | 2,378,500 | 1,447,380 |
Financial Results
| Financial Results ($ in billions) | FY22 Actual | FY23 Threshold | FY23 Target | FY23 Maximum | FY23 Actual | FY23 Growth Rate | | FY23 Incentive Plan Revenue | $198.30 | $216.90 | $230.75 | $243.44 | $220.08 | 10.98% | | FY23 Incentive Plan Operating Income | $80.47 | $88.54 | $96.77 | $109.35 | $91.13 | 13.25% |
Satya Nadella
| Average Financial: 63.61% | + | Average Operational: 136.67% | = | Overall Bonus: 85.53% |
Fiscal Year 2021 PSAs (Completed Performance Period)
| Fiscal Year 2021 PSA Core Metric Performance and Payout Percentages |
Fiscal Year 2021 PSAs (Completed Performance Period)
| PSA Core Metrics | Aggregate Weighting | Weighting | Threshold | Target | Maximum | Actual Result | Final Payout | | FY21 Core Metrics – Year 1(1) | 1/3 | | | | | | 144.07% | | FY22 Core Metrics – Year 2(2) | 1/3 | | | | | | 95.75% | | FY23 Core Metrics – Year 3 | 1/3 | | | | | | 99.65% | | Microsoft Cloud Revenue(3) | | 30% | $107.64 | $116.51 | $125.69 | $113.26 | 81.68% | | Microsoft Cloud Subscribers Growth | | 20% | 8.96% | 18.57% | 28.88% | 14.12% | 76.85% | | Teams Monthly Active Usage Growth | | 20% | -12.80% | 5.58% | 22.14% | 12.39% | 141.12% | | Xbox Content and Services Revenue Growth(3) | | 10% | -16.45% | 4.44% | 25.33% | 0.70% | 91.05% | | Windows 10/11 Monthly Active Devices Growth | | 10% | -4.90% | 5.67% | 12.01% | 5.51% | 99.24% | | LinkedIn Sessions | | 10% | 68.59 | 73.75 | 78.91 | 75.05 | 125.19% | | FY21 PSA 3-Year Average Payout | | | | | | | 113.16% |
Fiscal Year 2021 PSAs (Completed Performance Period)
| (1) Fiscal Year 2021 Core Metrics results related to Microsoft Cloud Revenue (weighted at 33%) with a resulting payout of 121.69% for the first half of the fiscal year and 157.07% for the second half of the fiscal year, Microsoft Cloud Subscribers (weighted at 32%) with a resulting payout of 196.54%, Teams Monthly Active Usage (weighted at 20%) with a resulting payout of 81.36%, Xbox Game Pass Subscribers (weighted at 5%) with a resulting payout of 82.28%, Surface Revenue (weighted at 5%) with a resulting payout of 200% for the first half of the fiscal year and 0% for the second half of the fiscal year, and LinkedIn Sessions (weighted at 5%) with a resulting payout of 195.97%. |
Fiscal Year 2021 PSAs (Completed Performance Period)
| (2) Fiscal Year 2022 Core Metric results related to Microsoft Cloud Revenue (weighted at 30%) with a resulting payout of 126.39%, Microsoft Cloud Subscribers Growth (weighted at 20%) with a resulting payout of 68.91%, Teams Monthly Active Usage Growth (weighted at 20%) with a resulting payout of 50.92%, Xbox Game Pass Subscribers (weighted at 10%) with a resulting payout of 56.80%, Windows OEM Revenue Growth (weighted at 10%) with a resulting payout of 191.15%, and LinkedIn Sessions (weighted at 10%) with a resulting payout of 90.66%. |
Relative TSR Modifier
Relative TSR Modifier The core metric results for the fiscal year 2021 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 72nd percentile of the S&P 500, below the 80th percentile performance that is a condition to receiving the maximum 150% multiplier.
Relative TSR Modifier
| Peer Group Index | FY21 PSA Performance Period | Relative Total Shareholder Return | Modifier Payout | | S&P 500 | July 1, 2020 – June 30, 2023 | 72nd percentile | 128.95% |
Relative TSR Modifier
Based on this result, the total payment percentage for the fiscal year 2021 PSAs was increased by 28.95%, resulting in the payout to our Named Executives of 145.92% of the target fiscal 2021 PSA shares.
Relative TSR Modifier
| 2023 PROXY STATEMENT | 47 |
Relative TSR Modifier
| 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 and 2023 PSAs (Open Performance Periods)
Fiscal Year 2022 and 2023 PSAs (Open Performance Periods) Performance under the fiscal year 2022 and 2023 PSAs will be determined following the end of the three-year performance periods ending June 30, 2024 and 2025, 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 2022 and 2023 PSAs are set forth on page 47 in the table labeled Fiscal Year 2021 PSA Core Metric Performance and Payout Percentages.
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. Consistent with our policy for U.S. employees at all levels, our Named Executives who retire from Microsoft after (a) age 65 or (b) age 55 with 15 years of continuous service are eligible for the continuation of vesting of outstanding SAs granted at the time of the annual rewards period 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, 2023, of our Named Executives only Mr. Nadella and Mr. Smith were 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, 2023 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 55. 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
Post-Employment Compensation
| 48 | |
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
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, 2023, are set forth in the table at page 55. Mr. Nadella participates in the Severance Plan on the same terms as our other executive officers.
Annual Compensation Risk Assessment
| • 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, and have the opportunity to reduce payments and use negative discretion, if appropriate • 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, 2023, 2022, and 2021. 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 | 2023 | 2,500,000 | 0 | 39,236,137 | 6,414,750 | 361,650 | 48,512,537 | | | 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 | | Amy E. Hood Executive Vice President and Chief Financial Officer | 2023 | 1,000,000 | 0 | 16,450,701 | 2,295,250 | 156,946 | 19,902,897 | | | 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 | | Judson B. Althoff Executive Vice President and Chief Commercial Officer | 2023 | 960,000 | 0 | 12,848,921 | 2,243,520 | 152,277 | 16,204,718 | | | 2022 | 960,000 | 0 | 14,420,730 | 3,412,560 | 55,708 | 18,848,998 | | Bradford L. Smith Vice Chair and President | 2023 | 1,000,000 | 0 | 14,524,413 | 2,378,500 | 212,777 | 18,115,690 | | | 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 | | Christopher D. Young(5) Executive Vice President, Business Development, Strategy, and Ventures | 2023 | 850,000 | 0 | 7,355,407 | 1,447,380 | 163,127 | 9,815,914 | | | 2022 | 850,000 | 1,500,000 | 7,131,582 | 2,133,840 | 105,036 | 11,720,458 | | | 2021 | 541,875 | 3,500,000 | 22,594,634 | 1,788,188 | 70,386 | 28,495,083 |
Summary Compensation Table
| (1) Includes installments of on-hire bonus payable to Mr. Young in fiscal years 2022 and 2021. |
Summary Compensation Table
| (2) 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 2023, 2022, and 2021, PSA values in this column include: (i) for fiscal year 2023 – 33.33% of each of the fiscal year 2023 PSAs, the fiscal year 2022 PSAs, and the fiscal year 2021 PSAs; (ii) 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; and (iii) 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. 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 2023, Mr. Nadella, $78,472,273; Ms. Hood, $16,932,981; Mr. Althoff, $12,339,046; Mr. Smith, $14,905,094; and Mr. Young, $7,867,277. (ii) 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. (iii) for fiscal year 2021, Mr. Nadella, $52,529,846; Ms. Hood, $22,824,789; Mr. Smith, $18,984,417; and Mr. Young, $2,775,988. |
Summary Compensation Table
| (3) Consists of Incentive Plan cash incentives. |
Summary Compensation Table
| (4) Details about the amounts in the “All Other Compensation” column for fiscal year 2023 are set forth in the table below. |
Grants of Plan-Based Awards
Grants of Plan-Based Awards This table provides information on grants of awards under any plan to the Named Executives in the fiscal year ended June 30, 2023.
Grants of Plan-Based Awards
| Named Executive | Award(1) | Grant Date | Estimated Possible Payouts under Non-Equity Incentive Plan Awards(2) | | | Estimated Future Payouts under Equity Incentive Plan Awards(3) | | | All Other Stock Awards (#) | Grant Date Fair Value of Stock Awards(4) ($) | | | | | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | | | | Satya Nadella | 2023 Cash Incentive | | 0 | 7,500,000 | 15,000,000 | | | | | | | | 2023 PSA | 9/19/2022 | | | | 2,390 | 63,742 | 191,226 | | 17,096,331 | | | 2022 PSA | 9/19/2022 | | | | 2,070 | 55,210 | 165,630 | | 15,453,186 | | | 2021 PSA | 9/19/2022 | | | | 970 | 25,865 | 77,595 | | 6,686,620 | | Amy E. Hood | 2023 Cash Incentive | | 0 | 2,500,000 | 5,000,000 | | | | | | | | 2023 PSA | 9/19/2022 | | | | 418 | 11,155 | 33,465 | | 2,991,883 | | | 2022 PSA | 9/19/2022 | | | | 362 | 9,662 | 28,986 | | 2,704,394 | | | 2021 PSA | 9/19/2022 | | | | 402 | 10,715 | 32,145 | | 2,770,214 | | | 2023 Stock Award | 9/19/2022 | | | | | | | 33,465 | 7,984,210 | | Judson B. Althoff | 2023 Cash Incentive | | 0 | 2,400,000 | 4,800,000 | | | | | | | | 2023 PSA | 9/19/2022 | | | | 350 | 9,332 | 27,996 | | 2,502,936 | | | 2022 PSA | 9/19/2022 | | | | 261 | 6,957 | 20,871 | | 1,947,171 | | | 2021 PSA | 9/19/2022 | | | | 249 | 6,651 | 19,953 | | 1,719,417 | | | 2023 Stock Award | 9/19/2022 | | | | | | | 27,996 | 6,679,398 | | Bradford L. Smith | 2023 Cash Incentive | | 0 | 2,500,000 | 5,000,000 | | | | | | | | 2023 PSA | 9/19/2022 | | | | 371 | 9,880 | 29,641 | | 2,650,004 | | | 2022 PSA | 9/19/2022 | | | | 321 | 8,558 | 25,674 | | 2,395,291 | | | 2021 PSA | 9/19/2022 | | | | 349 | 9,312 | 27,936 | | 2,407,252 | | | 2023 Stock Award | 9/19/2022 | | | | | | | 29,641 | 7,071,865 | | Christopher D. Young | 2023 Cash Incentive | | 0 | 1,700,000 | 3,400,000 | | | | | | | | 2023 PSA | 9/19/2022 | | | | 179 | 4,781 | 14,342 | | 1,282,223 | | | 2022 PSA | 9/19/2022 | | | | 155 | 4,141 | 12,423 | | 1,159,066 | | | 2021 PSA | 9/19/2022 | | | | 216 | 5,772 | 17,316 | | 1,492,350 | | | 2023 Stock Award | 9/19/2022 | | | | | | | 14,342 | 3,421,769 |
Grants of Plan-Based Awards
| (1) All awards are granted under the Executive Incentive Plan. SAs and PSAs were granted under the 2017 Stock Plan. |
Grants of Plan-Based Awards
| (2) This column represents fiscal year 2023 cash incentives. Please see the section entitled “Fiscal Year 2023 Cash Incentive Awards” in the Compensation Discussion and Analysis for more information. |
Grants of Plan-Based Awards
| (3) These columns represent the threshold, target, and maximum shares for the PSAs with a grant date in fiscal year 2023. 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 2023 (33.33% of each of the 2023, 2022, and 2021 PSAs). The threshold is calculated as if the threshold of only the least weighted metric (10% weight for fiscal year 2023) 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&P 500 is applied. The maximum is calculated assuming all maximum targets were met and the relative TSR multiplier was fully earned. |
Grants of Plan-Based Awards
| (4) Includes the grant date fair values for SAs and PSAs calculated in accordance with FASB ASC Topic 718 based on the market price of the shares subject to the award on the date of grant. The value of SAs is reduced by the present value of estimated future dividends because dividends are not paid on SA shares until vesting. Values for PSAs in this column are calculated using a Monte Carlo simulation valuation performed as of the date of grant by an independent third party. 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 2023 (33.33% of each of the 2023, 2022, and 2021 PSAs). |
Grants of Plan-Based Awards
| 52 | |
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, 2023
Outstanding Equity Awards at June 30, 2023 This table provides information about unvested SAs and PSAs held by the Named Executives on June 30, 2023.
Outstanding Equity Awards at June 30, 2023
| | 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 | 9/18/2019 | 11,334 | 3,859,680 | | | | | 9/15/2020 | 12,471 | 4,246,874 | | | | | 9/15/2020 | 113,227(4) | 38,558,323 | | | | | 9/14/2021 | | | 331,260 | 112,807,280 | | | 9/19/2022 | | | 191,226 | 65,120,102 | | Amy E. Hood | 9/18/2019 | 5,078 | 1,729,262 | | | | | 9/14/2020 | 12,056 | 4,105,550 | | | | | 9/14/2020 | 46,909(4) | 15,974,391 | | | | | 9/13/2021 | 18,117 | 6,169,563 | | | | | 9/13/2021 | | | 57,972 | 19,741,785 | | | 9/19/2022 | 33,465 | 11,396,171 | | | | | 9/19/2022 | | | 33,465 | 11,396,171 | | Judson B. Althoff | 9/3/2019 | 2,970 | 1,011,404 | | | | | 9/14/2020 | 7,483 | 2,548,261 | | | | | 9/14/2020 | 29,116(4) | 9,915,163 | | | | | 9/13/2021 | 13,044 | 4,442,004 | | | | | 9/13/2021 | | | 41,742 | 14,214,821 | | | 9/19/2022 | 27,996 | 9,533,758 | | | | | 9/19/2022 | | | 27,996 | 9,533,758 | | Bradford L. Smith | 9/18/2019 | 4,171 | 1,420,392 | | | | | 9/14/2020 | 10,476 | 3,567,497 | | | | | 9/14/2020 | 40,763(4) | 13,881,432 | | | | | 9/13/2021 | 16,046 | 5,464,305 | | | | | 9/13/2021 | | | 51,348 | 17,486,048 | | | 9/19/2022 | 29,641 | 10,093,946 | | | | | 9/19/2022 | | | 29,641 | 10,093,606 | | Christopher D. Young | 11/11/2020 | 41,561(4)(5) | 14,153,183 | | | | | 11/11/2020 | 6,495 | 2,211,807 | | | | | 11/11/2020 | 25,271 | 8,605,786 | | | | | 9/13/2021 | 7,765 | 2,644,293 | | | | | 9/13/2021 | | | 24,846 | 8,461,057 | | | 9/19/2022 | 14,342 | 4,884,025 | | | | | 9/19/2022 | | | 14,342 | 4,884,365 |
Outstanding Equity Awards at June 30, 2023
| (1) Vests 25% one year from the last business day of August preceding the award date and 12.5% semi-annually thereafter. |
Outstanding Equity Awards at June 30, 2023
| (2) The market value is the number of shares shown in the table multiplied by $340.54, the closing market price of Microsoft common stock on June 30, 2023. |
Outstanding Equity Awards at June 30, 2023
| (3) PSAs with a grant date in fiscal years 2023 and 2022 are reported assuming payout at maximum award levels, pursuant to SEC rules as the aggregate achievement of the performance metrics was trending above the target payout level as of June 30, 2023. Award shares that are earned vest in full following the three-year performance period. |
Outstanding Equity Awards at June 30, 2023
| (4) Reflects fiscal year 2021 PSA, with 3-year performance period ending June 30, 2023, which vested on August 31, 2023. Award shares are presented as the actual amount earned and vested on August 31, 2023. Award values reflect the closing market price of Microsoft common stock on June 30, 2023. |
Outstanding Equity Awards at June 30, 2023
| (5) Vests 25% on each November 11 following the award date. |
Outstanding Equity Awards at June 30, 2023
| 2023 PROXY STATEMENT | 53 |
Outstanding Equity Awards at June 30, 2023
| 1 | GOVERNANCE AND OUR BOARD OF DIRECTORS | 2 | NAMED EXECUTIVE OFFICER COMPENSATION | 3 | AUDIT COMMITTEE MATTERS | 4 | PROPOSALS TO BE VOTED ON DURING THE MEETING | 5 | INFORMATION ABOUT THE MEETING |
Option Exercises and Stock Vested
Option Exercises and Stock Vested This table provides information on an aggregate basis about stock awards that vested during the fiscal year ended June 30, 2023 for each of the Named Executives. Microsoft has not granted stock options, other than options substituted in acquisitions, since 2003. No Named Executives held any Microsoft stock options during the fiscal year.
Option Exercises and Stock Vested
| | Stock Awards | | | Named Executive | Number of Shares Acquired on Vesting (#) | Value Realized on Vesting(1) ($) | | Satya Nadella | 206,470 | 54,122,591 | | Amy E. Hood | 107,679 | 28,164,890 | | Judson B. Althoff | 63,814 | 16,684,477 | | Bradford L. Smith | 89,534 | 23,414,912 | | Christopher D. Young | 29,768 | 7,365,064 |
Option Exercises and Stock Vested
| (1) The value realized on vesting is calculated by multiplying the number of shares shown in the table by the market value of the shares on the vesting date. |
Nonqualified Deferred Compensation
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 2023. Microsoft does not contribute to the Deferred Compensation Plan.
Nonqualified Deferred Compensation
| Named Executive | Executive Contributions in Fiscal Year 2023(1) ($) | Aggregate Earnings in Fiscal Year 2023(2) ($) | Aggregate Balance at June 30, 2023(3) ($) | | 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 | 1,493,688 | 357,834 | 4,029,878 |
Nonqualified Deferred Compensation
| (1) These amounts are included in the Summary Compensation Table for fiscal year 2023. |
Nonqualified Deferred Compensation
| (2) None of the amounts in this column are included in the Summary Compensation Table because the earnings under the Deferred Compensation Plan were not preferential or above-market. |
Nonqualified Deferred Compensation
| (3) Of these balances, the following amounts, which were in the form of executive contributions, were reported in the Summary Compensation Table in prior-year proxy statements: Mr. Young – $2,500,000. |
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
| 54 | |
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 2023, the annual total compensation for the median employee of the Company (other than our CEO) was $193,770 and the annual total compensation of our CEO was $48,512,537. Based on this information, for fiscal year 2023 the ratio of the annual total compensation of our CEO to the annual total compensation of the median employee was 250 to 1. We believe 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, 2023, the last day of our fiscal year, excluding approximately 391 employees who became Microsoft employees in fiscal year 2023 as a result of the following business acquisitions: Fungible Inc.; Lumenisity Limited; Miburo Solutions, Inc.; Excite Hungary Kft.; and EduBrite Systems, Inc. To identify our median employee, we used a “total direct compensation” measure consisting of: (i) fiscal year 2023 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 2023 (excluding allowances, relocation payments, and profit-sharing), and (iii) the dollar value of SAs and target PSAs granted in fiscal year 2023. 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.
CEO Pay Ratio
| 2023 PROXY STATEMENT | 55 |
CEO Pay Ratio
| 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 |
Pay Versus Performance
Pay Versus Performance This section provides disclosure about the relationship between executive compensation actually paid to our principal executive officer (“PEO”) and Non-PEO Named Executives and certain financial performance measures of the Company for the fiscal years listed below. This disclosure has been prepared in accordance with Item 402(v) of Regulation S-K under the Securities Exchange Act of 1934 (the “Pay Versus Performance Rules”) and does not necessarily reflect how the Compensation Committee evaluates compensation decisions.
Pay for Performance Table
| Year 1 (a) | Summary Compensation Table Total for PEO ($) (b) | Compensation Actually Paid to PEO 2 ($) (c) | Average Summary Compensation Table Total for Non-PEO Named Executive Officers ($) (d) | Average Compensation Actually Paid to Non-PEO Named Executive Officers 2 ($) (e) | Value of Initial Fixed $100 Investment Based On: 3 | | Net Income ($) (in millions) (h) | Microsoft Incentive Plan Revenue 4 ($) (in billions) (i) | | | | | | | Microsoft Total Shareholder Return ($) (f) | Peer Group Total Shareholder Return ($) (g) | | | | 2023 | 48,512,537 | 93,079,188 | 16,009,805 | 29,288,965 | 172 | 168 | 72,361 | 220.08 | | 2022 | 54,946,310 | 56,936,384 | 20,074,444 | 20,527,908 | 128 | 123 | 72,738 | 206.67 | | 2021 | 49,858,280 | 139,060,569 | 22,306,746 | 39,456,632 | 134 | 150 | 61,271 | 170.54 |
Pay for Performance Table
| (2) The dollar amounts reported represent the amount of “compensation actually paid,” as calculated in accordance with the Pay Versus Performance Rules. These dollar amounts do not reflect the actual amounts of compensation earned by or paid to our Named Executives during the applicable year. For purposes of calculating “compensation actually paid,” the fair value of equity awards is calculated in accordance with FASB ASC Topic 718 using the same assumption methodologies used to calculate the grant date fair value of awards for purposes of the Summary Compensation Table (refer to “Named Executive Officer Compensation – Fiscal Year 2023 Compensation Tables – Summary Compensation Table” for additional information). |
Pay for Performance Table
| (3) In accordance with the Pay Versus Performance Rules, Microsoft and Peer Group total shareholder return (“TSR”) is determined based on the value of an initial fixed investment through the end of the listed fiscal year. The Peer Group TSR set forth in this table was determined using the Nasdaq Computer Index, which we also use in preparing the stock performance graph required by Item 201(e) of Regulation S-K for our Annual Report for the fiscal year ended June 30, 2023. |
Relationship Between “Compensation Actually Paid” and Performance Measures
Relationship Between “Compensation Actually Paid” and Performance Measures In accordance with the Pay Versus Performance Rules, the narrative below describes how “compensation actually paid” (CAP) to our Named Executives aligns with Microsoft’s financial performance as measured by our TSR, our Peer Group TSR, our net income, and Microsoft Incentive Plan Revenue.
Relationship Between “Compensation Actually Paid” and Performance Measures
| Compensation Actually Paid vs. Microsoft TSR vs. Peer Group TSR |
Relationship Between “Compensation Actually Paid” and Performance Measures
| 2023 PROXY STATEMENT | 57 |
Relationship Between “Compensation Actually Paid” and Performance Measures
| 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 |
Relationship Between “Compensation Actually Paid” and Performance Measures
| Compensation Actually Paid vs. Net Income vs. Incentive Plan Revenue |
Relationship Between “Compensation Actually Paid” and Performance Measures
| 58 | |
Relationship Between “Compensation Actually Paid” and Performance Measures
| 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 |
Proposal 1: Election of 12 Directors
Proposal 1: Election of 12 Directors
Proposal 1: Election of 12 Directors
| The Board of Directors has nominated 12 directors for election during the 2023 annual shareholders meeting (“Annual Meeting”) to hold office until the 2024 annual shareholders meeting. John Thompson and Padmasree Warrior are not seeking re-election and their Board service will end on the date of the Annual Meeting. The Board has nominated Catherine MacGregor and Mark Mason for election as directors. If elected, their terms will begin on December 7, 2023. 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. |
Proposal 1: Election of 12 Directors
Our Board of Directors recommends a vote FOR the election to the Board for each of the nominees listed below.
Proposal 1: Election of 12 Directors
| Reid G. Hoffman Age: 56 Director Since: 2017 Occupation: Partner, Greylock Partners | Hugh F. Johnston Age: 62 Director Since: 2017 Occupation: Vice Chairman, Executive Vice President, and CFO, PepsiCo, Inc. | Teri L. List Age: 60 Director Since: 2014 Occupation: Former Executive Vice President and CFO, The Gap, Inc. | Catherine MacGregor Age: 51 Director Since: New Nominee Occupation: Group CEO and Director, Engie S.A. | | Mark A. L. Mason Age: 54 Director Since: New Nominee Occupation: CFO, Citigroup Inc. | Satya Nadella (Board Chair) Age: 56 Director Since: 2014 Occupation: Chairman and CEO, Microsoft Corporation | Sandra E. Peterson Age: 64 Director Since: 2015 Occupation: Lead Independent Director, Microsoft Corporation; Operating Partner, Clayton, Dubilier & Rice, LLC | Penny S. Pritzker Age: 64 Director Since: 2017 Occupation: Founder and Chairman, PSP Partners, LLC | | Carlos A. Rodriguez Age: 59 Director Since: 2021 Occupation: Executive Chair, Automatic Data Processing, Inc. | Charles W. Scharf Age: 58 Director Since: 2014 Occupation: CEO, President, and Director, Wells Fargo & Company | John W. Stanton Age: 68 Director Since: 2014 Occupation: Founder and Chairman, Trilogy Partnerships | Emma N. Walmsley Age: 54 Director Since: 2019 Occupation: CEO and Director, GSK plc |
Proposal 1: Election of 12 Directors
| 2023 PROXY STATEMENT | 65 |
Proposal 1: Election of 12 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 |
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 Ms. MacGregor and Mr. Mason. 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.