$84 Million Pay Package Gets Approved for Microsoft CEO Satya Nadella

Shareholders of international software giant, Microsoft gave a submissive vote of approval on Wednesday for its CEO Satya Nadella’s $84 million (roughly Rs. 520 crores) pay, after a particular investor advisory group remarked that the company was paying him more than required. Later, advisory vote on Microsoft’s executive pay program won approval from more than 72 percent of shareholder votes cast, the company said after its annual shareholder meeting on 3rd December, 2014. ISS, which reviews proxy measures for many large companies and criticized Nadella’s pay, has said a vote below 70 percent is an indication that a company should review its policies. The vote fell short of the average support level of 91.5 percent for executive pay measures at other companies tracked by ISS affiliate, ISS ExecComp Analytics. By comparison, more than 92 percent of votes supported the company’s board of directors who were in support.

Most of the meeting was devoted to a recap of Microsoft’s business strategy and a discussion about diversity. Executives heard a presentation from civil rights leader Jesse Jackson, who has been urging the tech industry to hire and promote more women and minorities. Nadella repeated an earlier pledge to make that a priority at Microsoft

This pay package placed him among the highest paid CEOs in the country for last year. On top so far for first-year pays for CEO is $378 million (roughly Rs. 2,340 crores) that Apple awarded to Tim Cook when he became CEO in 2011. Oracle CEO Larry Ellison was awarded stock options and other incentives valued $67.3 million (roughly Rs. 416 crores) last year. Former Microsoft CEO Steve Ballmer was paid just $1.3 million (roughly Rs. 8 crores) in 2013, but he held shares worth nearly $16 billion (roughly Rs. 99,055 crores).

According to Wall Street analysts, who say Nadella is generally viewed as moving Microsoft in the right direction. This is one of the reasons he was favoured. “At a time when Nadella is contemplating a reorganization that includes cutting 18,000 jobs”, said Colin Gillis of BGC Financial. But he also pointed to the 30 percent increase in Microsoft’s stock price this year and said, “I think that’s the main issue most people care about. If you think about the billions in value that’s been created, this (pay) is just a tiny fraction of that.”

Nadella was paid a base salary of $918,917 and a $3.6 million (roughly Rs. 22 crores) bonus, along with stock grants valued at $79.8 million (roughly Rs. 494 crores). These stocks won’t vest before 2019, and Microsoft has said they are an incentive for future performance, since his stock will increase in value if the company prospers. That includes a one-time stock grant valued at $59 million (roughly Rs. 365 crores) when he was promoted to CEO, and an earlier grant valued at $7 million (roughly Rs. 43 crores) for his performance as executive vice president before he became CEO. It also includes stock valued at $13.5 million (roughly Rs. 83 crores) that he was granted when Microsoft presented top executives “retention” awards to keep them from jumping to other companies while the company searched for a successor to Ballmer.

In a report last month, ISS questioned the company’s decision to give what it called a “mega grant” of stock up front, since Microsoft also planned to award Nadella a subsequent annual grant valued at $13 million (roughly Rs. 80 crores) in the next fiscal year. ISS also said the company should adopt stricter performance standards for executive compensation.

“Microsoft wanted to lure and motivate a world-class CEO” said Microsoft Chairman John Thompson  and also mentioned, “the package is tied to performance and it motivates our CEO to create sustainable long-term shareholder value by providing him with the opportunity to share in those profits.”

by Dr. Aafreen N.K.
MGM Medical College

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