Board Adopts New “Say-on-Pay” Policy
Posted by Brad Smith
General Counsel and Corporate Secretary
and John Seethoff
Vice President and Deputy General Counsel
We’ve blogged in the past about Microsoft’s
commitment to strong corporate governance, and our belief in the need for
transparent policies that enhance public and investor trust in large
companies like our own.
Today, our Board of Directors put Microsoft’s philosophy into practice by
adopting a new “Say-on-Pay” policy that enables our shareholders to
weigh-in on our executive compensation practices.
Under the policy adopted by the Board
today, Microsoft shareholders will be able to cast a non-binding, advisory
vote every three years on the compensation programs for our senior
executive officers. The first vote will take place at our annual
shareholders’ meeting later this year on November 19.
mentioned in May, we’ve been studying the evolution of Say-on-Pay over
the last year. Variations of the concept have been circulating via
proposed legislation, shareholder proposals and management initiatives,
and our Board has carefully studied the alternatives to determine the
approach that would best serve our company and our shareholders.
Indeed, the decision to go with a triennial
approach to Say-on-Pay grew out of an open and constructive dialogue with
our shareholders. Earlier this year, we received two shareholder
proposals asking our Board to implement Say-on-Pay votes. We considered
the merits of each proposal and met with Walden Asset Management and
Calvert Investments, co-sponsors of one of the proposals, and the United
Brotherhood of Carpenters, sponsor of the other, to understand their goals
and motivations. We also sought input from several of our largest
institutional shareholders, governance advocates and other companies.
Our discussions led us to the conclusion
that a three-year cycle is optimal for Say-on-Pay votes at Microsoft.
Although we acknowledge that some constituencies support an annual
say-on-pay vote, a number of considerations led us to our conclusion.
- Our compensation program is designed to
induce and reward performance over a multi-year period. Say-on-Pay
votes should occur over a similar timeframe.
- A three-year cycle will provide
investors sufficient time to evaluate the effectiveness of our short-
and long-term compensation strategies and related business outcomes.
- Many large shareholders rely on proxy
advisory firms, which evaluate the compensation programs of over 12,000
U.S. public companies, for vote recommendations. We believe holding
Say-on-Pay votes every three years, rather than annually, helps proxy
advisory firms provide more detailed and thorough analyses and
- Most compensation programs can’t be
changed overnight. Triennial votes give the Board and the Compensation
Committee sufficient time to thoughtfully respond to shareholders’
sentiments and implement any necessary policy changes.
- Pre-existing Board requirements to seek
shareholder approval of employee stock plans and other
compensation-related matters give our shareholders an opportunity to
provide feedback even in years when Say-on-Pay votes do not occur.
Our Board has taken today’s action on its
own initiative, but we recognize that Say-on-Pay proposals are under
consideration on Capitol Hill. Microsoft will of course comply with any
requirements that emerge either through federal legislation or regulatory
changes adopted by the Securities and Exchange Commission.
We will also continue to look at additional
ways to engage with our shareholders on executive compensation. Just as
Microsoft believes in constant innovation in our products and services, we
believe there is considerable room for innovation in shareholder
Microsoft shareholders can communicate
directly with our Board, any committee of the Board or any individual
directors by e-mailing us at
additional information about corporate governance at Microsoft, please
click here, and feel free to leave a comment on this blog below.