Report card: Microsoft’s board boosts CEO Satya Nadella’s annual compensation to nearly $50M

Microsoft CEO Satya Nadella speaks in Seattle in May 2019. (GeekWire File Photo / Kevin Lisota)

Microsoft CEO Satya Nadella’s total compensation rose more than 12% to $49.9 million in fiscal year 2021, ended June 30, the company’s new proxy statement shows.

Nadella’s base salary remained the same, at $2.5 million. The increase in total compensation came in stock awards, totaling $33 million for 2021, up from $30.7 million for 2020; and cash bonus, or “non-equity incentive plan compensation,” which was $14.2 million for 2021, up from about $11 million for 2020.

By comparison, the annual total median compensation for Microsoft employees other than Nadella was $176,858, or a CEO pay ratio of 282-to-1, according to the proxy. That compares with an S&P 500 average of 299-to-1 for 2020, according to an AFL-CIO analysis.

Microsoft’s board said it adjusted the formula for Nadella’s stock awards and cash bonus this year, giving more weight to financial and operational performance, in response to shareholder feedback. That’s where Nadella benefitted, based on the board’s positive assessment of his performance and the company’s results.

Here are the financial benchmarks that the board used.

Here is the board’s assessment of Microsoft’s operational results for purposes of determining Nadella’s compensation.

Product & Strategy (10.0% weight). Score: 145% out of 200%

As digital transformation accelerated across all industries in fiscal year 2021, Mr. Nadella led Microsoft to strong growth across our business segments. Full year revenue growth for fiscal year 2021 remained strong (18% year-over-yeardespite the significant challenges our business teams have faced during the COVID-19 pandemic. Under Mr. Nadella’s leadership, during fiscal year 2021 Microsoft deepened the differentiation in its commercial business and consumer business portfolios, including significant growth in Office 365 Commercial revenue (22% year-over-year) and Teams monthly active users growth to nearly 250 million. Additionally, we experienced strong engagement and revenue in our Gaming business, and all-time high LinkedIn user engagement with annual revenues exceeding $10 billion. Mr. Nadella delivered on our desire to swiftly bring to market new offerings, including Azure Synapse, Microsoft Viva, additional collaboration features in Teams, and identity, security, compliance, and device management features that helped our security business surpass $10 billion in annual revenue. In addition, Mr. Nadella strengthened and deepened Microsoft’s capabilities across critical offerings including AI, industry-specific solutions, and gaming through strategic acquisitions. Furthermore, he positioned the Company for future growth as customer commitments grew meaningfully in the Azure, Microsoft 365, and Game Pass product areas and development work was completed to launch Windows 11 in fiscal year 2022.

Customers & Stakeholders (10.0% weight). Score: 170% out of 200%.

Mr. Nadella led Microsoft in facing the many challenges arising during fiscal year 2021, advancing our mission to provide services and solutions to all people and organizations around the globe, and navigating the Company through the COVID-19 pandemic. Under Mr. Nadella’s leadership, Microsoft continued making progress on issues that matter to customers and governments throughout the world, establishing groundbreaking partnerships across the healthcare, financial services, manufacturing, and public sectors.

Microsoft has further positioned itself as a leader in cybersecurity, with nearly 600,000 organizations using our security offerings across Azure and Microsoft 365. Under Mr. Nadella’s leadership, Microsoft has continued to advance global cybersecurity policy through its work with governments, the UN, the Paris Peace Forum, the Cybersecurity Tech Accord, and the Company’s Defending Democracy Program. Mr. Nadella also initiated our aggressive ten-year carbon reduction commitment and implemented a variety of internal programs to drive achievement of that commitment, including the largest carbon removal purchase in business history.

Under Mr. Nadella’s leadership, Microsoft continued to meaningfully impact the lives of users across geographies, expanding efforts to ensure an inclusive economic recovery. In rural and urban settings, Microsoft tools and initiatives have enabled learning and training, including addressing the disability divide in accessibility through investments in technology, workforce, and workplace, and providing access to broadband service.

Culture & Organizational Leadership (10.0% weight). Score: 180% out of 200%.

Mr. Nadella furthered the Company’s cultural growth and engagement during fiscal year 2021. The living culture and talent of the Company is a core priority for the Board and Mr. Nadella, and his efforts in this area have been exceptional. Under Mr. Nadella’s leadership, Microsoft is well on its way to achieving the company’s commitment to double the representation of Black and African American, and Hispanic and Latinx senior leaders and people mangers by 2025. Additionally, Microsoft achieved a notable increase in representation of women globally in a year of significant employee population growth. Mr. Nadella accelerated the execution of the Company’s talent strategy by hiring a number of critical leaders across multiple functions, with a particular focus on the consumer, to best position Microsoft for near-term and longer-term growth and successful executive succession.

Additionally, during fiscal year 2021, Mr. Nadella led Microsoft’s efforts to expand its employee and community-focused health and wellbeing initiatives, including expanded benefits for working parents, development of high-volume vaccine clinics focused on equitable distribution, and the creation of a hybrid workplace.

Mr. Nadella has enthusiastically fostered a culture of empowerment. By implementing a manager framework of Model, Coach, Care, at a time when employees were feeling more isolated than ever, Mr. Nadella fostered a culture of employee well-being. Over the course of fiscal year 2021 as we all navigated disrupted work and home environments, employees, through our engagement surveys, provided historically strong ratings for the Company, its values, and its leadership.

Here’s the compensation table for all of Microsoft’s named executives.

Read the full proxy statement here, including shareholder resolutions.

The board also nominated a new board member, Carlos Rodriguez, the CEO of payroll services giant ADP, who would bring the total to 12 board members.

Microsoft’s annual meeting will be held virtually on Nov. 30. The company reports earnings for the first fiscal quarter of 2022 on Oct. 26.

Source: GeekWire

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