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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

September 25, 2008 at 2:02 PM

Microsoft’s new bonus plan for Steve Ballmer, et al: Up to $20 mil apiece

Microsoft just disclosed a new bonus plan for its top executives.

Instead of the current mix of cash bonuses and stock awards, executive bonuses will come from a pool – for fiscal 2009, that pool is the equivalent to 0.35 percent of the company’s annual operating income during the year.

(In fiscal 2008, it’s pre-tax operating income excluding investment and other income was $22.492 billion, so the pool would have been $80.3 million, or $83.4 million including investment income.)

Payouts are capped at $20 million per individual. Oh well, I guess everyone’s got to face the new economic reality.

Here’s the description, from Microsoft’s filing with the SEC:

The Plan allows the Compensation Committee to establish award programs for specified performance periods (e.g., one or more fiscal years). The maximum amount payable to a participating executive officer is a percentage of an incentive pool for a performance period. For fiscal year 2009, awards will be granted from an incentive pool with maximum funding of 0.35% of Microsoft’s fiscal year 2009 corporate operating income. The awards granted to each participating executive officer will be limited to a fixed share of the incentive pool, and these awards may be further reduced or eliminated in the discretion of the Compensation Committee (or in the discretion of the Board of directors, for awards to the Company’s chief executive officer, Steven A. Ballmer). The Plan specifies a maximum amount of $20,000,000 that may be paid under the Plan to a participating executive officer for one or more performance periods that end during a fiscal year. Award amounts under the Plan may be made in either or both stock awards issued under the Microsoft Corporation 2001 Stock Plan and cash. Vesting of stock awards will be determined by the Compensation Committee. The 2001 Stock Plan generally requires that stock awards vest over at least a three-year period.

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