Microsoft Chief Executive Satya Nadella was paid $90.8 million during the company’s most recent fiscal year.
That’s according to an influential shareholder advisory firm, which is recommending shareholders vote against the pay package.
Institutional Shareholder Services, which advises large investors on how to vote on corporate issues, says Microsoft shareholders should say no in the largely symbolic vote on executive pay at the company’s Dec. 3 shareholder meeting.
Of course, Nadella didn’t actually take home just short of $100 million last year.
Much of the discrepancy between the amount of cash and stock Nadella actually brought in the fiscal year ended in June (a healthy $11.6 million, excluding one-time payments) and the $90.8 million figure is the result of a massive pile of stock Nadella stands to make if he sticks around and Microsoft’s share price does well.
Microsoft will give Nadella between 450,000 and 2.7 million shares over the next seven years, depending on how well the company performs compared with large peers in corporate America. Microsoft’s “target,” which assumes the company beats 60% of the S&P 500, is to deliver 1.8 million shares, a stake ISS values at $65 million.
ISS takes issue with the payment in part because it’s not the only pile of Microsoft stock Nadella stands to receive. He was awarded a $13.5 million retention bonus, part of the company’s payments to executives who stuck around after Steve Ballmer’s departure.
ISS said he’s also due to receive $13.6 million more next year as part of his regular stock-based compensation. Adding that to his base salary and a potential cash bonus, Microsoft said, gets Nadella to a targeted pay level of about $18 million for the current year.
“Significant concerns are raised by Nadella’s new compensation package,” ISS said. Among those: even if Microsoft’s shares underperform those of 70 percent of the S&P 500, he’ll still be owed 450,000 shares as part of the long-term package. Nadella’s total compensation last year was more than 5 times the median pay for chief executives at firms ISS identifies as Microsoft peers.
This long-term grant, the company said, is designed to align Nadella’s interest with those of Microsoft shareholders. It’s also a way to jumpstart his own investment in the company. Though he’s spent his career at Microsoft, Nadella doesn’t have anywhere near the financial stake invested in Microsoft as predecessors Ballmer and Bill Gates.
The long-term stock grant is structured to motivate “our CEO to create sustainable long-term shareholder value by providing him with the opportunity to share in those gains and build ownership in the company over the next seven years,” Microsoft board chairman John Thompson said in a letter to shareholders last week.
Glass Lewis, an ISS peer and the other heavyweight in the telling-shareholders-how-to-vote business, came down on the other side, advocating for approval of Nadella’s pay package.
Its report wasn’t without caveats, however. Glass Lewis acknowledged that in light of other regular and one-time payments Nadella received in the last year, “shareholders may accordingly question the nature and size” of the long-term payment.
But Glass Lewis concluded that given Microsoft’s interest in arranging a smooth CEO transition — and the fact that Nadella is at the helm of a company much larger than many of its technology industry peers — the advisory firm is OK with the package on the whole.