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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No.)
 
 
Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
 
   Preliminary Proxy Statement
  
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
   Definitive Proxy Statement
   Definitive Additional Materials
   Soliciting Material under §240.14a-12
Microsoft Corporation
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
 
  No fee required
 
  Fee paid previously with preliminary materials
 
  Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and
0-11
 
 
 


 

Notice of Annual Shareholders Meeting and

Proxy Statement 2024

 

     
December 10, 2024   Virtual Meeting Site:
8:30 a.m. Pacific Time                   virtualshareholdermeeting.com/MSFT24

 

 

LOGO

 

  LOGO


 

LOGO

 

 

 

“AI is one of the most transformative technologies of our time, and we believe it will fundamentally bend the productivity curve for every individual, organization, and industry sector to help us address some of our most pressing global challenges. We know Microsoft will only succeed if the world is fundamentally succeeding. We are focused on ensuring the world benefits from the broad technological shift to AI, while mitigating its risks.”

 

Satya Nadella,    

Chairman and CEO

 

Microsoft Corporation (“Company”) works to conduct business in ways that are principled, transparent, and accountable to our shareholders and other key stakeholders. We believe doing so generates long-term value. As we work to help everyone achieve more, we are committed to improving our world and reporting our progress.

Focus for Societal Impact

 

At Microsoft, we focus on four enduring commitments that are central to meeting our mission and that become even more important in the era of AI:
Expand opportunity   Earn trust   Protect fundamental rights   Advance sustainability

LOGO

 

 

LOGO

 

 

LOGO

 

 

LOGO

 

Note About Forward-Looking Statements

This Proxy Statement includes estimates, projections, statements relating to our business plans, objectives, and expected operating results that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may appear throughout this report, including the Proxy Summary, Part 2 – Named Executive Officer Compensation, and Part 4 – Proposals to be Voted on During the Meeting. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “intend,” “strategy,” “future,” “opportunity,” “plan,” “may,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties that may cause actual results to differ materially. We describe risks and uncertainties that could cause actual results and events to differ materially in “Risk Factors,” “Quantitative and Qualitative Disclosures about Market Risk,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our Forms 10-K and 10-Q. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date they are made. We undertake no obligation to update or revise publicly any forward-looking statements, whether because of new information, future events, or otherwise.

 

This Proxy Statement includes several website addresses and references to additional materials found on those websites. These websites and materials are not incorporated by reference herein.

 


 

 

LOGO

Letter from our Chairman and Chief Executive Officer

October 24, 2024

Dear Shareholder,

On behalf of the Board of Directors, it is our pleasure to invite you to the 2024 Annual Shareholders Meeting of Microsoft Corporation (“Annual Meeting”), on December 10, 2024, beginning at 8:30 a.m. Pacific Time. This year’s Annual Meeting will be held in a virtual format through a live webcast. We will provide the webcast of the Annual Meeting at virtualshareholdermeeting.com/MSFT24. In addition, you will have the option to view the Annual Meeting through Microsoft Teams at microsoft.com/investor. A transcript with video and audio of the entire Annual Meeting will be available on the Microsoft Investor Relations website after the meeting. For more information on how to participate in the meeting, please see Part 5 – Information About the Meeting on page 90 in this Proxy Statement.

The Notice of 2024 Annual Shareholders and this Proxy Statement contain details of the business to be conducted during the Annual Meeting.

Whether or not you participate in the Annual Meeting, it is important that your shares be represented and voted. We urge you to promptly vote and submit your proxy (1) via the Internet, (2) by phone, or (3) if you received your proxy materials by mail, by signing, dating, and returning the enclosed proxy card or voting instruction form in the envelope provided for your convenience.

This year’s shareholders Q&A session will include an opportunity to submit questions. You may submit a question in advance of the meeting at proxyvote.com after logging in with the control number (“Control Number”) found next to the label for postal mail recipients or within the body of the email sending you the Proxy Statement. Live questions may be submitted online beginning shortly before the start of the Annual Meeting through virtualshareholdermeeting.com/MSFT24.

Thank you for your continued investment in Microsoft.

Sincerely,

 

 

LOGO

Satya Nadella

Chairman and Chief Executive Officer

 


 

LOGO

Letter from the Board of Directors

 

October 24, 2024

 

Dear Shareholder,

Microsoft’s Board remains incredibly proud of the work the Company and its employees have done to help customers and partners tackle business and societal challenges around the globe using digital technology. We are excited by Microsoft’s advancements in a defining technology of our time, artificial intelligence (“AI”), and the central role AI will play in the Company’s mission to help every person and organization on the planet to achieve more. We also appreciate the Company’s work to ensure this world-changing technology is guided by the values of transparency, accountability, fairness, inclusiveness, reliability and safety, and privacy and security.

Amidst global business challenges, Microsoft revenue once again broke records in fiscal year 2024. Microsoft’s leadership and the Company as a whole achieved this through an ongoing focus on providing technology innovations to make our customers more productive and resilient. As a result, Microsoft delivered strong results for its shareholders, including a return of over $34 billion in the form of share repurchases and dividends. We look forward to more opportunity ahead as we remain committed to the long-term interests of the Company’s shareholders and a broad range of stakeholders critical to the Company’s success, including employees, customers, the communities we operate in, and our partners and suppliers.

With this in mind, Microsoft continued to enhance our reporting on important environmental and social matters, including the release of our inaugural Responsible AI Transparency Report. Also of note, in response to the evolving cybersecurity threat landscape, Microsoft launched the Secure Future Initiative (“SFI”) to focus our business strategy and efforts on continual improvement in cybersecurity protection.

For more information on these initiatives and information across a breadth of environmental, social, and governance topics, we encourage you to read the progress reports Microsoft published over the course of the past fiscal year which are available at microsoft.com/transparency and microsoft.com/csr.

This Proxy Statement describes Microsoft’s corporate governance policies and practices that foster the Board’s effective oversight of the Company’s business strategies and practices. A key component to our effective governance is the Board’s commitment to provide oversight and perspectives reflecting a diversity of independent views. Of this year’s Board nominees, 11 of 12 are independent, which includes Sandra Peterson as Lead Independent Director and all committee chairs and members. The nominees represent a wide range of backgrounds, experiences, and skills. We believe our diversity of perspectives contributes to the Board’s effectiveness in managing risk and providing guidance that positions Microsoft for long-term success in a dynamically changing business environment. Beyond their particular expertise, we also seek directors with proven leadership experience that enables them to understand and contribute meaningfully to the oversight of the broad range of business, risk, and regulatory matters the Company faces.

The Proxy Statement also includes information about all of the management and shareholder proposals up for a vote at the Company’s Annual Meeting. We value your vote and we encourage you to use one of the options laid out in this Proxy Statement to vote your shares whether or not you plan to join us for the Annual Meeting. As we look ahead, we continue to see tremendous opportunities for the Company’s business and shareholder value creation, with the ability to deliver positive impacts at a global scale. We appreciate your investment in Microsoft and thank you for the trust you place in us and the opportunity to serve you and our Company as directors.

Sincerely,

Your Board of Directors


 

LOGO

 

 

Notice of 2024 Annual Shareholders Meeting

 

Date     December 10, 2024
Time     8:30 a.m. Pacific Time
Virtual Meeting     This year’s meeting is a virtual shareholders meeting at virtualshareholdermeeting.com/MSFT24
Record Date     September 30, 2024. Only shareholders of record at the close of business on the record date are entitled to receive notice of, and to vote at, the Annual Meeting.
Proxy Voting     Make your vote count. Please vote your shares promptly to ensure the presence of a quorum during the Annual Meeting. Voting your shares now via the Internet, by telephone, or by signing, dating, and returning the enclosed proxy card or voting instruction form will save the expense of additional solicitation. If you wish to vote by mail, we have enclosed an addressed envelope with postage prepaid if mailed in the United States. Submitting your proxy now will not prevent you from voting your shares during the Annual Meeting, as your proxy is revocable at your option. We are requesting your vote to:
Items of

Business

   

•  Elect the 12 director nominees named in this Proxy Statement

 

•  Approve, on a nonbinding advisory basis, the compensation paid to our named executive officers (“say-on-pay vote”)

 

•  Ratify the selection of Deloitte & Touche LLP as our independent auditor for fiscal year 2025

 

•  Vote on six shareholder proposals, if properly presented at the Annual Meeting

 

•  Transact other business that may properly come before the Annual Meeting

Address of Corporate
Headquarters
    One Microsoft Way, Redmond, WA 98052
Meeting Details     See Part 5 – Information About the Meeting for details

 

 

Important notice regarding the availability of proxy materials for the Annual Meeting to be held on December 10, 2024. Our 2024 Proxy Statement and Annual Report to Shareholders are available at microsoft.com/investor.

 

By Order of the Board of Directors

 

 

LOGO

Keith R. Dolliver

Secretary

Redmond, Washington

October 24, 2024

 

 

2024 PROXY STATEMENT i


Proxy Statement Table of Contents

 

   

Proxy summary

 

    

 

1

 

 

 

1

  

 

 

 

Governance and
our Board of
Directors

 

 
 
 

        
     

 

 

Earning Trust

     7  
     

 

 

Concrete Commitments and Transparent Reporting on Progress

     7  
     

 

 

Engagement for Global Impact

     8  
     

 

 

Board of Directors Oversight Roles

     9  
     

 

Our Governance Structure

     12  
     

 

Director Selection and Qualifications

     19  
     

 

Board Composition and Diversity

     20  
        

 

Our Director Nominees

     21  
                      

 

Director Compensation

 

    

 

29

 

 

 

2

  

 

 

 

Named Executive
Officer
Compensation

 

 
 
 

     

A Letter from the Compensation Committee

     32  
     

 

Compensation Discussion and Analysis

     34  
     

 

Section 1 – Performance Update

     34  
     

 

Section 2 – Executive Compensation Program

     39  
     

 

Section 3 – Pay Setting Governance and Process

     40  
     

 

Section 4 – Fiscal Year 2024 Compensation Program Design

     43  
     

 

Section 5 – Fiscal Year 2024 Compensation Decisions and Results

     47  
        

Section 6 – Fiscal Year 2025 Executive Compensation Program Changes

     52  
        

Section 7 – Other Compensation Policies and Information

     53  
        

Compensation Committee Report

     56  
        

Fiscal Year 2024 Compensation Tables

     57  
        

Summary Compensation Table

     57  
        

Grants of Plan-Based Awards

     59  
        

Outstanding Equity Awards at June 30, 2024

     60  
        

Option Exercises and Stock Vested

     61  
        

Nonqualified Deferred Compensation

     61  
        

Payments at Termination of Employment

     62  
        

CEO Pay Ratio

     62  
        

Pay Versus Performance

     63  
        

Equity Compensation Plan Information

     66  
        

Principal Shareholders

     66  
        

Stock Ownership Information

     67  
                      

Delinquent Section 16(a) Reports

 

    

 

68

 

 

 

 

 

ii    LOGO   


 

 

 

         

3

  

 

 

 

Audit Committee
Matters

 

 
 

     

 

Audit Committee Report

     69  
     

 

Fees Billed by Deloitte & Touche

     71  
     

 

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor

     72  
        
        
                      

4

  

 

 

 

Proposals to be
Voted on During
the Meeting

 

 
 
 

     

 

Proposal 1: Election of 12 Directors

     73  
     

 

Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation

     74  
     

 

Proposal 3: Ratification of the Selection of Deloitte & Touche LLP as our Independent Auditor for Fiscal Year 2025

     75  
           

 

Shareholder Proposals

 

    

 

76

 

 

 

5

  

 

 

 

Information About
the Meeting

 

 
 

     

 

Date, Time, and Place of Meeting

     90  
     

 

Proxy Materials are Available on the Internet

     90  
     

 

Participating in the Annual Meeting

     90  
     

 

Soliciting Proxies

     90  
     

 

Householding

     91  
     

 

Election of Directors

     91  
     

 

Voting

     91  
        

Shareholders Entitled to Vote; Quorum

     91  
        

Vote Required; Effect of Abstentions and Broker
Non-Votes

     91  
        

Vote Confidentiality

     92  
        

Tabulation of Votes

     92  
        

Where to Find More Proxy Voting Information

     92  
        

Where to Find our Corporate Governance Documents

     92  
        

Proposals by Shareholders for 2025 Annual Meeting

     93  
                      

Other Business

 

    

 

93

 

 

 

Annex A — Board Diversity Matrix

 

    

 

94

 

 

 

 

 

2024 PROXY STATEMENT   iii


Proxy Summary

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all information you should consider. Please read this entire Proxy Statement carefully before voting.

 

 

 Annual Shareholders Meeting  

 

 
 

Date: December 10, 2024

 

Time: 8:30 a.m. Pacific Time

 

Meeting Agenda:

The meeting will cover the proposals listed under Voting Matters and Vote Recommendations below, and any other business that may properly come before the meeting.

 

 

Place: virtualshareholdermeeting.com/MSFT24

 

 

Record Date: September 30, 2024

 

Mailing Date:

This Proxy Statement was first mailed to shareholders on or about
October 29, 2024.

 

 

Voting:

Shareholders as of the record date are entitled to vote. Each share of common stock of Microsoft Corporation (“Company”) is entitled to one vote for each director nominee and one vote for each proposal.

 

 

Vote in Advance of the Meeting
LOGO  

Vote your shares at proxyvote.com.

Have your Notice of Internet Availability or proxy card for the 16-digit Control Number needed to vote.

LOGO   Call toll-free number 1-800-690-6903.
LOGO   Sign, date, and return the enclosed proxy card or voting instruction form.

 

 

Vote Online During the Meeting

 

LOGO

  See page 90 in Part 5 – Information About the Meeting for details on voting your shares during the meeting through proxyvote.com.

Voting Matters and Vote Recommendations

See Part 4 – Proposals to be Voted on During the Meeting for more information.

     

Board

Recommends

    

See

 Page 

 

 

Management Proposals

                 

 

Election of 12 Directors

  

 

 

 

FOR

 

 

  

 

 

 

73

 

 

 

Advisory Vote to Approve Named Executive Officer Compensation (“say-on-pay vote”)

  

 

 

 

FOR

 

 

  

 

 

 

74

 

 

 

Ratification of the Selection of Deloitte & Touche LLP as our Independent Auditor for Fiscal Year 2025

  

 

 

 

FOR

 

 

     75  
     

 

Shareholder Proposals

 

    

 

 

 

 

 

    

 

 

 

 

 

Report on Risks of Weapons Development

  

 

 

 

AGAINST

 

 

  

 

 

 

76

 

 

 

Assessment of Investing in Bitcoin

  

 

 

 

AGAINST

 

 

  

 

 

 

78

 

 

 

Report on Data Operations in Human Rights Hotspots

  

 

 

 

AGAINST

 

 

  

 

 

 

79

 

 

 

Report on Artificial Intelligence and Machine Learning Tools for Oil and Gas Development and Production

  

 

 

 

AGAINST

 

 

  

 

 

 

82

 

 

 

Report on AI Misinformation and Disinformation

  

 

 

 

AGAINST

 

 

  

 

 

 

84

 

 

 

Report on AI Data Sourcing Accountability

  

 

 

 

AGAINST

 

 

  

 

 

 

87

 

 

 

2024 PROXY STATEMENT

  1


Our Director Nominees

See Part 1 – Governance and our Board of Directors for more information.

The following table provides summary information about each of the 12 director nominees. Each director is elected annually by a majority of votes cast.

Name

Occupation

  Age  

Director

Since

  Independent  

 Other Public 

Boards

Reid G. Hoffman

Partner, Greylock Partners

  57   2017   Yes   2

Hugh F. Johnston

Senior Executive Vice President and CFO,

The Walt Disney Company

  63   2017   Yes   1

Teri L. List

Former Executive Vice President and CFO, The Gap, Inc.

  61   2014   Yes   3

Catherine MacGregor

Group CEO and Director, Engie S.A.

  52   2023   Yes   1

Mark A. L. Mason

CFO, Citigroup Inc.

  55   2023   Yes   0

Satya Nadella

Chairman and CEO, Microsoft Corporation

  57   2014   No   0

Sandra E. Peterson

Lead Independent Director, Microsoft Corporation;

Operating Partner, Clayton, Dubilier & Rice, LLC

  65   2015   Yes   0

Penny S. Pritzker

Founder and Chairman, PSP Partners, LLC

  65   2017   Yes   0

Carlos A. Rodriguez

Director, Automatic Data Processing, Inc.

  60   2021   Yes   1

Charles W. Scharf

CEO, President, and Director, Wells Fargo & Company

  59   2014   Yes   1

John W. Stanton

Founder and Chairman, Trilogy Partnerships

  69   2014   Yes   1

Emma N. Walmsley

CEO and Director, GSK plc

  55   2019   Yes   1

Committee Memberships

The following table provides current membership for each Board committee.

 

Name

  Audit   Compensation   Environmental, Social,
and Public Policy
 

Governance and

Nominating

Reid G. Hoffman

   

 

   

 

  Member    

 

Hugh F. Johnston

  Chair,

Financial Expert

   

 

   

 

   

 

Teri L. List

  Financial Expert
and Member
   

 

   

 

  Member

Catherine MacGregor

   

 

   

 

  Member    

 

Mark A. L. Mason

   

 

   

 

   

 

  Member

Satya Nadella

   

 

   

 

   

 

   

 

Sandra E. Peterson

   

 

  Member    

 

  Chair

Penny S. Pritzker

   

 

   

 

  Chair    

 

Carlos A. Rodriguez

  Financial Expert
and Member
  Chair    

 

   

 

Charles W. Scharf

   

 

  Member    

 

  Member

John W. Stanton

  Member    

 

  Member    

 

Emma N. Walmsley

   

 

  Member   Member    

 

 

2   

LOGO


Executive Compensation Advisory Vote

Our Board recommends that shareholders vote to approve, on an advisory basis, the compensation paid to the Company’s named executive officers (“Named Executives”) as described in this Proxy Statement (“say-on-pay vote”), for the reasons below.

Pay for Performance

 

We have executed on our pay for performance philosophy.  

 

•  Over 95% of the annual target compensation opportunity for our CEO is performance-based and over 50% for our other Named Executives

 

•  Cash incentive awards are structured 50% (70% for CEO) based on pre-established goals (balance of growth and profitability goals) and 50% (30% for CEO) based on operational performance as assessed across three performance categories, diversifying the risk associated with any single aspect of performance

 

• The metrics for our performance stock awards are reviewed annually to ensure they reflect key business developments that drive long-term growth

  

 

• Our performance stock awards (“PSAs”) include a relative total shareholder return (“TSR”) modifier to reward significant positive outperformance relative to the S&P 500 and reduce rewards for underperformance to align executives’ and shareholders’ long-term interests

 

•  At least 70% of target compensation for our Named Executives was equity-based, with average across all Named Executives over 80%, providing incentives to drive long-term business success and direct alignment with returns to shareholders

 

Sound Program Design

 

 

We design our executive compensation program to attract, motivate, and retain the key executives who drive our success and industry leadership, while considering Company and individual performance and alignment with the long-term interests of our shareholders. We achieve our objectives through compensation that:

 

 
 

•  Provides a competitive total pay opportunity

 

•  Delivers a majority of pay based on performance

 

•  Consists primarily of stock-based compensation

  

•  Enhances long-term focus through multi-year performance requirements or vesting of stock-based compensation

 

• Does not encourage unnecessary and excessive risk taking

 
   

See Part 2 – Named Executive Officer Compensation for more information.

 

2024 PROXY STATEMENT

  3


Business Overview

Our Business Performance

In fiscal year 2024, we continued to achieve strong business results, focusing on enabling the success and earning the trust of our customers. We create platforms and tools, powered by AI, that deliver innovative solutions that meet the evolving needs of our customers. From infrastructure and data, to business applications and collaboration, we provide unique, differentiated value to customers.

Fiscal Year 2024 Business Performance Highlights

 

Revenue

( LOGO 16%)

 

$245 billion

 

   

 

   

 

Operating Income

( LOGO 24%)

 

$109 billion

 

   

 

   

 

Net Income

( LOGO 22%)

 

$88 billion

 

   

 

   

 

Diluted Earnings per Share

( LOGO 22%)

 

$11.80

           

Selected highlights from fiscal year 2024 include the following metrics. Percentages are year-over-year.

 

 

Microsoft Cloud revenue increased 23% to $137.4 billion

 

 

Office Commercial products and cloud services revenue increased 14%

 

 

Linkedln revenue increased 9%

 

 

Dynamics products and cloud services revenue increased 19%

 

 

Server products and cloud services revenue increased 22%

 

 

Windows revenue increased 8%

 

 

Xbox content and services revenue increased 50% driven by 44 points of net impact from the Activision Blizzard Inc. (“Activision Blizzard”) acquisition. The net impact reflects the change of Activision Blizzard content from third-party to first-party

A complete list of our fiscal year 2024 key performance metrics and their definitions is available in our Form 10-K for the fiscal year ended June 30, 2024.

 

4   

LOGO


Governance and Board Best Practices

Our mission to empower every person and every organization on the planet to achieve more is ambitious, and we cannot fulfill it with a narrow or short-term focus. Our adoption of leading governance practices fosters our sustained business success over the long term. Strong corporate governance, informed by participation from our shareholders, is essential to achieving our mission. The Lead Independent Director and Compensation Committee chair have ongoing consultations on governance and executive compensation topics with a cross-section of Microsoft’s large institutional investors, most recently in the first quarter of fiscal year 2025.

Our Board believes that having a diverse mix of directors with complementary qualifications, expertise, and attributes is essential to meeting its oversight responsibility. Of our 12 Board nominees, 11 are independent. Having an independent Board is a core element of our governance philosophy.

Our Director Nominees

 

 

LOGO

 

Board Diversity

 

       

LOGO

 

 

LOGO

 

 

LOGO

   

8

 

               
  

 

LOGO

 

Financial

 

     
   

6

 

                   
  

 

LOGO

 

Global Business

 

     
   

11

 

         
  

 

LOGO

 

Leadership

 

     
   

12

 

       
  

 

LOGO

 

Mergers and Acquisitions

 

     
   

12

 

       
  

 

LOGO

 

Sales and Marketing

 

     
   

6

 

                   
  

 

LOGO

 

Technology

 

     
   

5

 

                     
   

 

                             

Independent, Effective Board Oversight

 

•  Lead Independent Director

 

•  11 of 12 director nominees are independent

 

•  All committee chairs and members are independent

 

•  Board-adopted refreshment commitment to maintain an average tenure of 10 years or less for its independent directors as a group

 

•  The Board is committed to actively seeking highly qualified women and individuals from minority groups to include in the pool of potential Board nominees and CEO candidates

 

•  Executive sessions provided for all quarterly Board and committee meetings

 

•  Annual Board and committee evaluations, periodically using a third-party facilitator to conduct the evaluations

 

•  Director orientation and continuing education and strategy programs for directors

 

•  All current Audit Committee members meet the Nasdaq Stock Market LLC listing standard of financial sophistication, and three members are “audit committee financial experts” under the Securities and Exchange Commission rules

 

 

2024 PROXY STATEMENT

  5


Shareholder Rights

 

 

Single class of stock with equal voting rights

 

 

All directors are elected annually

 

 

Directors are elected by majority vote in uncontested elections

 

 

Confidential voting policy

 

 

15% of outstanding shares can call a special meeting

 

 

Our Bylaws provide for “proxy access” by shareholders

 

See Part 1 – Governance and our Board of Directors and Part 5 – Information About the Meeting for more information.

 

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COMMITTEE  
MATTERS

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PROPOSALS TO
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INFORMATION   
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1. Governance and our Board of Directors

 

 

 

Earning Trust

Earning the trust of our customers, partners, shareholders, and other stakeholders is the foundation of our business success and is fundamental to realizing Microsoft’s mission to empower every person and every organization on the planet to achieve more. The Board of Directors is committed to building trust through strong corporate governance, effective oversight, and strategic engagement. Together, these ensure accountability and position Microsoft for sustained success in a turbulent world.

Like many in the investor community, the Board and Microsoft’s leaders recognize the interconnections between corporate governance and effective business responses to pressing environmental and social challenges. In considering these challenges, Microsoft and its Board have proactively engaged with investors to learn from their perspectives and to share the Company’s approach, as well as considering best practices from our industry peers, partners, customers, and the broader business community. Microsoft’s Board and management team understand that the work the Company does across a spectrum of environmental and social areas makes an important contribution to the Company’s long-term financial performance and growth. We are committed to building and executing on strategies to help foster a healthy planet and advance a more inclusive global economy that fosters additional growth opportunities for everyone. Microsoft’s management benefits from the oversight and diverse perspectives offered by the Board and its committees, which cover a broad range of environmental, social, and governance (“ESG”) topics, which are described throughout this Proxy Statement.

Microsoft also gains trust from our longstanding commitments to conducting our business in ways that are principled, transparent, and accountable. The foundation of these commitments is expressed in Microsoft’s Standards of Business Conduct (“Trust Code”) at aka.ms/policiesandguidelines which apply to our employees, officers, Board of Directors, and our subsidiaries and controlled affiliates across the globe. The Trust Code requires not only legal compliance, but also broader commitments to address accessibility, diversity and inclusion, human rights, and privacy. In support of the Trust Code, we strive to build a workplace culture that embraces learning and fosters trust – a culture where every employee feels free to ask questions and raise concerns when something doesn’t seem right. We extend our high expectations to suppliers who do business with Microsoft, requiring them to uphold the human rights, labor, health and safety, environmental, and business ethics practices prescribed in our Supplier Code of Conduct at aka.ms/scoc. Finally, in response to the evolving cybersecurity threat landscape, Microsoft launched the Secure Future Initiative (“SFI”) to focus our business strategy and efforts on continual improvement in cybersecurity protection.

 

 

Concrete Commitments and Transparent Reporting on Progress

We hold ourselves accountable by publicly reporting on our policies, practices, and performance to provide our stakeholders visibility into how we are meeting our commitments and responsibilities. We believe our position in the world demands it, and we are confident that it is critical to fostering our long-term business success. Our Reports Hub available at microsoft.com/transparency provides a consolidated, comprehensive view of our ESG reporting and data ranging from our carbon footprint to workforce demographics to political donations. We work to align our ESG reporting to commonly used global standards such as those provided by the Task Force on Climate-Related Financial Disclosures. In addition, we were among the first companies to align our human rights work with the United Nations Guiding Principles on Business and Human Rights and to adopt the United Nations Guiding Principles Reporting Framework.

Recognizing the interest of shareholders in establishing greater transparency about corporate political contributions, we disclose our political contributions to support candidates and ballot measures and how certain of our trade association membership dues are used for political activities. As part of our commitment to transparency, we developed the Principles and Policies for Guiding Microsoft’s Participation in the Public Policy Process in the U.S., which focuses on ensuring compliance with applicable federal and state laws and goes beyond compliance to implement what we consider leading practices in corporate accountability, transparency, integrity, and responsibility. The policy is available at microsoft.com/public-policy-engagement.

The corporate governance policies and practices described throughout this Proxy Statement and the effective, engaged Board oversight they foster provide the foundation for all of our commitments.

 

 

2024 PROXY STATEMENT

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EXECUTIVE OFFICER   
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AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
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  5  

 

INFORMATION   
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MEETING

 

       

 

 

Engagement for Global Impact

Below are five important initiatives that we know are of interest to many of our shareholders and other stakeholders based on feedback we have received. A wide range of information about other environmental and social topics is available at microsoft.com/csr.

Responsible Artificial Intelligence (“AI”)

In 2016, our Chairman and CEO, Satya Nadella, set Microsoft on a clear course to adopt a principled and human-centered approach to our investments in AI. Since then, we have been hard at work to build products that align with our values. As we design, build, and release AI products, six values–– transparency, accountability, fairness, inclusiveness, reliability and safety, and privacy and security––remain our foundation and guide our work every day. Microsoft details our approach to responsible AI in an annual report (see aka.ms/RAITransparencyReport2024). More information and resources are available at microsoft.com/ai/responsible-ai.

Microsoft’s Environmental, Social, and Public Policy Committee provides oversight and guidance to management on responsible AI policies and programs.

Privacy and Cybersecurity

Microsoft is committed to integrating privacy and security into product, service, and technology design. As we articulate in our Privacy Principles, we value, protect, and defend privacy and empower people and organizations to control their data and have meaningful choices in how it is used. More information is available at microsoft.com/privacy.

Microsoft’s Environmental, Social, and Public Policy Committee provides oversight and guidance on Microsoft’s privacy policies and programs.

On cybersecurity, Microsoft has made it the top corporate priority to protect the computing environment used by our customers and employees and to support the resiliency of our cloud infrastructure and services, products, devices, and our internal corporate resources from determined adversaries. In response to the evolving cybersecurity threat landscape, we launched the SFI in November 2023 and expanded the scope of SFI in May 2024. The SFI focuses our business strategy and efforts on continual improvement in cybersecurity protection. We operate a cybersecurity program and governance framework designed to protect our computing environments against cybersecurity threats, and we have controls, policies, and procedures to identify, manage, and mitigate cybersecurity threats. Our culture also embeds the security of customers and Microsoft as a priority for every employee and across all of our organizations. Additional discussion of our approach to cybersecurity is available in Part I, Item 1C of our Form 10-K for the fiscal year ended June 30, 2024.

Microsoft’s Board of Directors oversees cybersecurity risk. Cybersecurity reviews by the Board are scheduled to occur at least quarterly, or more frequently as determined to be necessary or advisable.

Environmental Sustainability

In 2020, Microsoft committed that by 2030 we would become carbon negative, water positive, zero waste, and protect more land than we use. Since then, we have seen major changes both in the technology sector and in our understanding of what it will take to meet our climate goals. New technologies, including generative AI, hold promise for new innovations that can help address the climate crisis. At the same time, the infrastructure and electricity needed for these technologies create new challenges for meeting sustainability commitments across the tech sector. As we take stock as a company in 2024, we remain resolute in our commitment to meet our climate goals and to empower others with the technology needed to build a more sustainable future. We report our progress annually at aka.ms/MSFTsustainabilityreport and additional information is available at microsoft.com/environment.

Microsoft’s Environmental, Social, and Public Policy Committee provides oversight and guidance on Microsoft’s environmental sustainability strategy and commitments.

Human Capital

Microsoft aims to recruit, develop, and retain world-changing talent from a diversity of backgrounds. To foster their and our success, we seek to create an environment where people can thrive and do their best work. We strive to maximize the potential of our human capital resources by creating a respectful, rewarding, and inclusive work environment that enables our global employees to create products and services that further our mission. We design our employee programs to attract, reward, and retain top

 

 

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talent, enable our employees’ continual growth, and reinforce our culture and values. Our employee listening systems enable us to gather feedback directly from our workforce to inform our programs and employee needs globally, giving us real-time insights into ways we can support our employees. As a company, we will continue to leverage data and research to inform decision making, balancing the needs of the business, team, and individual. Diversity and inclusion are core to our business and information regarding our diversity and racial equity initiatives is available at microsoft.com/diversity and microsoft.com/racial-equity-initiative.

Microsoft’s Board and its Compensation Committee provide oversight and guidance to management on Microsoft’s workplace and culture.

Racial Equity Initiative

In June 2020, we outlined a series of multi-year commitments designed to address the racial injustice and inequity experienced by racial and ethnic minorities in the United States, including Black and African American communities. We remain committed to addressing racial injustice and inequity and helping improve lived experiences at Microsoft, in employees’ communities, and beyond.

Our Racial Equity Initiative focuses on three multi-year pillars, each containing actions and progress we expect to make or exceed by 2025. Details on the components of this important initiative and a fact sheet on our progress four years after its launch are available at microsoft.com/racial-equity-initiative.

Microsoft’s Board, its Environmental, Social, and Public Policy Committee, and its Compensation Committee provide oversight on many aspects of Microsoft’s Racial Equity Initiative.

 

 

Board of Directors Oversight Roles

Shareholders elect our Board to serve their long-term interests and to oversee management. Our Board and its committees work closely with management to provide oversight, review, and counsel related to long-term strategy, risks and opportunities, and feedback from shareholders.

Strategy

Led by our CEO, senior management develops and executes our business strategy. They manage our operations and work to model our desired culture, create innovative products, establish accountability, and control risk. Our CEO and senior management also align our structure, operations, people, policies, and compliance efforts to our mission and strategy.

Overseeing management’s development and execution of the Company’s strategy is one of our Board’s primary responsibilities. The Board works closely with senior management to respond to a dynamic business environment. Management benefits from the insights and perspectives of a diverse mix of directors with complementary qualifications, expertise, and attributes. Senior management and other leaders from across the Company provide business and strategy updates to our Board through regular strategy-focused meetings. At meetings throughout the year, the Board also assesses the strategic alignment of the Company’s budget and capital plan, business initiatives, and its strategic acquisition and integration process. For major initiatives, such as our approach to AI, the Board engages with management on strategic vision, investments, partnerships, capital requirements, and risks. For large acquisitions such as Activision Blizzard, GitHub, LinkedIn, and Nuance Communications, the Board engages management on a broad range of considerations, such as due diligence findings, valuation, and integration planning.

Risk Oversight

Effective risk management is critical to Microsoft’s ability to achieve its mission. The Board exercises direct oversight of strategic risks to the Company and other risk areas not delegated to one of the Board’s committees. Our Board looks to the expertise of its committees to provide strategic oversight in their areas of focus. The committees are charged with specific areas of risk oversight and regularly report back to the full Board.

 

 

2024 PROXY STATEMENT

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NAMED
EXECUTIVE OFFICER   
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AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
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INFORMATION   
ABOUT THE
MEETING

 

       

 

The Board of Directors

The Board oversees business affairs, integrity, risk management, CEO succession planning, and other matters reserved to the full Board and performs the annual CEO evaluation.

 

 

Audit
Committee

        

 

Compensation
Committee

        

Environmental, Social,

and Public Policy

Committee

 

 

  

   

Governance and

Nominating

Committee

 

              
Oversees the Company’s processes to manage risk; the Company’s financial statements; compliance with legal and regulatory requirements and corporate policies and controls, including controls over financial reporting, computerized information systems and security; and the independent auditor and internal audit function.        

Oversees the Company’s compensation and benefits programs; human capital management and diversity and inclusion principles and

programs; senior management succession planning and compensation; and advises the Board on CEO compensation.

       

Oversees key non-financial regulatory risks; management policies and programs relating to key environmental and social matters, including climate change and environmental sustainability, competition and antitrust, privacy, trade, digital safety, responsible AI, accessibility, human rights, and responsible sourcing; and reviews government relations activities and public policy agenda.

       

Oversees director selection and succession planning; Board effectiveness and independence, committee functions and charters; adherence to our corporate governance framework; and other corporate governance matters.

                 

Company Management

The Board, in consultation with each of its committees, oversees Company management in exercising its responsibility managing risk. The Board relies upon senior management to supervise risk management activities within the Company. Senior management is responsible for developing a continuously improving culture of risk-aware practices to identify and manage the appropriate level of risk in pursuit of our business objectives. On a regular basis, the Board and its committees engage with our senior management, our chief risk executive and chief compliance officer, and other members of management on risk as part of broad strategic and operational discussions which encompass interrelated risks, as well as on a risk-by-risk basis. In addition, risk management is supported by our compliance organization, investigatory teams, internal audit and external audit reviews, enterprise risk organization, a risk management community within our business teams, and our legal department. Microsoft has also established robust standards of business conduct that apply to all employees globally and provides numerous methods for employees to elevate risk concerns directly to management or through anonymous channels.

 

Internal
Audit
         Enterprise
Risk Management
        

Regulatory
Governance

 

       
Provides independent and objective audit, investigative, and advisory services designed to provide assurance that the Company is appropriately addressing its risks; assists senior management and the Board in accomplishing their objectives by bringing a systematic, disciplined, technology-enabled approach to evaluate, investigate, and improve the effectiveness of enterprise risk management, governance, controls, and operations. The Audit Committee reviews the internal audit assessment quarterly.        

Drives the process of identification, assessment, prioritization, and mitigation of the Company’s most significant risks to its strategies and ambitions, with the input of management risk owners, the enterprise risk organization, and subject matter experts from across the Company. The Audit Committee reviews the Enterprise Risk Management assessment semi-annually.

       

To comply with the accelerating global regulatory obligations, the Company established a regulatory governance framework to create a repeatable system-focused approach to regulatory governance with an initial focus on four domains: Responsible AI, Privacy, Digital Safety, and Cybersecurity. Through the framework, the Company’s legal and regulatory subject matter experts ingest regulations, develop standards and implementation guidance, and, when appropriate, work with its engineers to develop and implement products to monitor compliance. The Company’s business teams, with legal support, manage the compliance programs and prepare external regulatory and commercial reporting, and the Company’s internal audit teams conduct reviews of its programs and processes.

           

 

 

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Selected Areas of Oversight

 

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  Cybersecurity    The Board maintains direct oversight over cybersecurity risk. The Board receives and provides feedback on regular updates from management regarding cybersecurity governance processes, the status of projects to strengthen internal cybersecurity, security features of the products and services we provide our customers, and the results of security breach simulations. The Board also discusses recent incidents throughout the industry and the emerging threat landscape.
     

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AI Strategy, Governance,

and Regulation

   The Board maintains direct oversight over AI strategy risk. Our Environmental, Social, and Public Policy Committee assists the Board in overseeing Microsoft’s AI governance and regulation risk and provides oversight and guidance on Microsoft’s responsible AI policies and programs. The Committee receives and provides feedback on regular updates from management regarding Microsoft’s ability to design, build, and use AI in a way that meets regulatory expectations.

LOGO

 

Datacenter

Supply Chain

and Capacity

   Our Audit Committee and Environmental, Social, and Public Policy Committee assist the Board in overseeing Microsoft’s datacenter supply chain and capacity risk. The Committees regularly interacts with management on supply chain network management, including resource availability, delivery of network, and diversification of suppliers.
     

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Privacy and

Personal Data

   Our Environmental, Social, and Public Policy Committee assists the Board in overseeing Microsoft’s privacy and personal data risk, provides oversight and guidance on Microsoft’s privacy policies and programs, and oversees the impact of regulatory requirements on the Company and its businesses. The Committee receives and provides feedback on regular updates from management regarding the appropriate collection, use, and retention of customer, member, and employee personal data.

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  Digital Safety and Service Misuse    Our Environmental, Social, and Public Policy Committee assists the Board in overseeing Microsoft’s digital safety and service misuse risk. The Committee receives and provides feedback on regular updates from management regarding the protection of users from illegal, abusive, or potentially harmful content or conduct on Microsoft services, as well as the evolving regulatory landscape.

Culture and Workplace

Our culture isn’t what we talk or write about; it’s what we live every day. Our senior management holds itself accountable for modeling the culture we strive for. We focus on creating a respectful, rewarding, diverse, and inclusive work environment where people can thrive and where they can do their best work. Key to this environment is cultivating a growth mindset, where our workforce is focused on learning, listening, and growing. Our culture also embeds the security of customers and Microsoft as a priority for every employee and across all of our organizations.

Our employee listening systems enable us to gather feedback directly from our workforce to inform our programs and employee needs globally. Employees participate in our Employee Signals surveys, which cover a variety of topics such as thriving, inclusion, team culture, wellbeing, and learning and development. We also collect Daily Signals employee survey responses, giving us real-time insights into ways we can support our employees. In addition to Employee Signals and Daily Signals surveys, we gain insights through onboarding, exit surveys, internal Viva Engage channels, employee Q&A sessions, and our internal AskHR Service support.

The Board and the Compensation Committee engage with senior management, including Human Resources executives, across a broad range of human capital management topics. Management prepares and reviews with the Board a variety of materials including culture, succession planning and development, compensation, benefits, employee recruiting and retention, and diversity and inclusion. Additionally, each year the Compensation and Audit Committees evaluate management’s annual assessment of risk related to our compensation policies and practices, including reviewing the work of management’s Sales Incentive Compensation Governance Committee.

 

 

2024 PROXY STATEMENT

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EXECUTIVE OFFICER   
COMPENSATION

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AUDIT
COMMITTEE  
MATTERS

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PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

In early 2022, the Board initiated an independent review of the effectiveness of the Company’s sexual harassment and gender discrimination policies and practices in recognition of the importance of these issues to employees, shareholders, and other stakeholders. The Board directed that a third-party assessment be conducted to address the full scope of an advisory shareholder resolution approved by shareholders at the 2021 Annual Meeting. The law firm ArentFox Schiff LLP assessed the Company’s policies and procedures relating to sexual harassment and gender discrimination. ArentFox provided the Board with a report detailing its findings and recommendations and Microsoft’s management team prepared an implementation plan that addresses all the recommendations in the ArentFox report. The Board thoroughly reviewed the ArentFox report and approved the specific actions in the implementation plan. Microsoft has now fully implemented the report’s recommendations and board-approved implementation plan and begun annual reporting of workplace investigations data at www.microsoft.com/transparency.

 

 

Our Governance Structure

Framework

We have developed a corporate governance framework designed to ensure our Board has the authority and practices in place to review and evaluate our business operations and to make decisions independent of management. Our goal is to align the interests of directors, management, and shareholders, and comply with or exceed the requirements of the Nasdaq Stock Market LLC (“Nasdaq”) and applicable laws and regulations. This framework establishes the practices our Board follows with respect to, among other things, Board composition and member selection, Board meetings and involvement of senior management, director compensation, CEO performance evaluation, management succession planning, and Board committees. The Board is committed to seeking opportunities for improvements on an ongoing basis. Each summer, the Board updates our corporate governance framework based on shareholder feedback, results from the annual shareholders meeting, the Board and committees’ annual assessments, governance best practices, and regulatory developments. Our Board maintains a variety of documents detailing the directives and procedures associated with corporate governance at Microsoft, listed below. These documents are available on our website at aka.ms/policiesandguidelines.

 

• Articles of Incorporation

• Bylaws

• Corporate Governance Guidelines

• Director Independence Guidelines

• Microsoft Finance Code of Professional Conduct

• Microsoft Standards of Business Conduct (“Trust Code”)

• Audit Committee Charter and Responsibilities Calendar

  

• Compensation Committee Charter

• Environmental, Social, and Public Policy Committee Charter

• Governance and Nominating Committee Charter

• Executive Stock Ownership Policy

• Executive Compensation Recovery Policy

• Compensation Consultant Independence Standards

Shareholder Rights

Microsoft strives to implement best practices in shareholder rights and to ensure the Company and Board align with the long-term interests of shareholders. We have enhanced our corporate governance framework over time based on input from our Board, shareholders, and other governance experts. Shareholder rights include:

 

 

Single class of shares with each share entitled to one vote

 

 

Annual election of all directors (unclassified board)

 

 

Majority voting standard for directors in uncontested elections

 

 

Confidential voting policy

 

 

Shareholders of 15% of outstanding shares have the right to call a special meeting

 

 

Proxy access bylaw allows groups of up to 20 shareholders holding 3% of shares for at least three years to nominate up to two individuals or 20% of the Board (whichever is greater) for inclusion in the proxy statement and ballot for election at an annual shareholders meeting

 

 

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PROPOSALS TO
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THE MEETING

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Other requirements that align Company and long-term interests of shareholders include:

 

 

Significant stock ownership requirements for directors, executive officers, and other senior leaders

 

 

Strong ‘no-fault’ executive compensation recovery (“clawback”) policy that applies to executive officers, other senior leaders, and our chief accounting officer

 

 

Strict hedging and pledging prohibitions against our directors and executive officers hedging their ownership of Microsoft stock, including by trading in options, puts, calls, or other derivative instruments related to Company equity or debt securities. Directors and executive officers are prohibited from purchasing Microsoft stock on margin, borrowing against Microsoft stock held in a margin account, or pledging Microsoft stock as collateral for a loan

 

 

Board tenure policy that seeks to maintain an average tenure of 10 years or less for the Board’s independent directors as a group

 

 

Public company board service guideline that, absent circumstances that enable the director to have sufficient capacity, generally no director should serve on more than three other public company boards. Directors who are current CEOs should not serve on more than one other public company board

Shareholder Engagement

Effective corporate governance includes regular, constructive conversations with our shareholders to proactively seek shareholder insights and to answer shareholder inquiries. We maintain an active dialogue with shareholders to ensure we thoughtfully consider a diversity of perspectives on issues including strategy, business performance, risk, culture and workplace topics, compensation practices, and a broad range of environmental and social topics. As noted above, the Board updates our corporate governance framework each summer based on a number of inputs, including shareholder feedback.

Our Office of the Corporate Secretary coordinates shareholder engagement with Investor Relations and provides a summary of all relevant ESG feedback to our Board. In fiscal year 2024, we engaged on governance and environmental and social topics with a cross-section of shareholders owning approximately 50% of Microsoft shares. The Lead Independent Director and Compensation Committee chair also have ongoing consultations on governance and executive compensation topics with a cross-section of Microsoft’s large institutional investors, most recently in the first quarter of fiscal year 2025. In addition, throughout the year our Investor Relations group engages with our shareholders, frequently along with Satya Nadella, our Chairman and CEO, and Amy Hood, our CFO.

To communicate broadly with our shareholders, we also seek to transparently share relevant information through our Investor Relations website, our Annual Report, this Proxy Statement, our Reports Hub, and in posts on the Microsoft On the Issues blog.

Board Leadership

The Board’s independent directors elected Satya Nadella to the role of Chairman and CEO, and Sandra Peterson as Lead Independent Director.

In his role, Mr. Nadella leverages his deep understanding of the business to elevate the right strategic opportunities and identify key risks and mitigation approaches for the Board’s review. As Lead Independent Director, Ms. Peterson retains significant authority including providing input on behalf of the independent directors on Board agendas and schedules, calling meetings of the independent directors, authorizing retention of outside counsel, advisors, or other consultants, setting agendas for executive sessions, leading performance evaluations of the CEO, and overseeing CEO succession planning. Additional information about the role of the Lead Independent Director is described in this Part 1 under “Board Independence” below.

The Board does not have a policy as to whether the Chairman should be an independent director, an affiliated director, or a member of management. The independent directors annually appoint a Chairman of the Board. To ensure robust independent leadership on the Board, if the individual appointed as Chairman is not an independent director, or when the independent directors determine that it is in the best interests of the Company, the independent directors will also annually appoint a Lead Independent Director. Our Board believes its current leadership structure is appropriate because it effectively allocates authority, responsibility, and oversight between management and the independent members of our Board. It does this by giving primary responsibility for the operational leadership and strategic direction of the Company to our Chairman and Chief Executive Officer, while enabling the Lead Independent Director to facilitate our Board’s independent oversight of management, promote communication between management and our Board, and support our Board’s consideration of key governance matters. The Board believes its programs for overseeing risk, as described in this Part 1 under “Risk Oversight,” would be effective under a variety of leadership frameworks and therefore do not materially affect its choice of structure.

 

 

2024 PROXY STATEMENT

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GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

CEO Succession

A primary responsibility of the Board is planning for CEO succession and overseeing identification and development of other members of the senior leadership team (“SLT”). The Board and the Compensation Committee work with the CEO and our Chief Human Resources Officer to plan for succession. For the CEO, the succession plan covers identification of internal and external candidates, and professional and leadership development plans for internal candidates. The Board annually reviews the CEO succession plan. The criteria used to assess potential CEO candidates are formulated based on the Company’s business strategies, and include strategic vision, leadership, and operational execution. The Board is committed to actively seeking highly qualified women and individuals from minority groups to include in the pool of potential CEO candidates. The Board maintains an emergency succession contingency plan that is reviewed on an annual basis by the Board and Governance and Nominating Committee. The plan identifies roles and responsibilities of individuals who would act if an unforeseen event prevented the CEO from continuing to serve. The Compensation Committee reviews the plan with the CEO and reports to the Board on development and succession plans for the other members of the SLT. The Board may review development and succession planning more frequently as it deems necessary or desirable.

Annual Board and Committee Evaluation Process

The Board is committed to a rigorous self-evaluation process. The Governance and Nominating Committee annually evaluates the performance of the Board. In fiscal year 2024, the evaluation included utilizing a third-party facilitator to seek feedback from each director on the performance of the Board and each committee. The results were reported to and discussed with the Board and each relevant committee.

Our evaluation process is designed to elicit feedback on the processes, structure, composition, and effectiveness of the Board and each committee. The evaluation results have facilitated increased Board and committee effectiveness, including driving clarity on key areas for the Board’s focus over the coming year, focus on sustainable growth strategies for the Company, and input on management development and succession planning as well as Board and committee composition and recruiting.

Director Attendance

Each quarter, our Board holds two-day meetings comprised of committee and Board meetings. At each quarterly Board meeting, time is set aside for the independent directors to meet without management present. Additional executive sessions are held as needed.

In addition to the quarterly meetings, typically there are other regularly scheduled Board and committee meetings and several special meetings each year. Our Board met twelve times during fiscal year 2024. In addition, the Board held periodic meetings dedicated to strategy topics which included presentations and discussions with members of our SLT and other senior management.

Each director nominee attended at least 75% of the aggregate of all fiscal year 2024 meetings of the Board and each committee on which he or she served. In fiscal year 2024, the Board and committees of the Board held a total of 37 meetings. Together, the director nominees attended at least 90% of the combined total meetings of the Board and the committees on which they were members in fiscal year 2024.

Directors are expected to attend the annual shareholders meeting, if practicable. All directors attended the 2023 Annual Meeting.

Director Orientation and Continuing Education

Our orientation programs are designed to familiarize new directors with our businesses, strategies, and policies and assist new directors in developing Company and industry knowledge to optimize their service on the Board.

Regular continuing education programs enhance the skills and knowledge directors use to perform their responsibilities. These programs may include internally developed programs or programs presented by third parties. Past sessions covered topics ranging from AI to the evolution of our gaming business and detailed review of software licensing models.

Director Stock Ownership Policy

To align the interests of our directors and shareholders, our directors are required to own Microsoft shares equal in value to at least three times the base annual retainer (cash and stock) payable to a director. Each director must retain 50% of all net shares (post-tax) from the retainer until reaching the minimum share ownership requirement. Stock deferred under the Deferred Compensation Plan for Non-Employee Directors counts toward the minimum ownership requirement. Each of our directors complied with our stock ownership policy in fiscal year 2024.

 

 

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EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

Derivatives Trading, Hedging, and Pledging

Our directors and executive officers are prohibited from trading in options, puts, calls, or other derivative instruments related to Microsoft equity or debt securities. They also are prohibited from purchasing Microsoft common stock on margin, borrowing against Microsoft common stock held in a margin account, or pledging Microsoft common stock as collateral for a loan. Employees, other than executive officers, are generally permitted to engage in transactions designed to hedge or offset market risk.

Insider Trading Policies and Procedures

We have adopted insider trading policies and procedures applicable to our directors, officers, and employees, and have implemented processes for the Company that we believe are reasonably designed to promote compliance with insider trading laws, rules, and regulations, and the Nasdaq listing standards. Our General Insider Trading Policy prohibits our employees and related persons and entities from trading in securities of Microsoft and other companies while in possession of material, nonpublic information. Our General Insider Trading Policy also prohibits our employees from disclosing material, nonpublic information of Microsoft, or another publicly traded company, to others who may trade on the basis of that information. Our Restricted Trading Window Policy requires that certain officers of the Company (corporate vice presidents and above) and other designated employees only transact in Microsoft securities during an open window period, subject to limited exceptions. In addition, certain officers of the Company are required to obtain approval in advance of transactions in Microsoft securities. Our executive officers and directors must also comply with additional trading restrictions. The foregoing summary of our insider trading policies and procedures does not purport to be complete and is qualified by reference to our General Insider Trading Policy, Restricted Trading Window Policy and Insider Trading Compliance and Preclearance Policies for Section 16 Officers and Directors of Microsoft, copies of which can be found as exhibits to our Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

Board Independence

The Board’s independence enables it to be objective and critical in carrying out its oversight responsibilities. The Corporate Governance Guidelines provide that a substantial majority of our directors will be independent. The independent members of the Board annually appoint a Lead Independent Director to facilitate the Board’s oversight of management, promote communication between management and our Board, engage with shareholders, and lead consideration of key governance matters. Key elements of our Board independence include:

 

 

11 of 12 director nominees are independent. We are committed to maintaining a substantial majority of directors who are independent of the Company and management. Except for our Chairman and CEO, Satya Nadella, all director nominees are independent

 

 

Board tenure. We are committed to board refreshment. To strike a balance between retaining directors with deep knowledge of the Company and adding directors with a fresh perspective, the Board seeks to maintain an average tenure of 10 years or less for its independent directors as a group. The average tenure for our independent director nominees is 6.4 years. The average tenure is 6.7 years if Mr. Nadella is included

 

 

Board diversity. The Board is committed to actively seeking highly qualified women and individuals from minority groups to include in the pool of potential Board nominees and CEO candidates

 

 

Executive sessions of independent directors. At each quarterly Board meeting, time is set aside for the independent directors to meet in executive session without management present. Additional executive sessions are held as needed

 

 

Committee independence. Only independent directors are members of the Board’s committees. Each committee meets regularly in executive session

 

 

Independent compensation consultant. The compensation consultant retained by the Compensation Committee is independent of the Company and management as required by the Compensation Consultant Independence Standards

 

 

Lead Independent Director. The Lead Independent Director has a clearly defined set of responsibilities, significant authority, and provides independent Board leadership. Sandra Peterson was selected by the independent members of the Board to serve as Lead Independent Director. Key responsibilities and authority include:

 

   

Chairs executive sessions and coordinates activities of the independent directors

 

   

Leads the Board’s annual CEO performance evaluation

 

   

Coordinates Board oversight of CEO succession planning, including maintenance of an emergency succession plan

 

   

Chairs the annual shareholders meeting

 

 

2024 PROXY STATEMENT

  15


1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

   

Acts as liaison between the independent directors and the Chairman and CEO

 

   

Authorizes retention of outside counsel, advisors, or other consultants who report directly to the Board

 

   

Leads the Board meetings when the Chairman and CEO is not present

 

   

Shapes, reviews, and approves the agenda and schedule for Board meetings

 

   

Calls meetings of the independent directors

 

   

When requested, represents the Board with internal and external audiences, including shareholders

Board Committees

To support effective corporate governance, our Board delegates certain responsibilities to its committees, who report on their activities to the Board. These committees have the authority to engage legal counsel or other advisors or consultants as they deem appropriate to carry out their responsibilities. Our Board has four standing committees: an Audit Committee, a Compensation Committee, an Environmental, Social, and Public Policy Committee, and a Governance and Nominating Committee.

The table below provides current membership for each Board committee, followed by a summary of each committee’s responsibilities. Each committee has a charter describing its specific responsibilities which can be found on our website at aka.ms/boardcommittees.

 

Director

  Audit   Compensation  

Environmental, Social,

and Public Policy

 

Governance and

Nominating

Reid G. Hoffman

   

 

   

 

  Member    

 

Hugh F. Johnston

  Chair,

Financial Expert

   

 

   

 

   

 

Teri L. List

  Financial Expert

and Member

   

 

   

 

  Member

Catherine MacGregor

   

 

   

 

  Member    

 

Mark A. L. Mason

   

 

   

 

   

 

  Member

Satya Nadella

   

 

   

 

   

 

   

 

Sandra E. Peterson

   

 

  Member    

 

  Chair

Penny S. Pritzker

   

 

   

 

  Chair    

 

Carlos A. Rodriguez

  Financial Expert

and Member

  Chair    

 

   

 

Charles W. Scharf

   

 

  Member    

 

  Member

John W. Stanton

  Member    

 

  Member    

 

Emma N. Walmsley

   

 

  Member   Member    

 

Number of meetings in fiscal year 2024

  10   6   4   5

Audit Committee

 

 

Oversee the work of our accounting function and internal control over financial reporting

 

 

Oversee internal auditing processes

 

 

Inquire about significant risks, review our policies for enterprise risk assessment and risk management, and except as to those risks for which oversight has been assigned to other committees of the Board or retained by the Board, assess the steps management has taken to control these risks

 

 

Review with management policies, practices, compliance, and risks relating to our investment portfolio

 

 

Review with management the Company’s business continuity, resiliency, and disaster preparedness planning

 

 

Review compliance with significant applicable legal, ethical, and regulatory requirements, including those relating to regulatory matters that may have a material impact on our consolidated financial statements or internal control over financial reporting

 

 

16   

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GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

The Audit Committee is responsible for the compensation, retention, and oversight of the independent auditor engaged to issue audit reports on our consolidated financial statements and internal control over financial reporting. The Audit Committee relies on the expertise and knowledge of management, the internal auditor, and the independent auditor in carrying out its oversight responsibilities.

The Board has determined that each Audit Committee member has sufficient knowledge in financial and auditing matters to serve on the Audit Committee. All current members of the Audit Committee meet the Nasdaq listing standard of financial sophistication and three are “audit committee financial experts” under Securities and Exchange Commission (“SEC”) rules.

As provided in our Corporate Governance Guidelines, members of the Audit Committee ordinarily may not serve on over three public company audit committees (including Microsoft’s). In calculating service on a public company board or audit committee, service on a board or audit committee of a parent and its substantially-owned subsidiary counts as service on a single board or audit committee. Any Audit Committee member’s service on over three public company audit committees will be subject to the Board’s determination that the member is able to effectively serve on the Company’s Audit Committee. The Governance and Nominating Committee and the Board considered Ms. List’s service on four public company audit committees, including her professional qualifications, former experience as a public company chief financial officer, and the nature of and time involved in her service on other boards. Following such review, the Board determined that Ms. List is able to effectively continue to serve on the Company’s Audit Committee.

Compensation Committee

 

 

Assist our Board in establishing the annual goals and objectives of our CEO

 

 

Establish the process for annually reviewing our CEO’s performance

 

 

Recommend our CEO’s compensation to the independent members of our Board for approval

 

 

Approve annual compensation, annual goals and objectives, and in consultation with the CEO, oversee performance evaluations for the non-CEO members of the SLT

 

 

Review and discuss with the CEO and report to the Board development and corporate succession plans for the non-CEO members of the SLT

 

 

Oversee administration of the Company’s equity-based compensation and retirement plans

 

 

Monitor and evaluate the compensation and benefits structure of Microsoft as the Committee deems appropriate, including policies regarding SLT compensation

 

 

Oversee and advise the Board and management about Company programs for diversity and inclusion and human capital management

 

 

Periodically review the compensation paid to non-employee directors and make recommendations to our Board for any adjustments

 

 

Oversee the process and review the results of investigations of any sexual harassment complaints against senior officers. The Committee will report to the full Board on the conclusions of any investigation that results in a founded determination and the disciplinary and other actions taken

Our senior executives for Human Resources support the Compensation Committee in its work. The Committee may delegate its authority to subcommittees and to one or more designated members of the Committee. The Committee may delegate to one or more executive officers the authority to make grants of equity-based compensation to eligible individuals who are not executive officers and to administer the Company’s equity-based compensation plans. The Committee has delegated to senior management the authority to make stock award grants to employees who are not members of the SLT or Section 16 officers and to administer the Company’s equity-based compensation plans.

Independent compensation consultant. The Compensation Committee retained Pay Governance LLC as its independent compensation consultant throughout fiscal year 2024. The consultant advises the Committee on marketplace trends in executive compensation, management proposals for compensation programs, and executive officer compensation decisions. The consultant also evaluates compensation for non-employee directors, other members of senior management, and equity compensation programs generally. The consultant discusses recommendations to the Board on CEO compensation with the Committee and is directly accountable to the Committee. To maintain the independence of the consultant’s advice, the firm does not provide services to Microsoft other than those described above. The Committee has adopted Compensation Consultant Independence Standards,

 

 

2024 PROXY STATEMENT

  17


1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

which can be viewed on our website at aka.ms/policiesandguidelines. These standards require that the Committee annually assess the independence of its compensation consultant. A consultant satisfying the following requirements will be considered independent. The consultant (including each individual employee of the consultant providing services):

 

 

Is retained and terminated by, has its compensation fixed by, and reports solely to, the Compensation Committee

 

 

Is independent of the Company

 

 

Will not perform any work for Company management except at the request of the Compensation Committee chair and in the capacity of the Committee’s agent

 

 

Should not provide any unrelated services or products to the Company and its affiliates or management, except for surveys purchased from the consultant’s firm

In assessing the consultant’s independence, the Compensation Committee considers the nature and amount of work performed for the Committee during the year, the nature of any unrelated services performed for the Company, and the fees paid for those services in relation to the firm’s total revenue. The consultant annually prepares for the Committee an independence letter providing assurances and confirmation of the consultant’s independent status under the standards. The Committee believes that Pay Governance has been independent during its service for the Committee.

Environmental, Social, and Public Policy Committee

 

 

Assist the Board in overseeing the Company’s key non-financial regulatory risks that may have a material impact on the Company and its ability to sustain trust with customers, employees, and the public

 

 

Oversee management policies and programs relating to key environmental and social matters including climate change and environmental sustainability, competition and antitrust, privacy, trade, digital safety, responsible AI, accessibility, human rights, and responsible sourcing

 

 

Review our government relations activity and political activities and expenditures

 

 

Review our public policy agenda and position on significant public policy matters

Governance and Nominating Committee

 

 

Determine and recommend the slate of director nominees for election to our Board during the annual shareholders meeting

 

 

Identify, recruit, and recommend candidates for the Board

 

 

Review and make recommendations to the Board about the composition of Board committees

 

 

Annually evaluate the performance and effectiveness of the Board

 

 

Annually assess the independence of each director

 

 

Monitor adherence to, review, develop, and recommend changes to our corporate governance framework

 

 

Review and provide guidance to the Board and management about the framework for the Board’s oversight of, and involvement in, shareholder engagement

 

 

Annually review the charters of Board committees and, after consultation with the respective committees, recommend to the Board appropriate changes

 

 

Oversee the process and review the results of investigations of any sexual harassment complaints against members of the Board and the Chief Executive Officer. The Committee will report to the full Board on the conclusions of any investigation that results in a founded determination and the disciplinary and other actions taken

 

 

18   

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1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

 

Director Selection and Qualifications

Shareholders elect our Board of Directors annually. In making its annual director nominations determination, the Board’s objective is to recommend a group of directors that can best ensure the continuing success of our business and represent shareholder interests through the exercise of sound judgment using its diversity of experience and perspectives.

The Governance and Nominating Committee recommends to the Board director candidates for nomination and election during the annual shareholders meeting or for appointment to fill vacancies. The Committee works with our Board to determine the characteristics, skills, and experience for the Board as a whole and its individual members with the objective of having a board with diverse backgrounds, skills, and experience. In making its recommendations to our Board, the Committee considers the qualifications of individual director candidates applying the Board membership criteria described below. The Committee retains any search firm involved in identifying potential candidates and approves their fees.

For all directors, we require an independent mindset, integrity, personal and professional ethics, business judgment, and the ability and willingness to commit sufficient time to the Board. Our Board considers many factors in evaluating the suitability of individual director candidates, including their general understanding of global business, sales and marketing, finance, and other disciplines relevant to the success of a large, publicly traded company; understanding of our business and technology; educational and professional background; personal accomplishment; and geographic, gender, age, and ethnic diversity.

This Proxy Statement includes a table summarizing the key qualifications, skills, and attributes currently most relevant to the decision to nominate candidates to serve on the Board. As the Board strives to maintain a diverse set of skills and attributes, it also expects that each member will be able to understand and contribute meaningfully to the oversight of the range of material business, risk, and regulatory issues the Company faces. Management’s responsibility includes educating and communicating to the Board in a way that enables effective oversight of this broad set of issues. The Board is committed to actively seeking highly qualified women and individuals from minority groups to include in the pool from which new candidates are selected. We work with our search firm to ensure the candidate slate provided to the Committee includes diverse candidates.

The Board does not believe that directors should expect to be re-nominated annually. In determining whether to recommend a director for re-election, the Committee considers the director’s participation in and contributions to the activities of the Board, the results of the most recent Board evaluation, and meeting attendance.

When the Committee recruits new director candidates, that process typically involves either a search firm or a member of the Committee contacting a prospect to assess interest and availability. A candidate will then meet with members of the Board and Mr. Nadella, and then meet with members of management as appropriate. At the same time, the Committee and the search firm will contact references for the candidate. A background check is completed before a final candidate recommendation is made to the Board.

Shareholders have previously elected all Board nominees.

The Committee assesses its efforts to maintain an effective and diverse board as part of its regular responsibilities, which include annually:

 

 

Reporting to our Board on the performance and effectiveness of the Board

 

 

Presenting to our Board individuals recommended for election to the Board at the annual shareholders meeting

 

 

Assessing the Committee’s own performance

Shareholder Recommendations and Nominations of Director Candidates

Recommendations

The Governance and Nominating Committee considers shareholder recommendations for candidates for the Board of Directors using the same criteria described above. The name of any recommended candidate for director, together with a brief biography, a document indicating the candidate’s willingness to serve if elected, and evidence of the nominating shareholder’s ownership of Company stock must be sent to the attention of MSC 123/9999, Office of the Corporate Secretary, Microsoft Corporation, One Microsoft Way, Redmond, WA, 98052-6399.

Our Board and the Governance and Nominating Committee believe that all candidates should be treated equitably with respect to administrative and evidentiary requirements. Therefore, all nominees, whether proposed by the Board or recommended by shareholders, shall be subject to the same standards and informational requirements.

Nominations

Our Bylaws provide for proxy access shareholder nominations of director candidates by eligible shareholders. A shareholder who wishes to formally nominate a candidate, whether for inclusion in the Company’s proxy statement or not, must follow the procedures described in Article 1 of our Bylaws. Appropriately nominated proxy access candidates or candidates who comply with both our Advanced Notice Bylaw Provisions and the SEC’s Rule 14a-19 will be included in the Company’s proxy statement and ballot.

 

 

2024 PROXY STATEMENT

  19


1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

 

Board Composition and Diversity

Our Board of Directors believes that having a diverse mix of directors with complementary qualifications, expertise, and attributes is essential to meeting its oversight responsibility. A mark indicates a specific area of focus or expertise on which the Board particularly relies. Not having a mark does not mean the director does not possess that qualification or skill. Our director nominees’ biographies describe each director’s background and relevant experience in more detail. The Board Diversity Matrix of self-identified information by our directors is in Annex A.

 

 

LOGO

 

 

LOGO

 

 

20   

LOGO


1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

 

Our Director Nominees

Following are biographies for the 12 directors nominated by the Board for election during the 2024 Annual Meeting.

 

  LOGO    Reid G. Hoffman    
  
  

Age: 57 | Director since: 2017 | Birthplace: United States | Independent

 

 

LOGOLOGOLOGO

 

       

Experience:

Greylock Partners (2009-present)

(venture capital firm)

•  Partner (2023-present)

•  General Partner (2009-2023)

Reinvent Capital (2019-present)

•  Advisory Partner (2019-present)

LinkedIn Corporation (2003-2016)

•  Co-founder and Chairman (2003-2016)

•  Executive Chairman (2009)

•  Chief Executive Officer (2003-2007 and 2008-2009)

•  President, Products (2007-2008)

PayPal Holdings, Inc. (2000-2002)

•  Executive Vice President (2000-2002)

 

 

    

Microsoft Committees:

• Environmental, Social, and Public Policy

 

Other Public Company Directorships:

• Joby Aviation, Inc.

• Aurora Innovation, Inc.

 

Former Public Company Directorships Held in the Past Five Years:

• Reinvent Technology Partners Z

    

 

  LOGO    Hugh F. Johnston    
  
  

Age: 63 | Director since: 2017 | Birthplace: United States | Independent

 

 

LOGOLOGOLOGOLOGO

 

       

Experience:

The Walt Disney Company (2023-present)

(media and entertainment)

•   Senior Executive Vice President and Chief Financial Officer (2023-present)

PepsiCo, Inc. (1987-1999 and 2002-2023)

•   Vice Chairman (2015-2023)

•   Executive Vice President and Chief Financial Officer
(2010-2023)

•   Executive Vice President, Global Operations (2009-2010)

•   President, Pepsi-Cola North America (2007-2009)

•   Various positions of increasing authority
(1987-1999 and 2002-2007)

Merck & Co., Inc. (1999-2002)

•   Vice President, Retail Marketing, Merck-Medco Managed Care LLC (1999-2002)

 

 

    

Microsoft Committees: 

• Audit (Chair)

 

Other Public Company Directorships:

• HCA Healthcare, Inc.

 

Former Public Company Directorships

Held in the Past Five Years:

•  None

    

 

    LOGO   Board Diversity    LOGO   Financial       LOGO   Global
Business
      LOGO   Leadership       LOGO   Mergers and
Acquisitions
      LOGO   Sales and
Marketing
      LOGO   Technology

 

 

2024 PROXY STATEMENT

  21


1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

  LOGO    Teri L. List    
  
  

Age: 61 | Director since: 2014 | Birthplace: United States | Independent

 

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

 

       

Experience:

The Gap, Inc. (2016-2020)

(clothing and accessories retailer)

•   Executive Vice President and Chief Financial Officer  (2016-2020)

Dick’s Sporting Goods, Inc. (2015-2016)

•   Executive Vice President and Chief Financial Officer  (2015-2016)

Kraft Foods Group, Inc. (2013-2015)

•   Senior Advisor (2015)

•   Executive Vice President and Chief Financial Officer  (2013-2015)

•   Senior Vice President (2013)

The Procter & Gamble Company (1994-2013)

•   Senior Vice President and Treasurer (2009-2013)

•   Various positions of increasing authority (1994-2009)

    

Microsoft Committees:

•  Audit

•  Governance and Nominating

 

Other Public Company Directorships:

•  Danaher Corporation

•  lululemon athletica inc.

•  Visa Inc.

 

Former Public Company Directorships

Held in the Past Five Years:

•  DoubleVerify Holdings, Inc.

•  Oscar Health, Inc.

 

Other Positions:

•  Former Trustee, Financial Accounting Foundation

•  Former Practice Fellow, Financial Accounting Standards Board

 

 

    

 

  LOGO   Catherine MacGregor    
  
 

Age: 52 | Director Since: 2023 | Birthplace: Morocco | Independent

 

 

LOGO    LOGO    LOGO    LOGO    LOGO

 

       

Experience:

Engie S.A. (2021-present)

(energy company)

•  Group Chief Executive Officer and Director (2021-present)

TechnipFMC plc (2019-2020)

•  President, Technip Energies (2019-2020)

Schlumberger N.V. (1995-2018)

•  President, Drilling Group (London) (2017)

•  President, Reservoir Characterization Group
(France) (2016)

•  President, Europe & Africa, La Defense (France) (2013)

•  President, Wireline, Schlumberger Wireline (France) (2009)

•  Group Human Resource Director (France) (2007)

•  Various positions of increasing authority (Congo, UK,
Malaysia, US, and France) (1995-2007)

    

Microsoft Committees:

•  Environmental, Social, and Public Policy

 

Other Public Company Directorships:

•  Engie S.A.

 

Former Public Company Directorships

Held in the Past Five Years:

•  None

 

    

 

 

22   

LOGO


1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

  LOGO    Mark A. L. Mason    
  
  

Age: 55 | Director Since: 2023 | Birthplace: United States | Independent

 

 

LOGO    LOGO    LOGO    LOGO    LOGO   

 

       

Experience:

Citigroup Inc. (2001-present)

(banking and financial services company)

•  Chief Financial Officer (2019-present)

•  Chief Financial Officer, Institutional Clients Group (2014)

•  Chief Executive Officer, Citi Private Bank (2013)

•  Chief Executive Officer, Citi Holdings (2012)

•  Chief Operating Officer, Citi Holdings (2009)

•  Chief Financial Officer and Head of Strategy and M&A, Global Wealth Management (2006)

•  Various positions of increasing authority (2001-2006)

 

  

    

Microsoft Committees:

•  Governance and Nominating

 

Other Public Company Directorships:

•  None

 

Former Public Company Directorships
Held in the Past Five Years:

•  None

    

 

  LOGO    Satya Nadella    
  
  

Age: 57 | Director Since: 2014 | Birthplace: India

 

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

 

       

Experience:

Microsoft Corporation (1992-present)

•  Chairman and Chief Executive Officer (2021-present)

•  Chief Executive Officer and Director (2014-2021)

•  Executive Vice President, Cloud and Enterprise (2013-2014)

•  President, Server and Tools (2011-2013)

•  Senior Vice President, Online Services Division (2009-2011)

•  Senior Vice President, Search, Portal, and Advertising (2008-2009)

•  Various positions of increasing authority (1992-2008)

 

  

    

Microsoft Committees:

• None

 

Other Public Company Directorships:

• None

 

Former Public Company Directorships
Held in the Past Five Years:

•  Starbucks Corporation

    

 

    LOGO   Board Diversity   LOGO   Financial       LOGO   Global
Business
      LOGO   Leadership       LOGO   Mergers and
Acquisitions
      LOGO   Sales and
Marketing
      LOGO   Technology

 

 

2024 PROXY STATEMENT

  23


1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

  LOGO    Sandra E. Peterson    
  
  

Age: 65 | Director Since: 2015 | Birthplace: United States | Independent

 

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

 

       

Experience:

Microsoft Corporation (2015-present)

•  Lead Independent Director (2023-present)

Clayton, Dubilier & Rice, LLC (2019-present)

(investment firm)

•  Operating Partner (2019-present)

Johnson & Johnson (2012-2018)

•  Group Worldwide Chair and member of the Executive
Committee (2012-2018)

Bayer CropScience AG (2010-2012)

•  Chief Executive Officer and Chairman of the Board of
Management (2010-2012)

•  Member of Board of Management (2010)

Bayer HealthCare LLC (2005-2010)

•  Executive Vice President and President, Medical Care
(2009-2010)

•  President, Diabetes Care Division (2005-2009)

Medco Health Solutions, Inc. (1999-2004)

•  Group President of Government (2003-2004)

•  Senior Vice President, Health Businesses (2001-2003)

•  Senior Vice President, Marketing and Strategy (1999-2001)

 

 

    

Microsoft Committees:

•  Compensation

•  Governance and Nominating (Chair)

 

Other Public Company Directorships:

•  None

 

Former Public Company Directorships

Held in the Past Five Years:

•  Covetrus, Inc.

•  Zymergen, Inc.

    

 

  LOGO    Penny S. Pritzker    
  
  

Age: 65 | Director Since: 2017 | Birthplace: United States | Independent

 

 

LOGO    LOGO    LOGO    LOGO

 

       

Experience:

United States Secretary of Commerce (2013-2017)

PSP Partners, LLC (present)

(private investment firm)

•  Founder and Chairman (present)

Pritzker Realty Group (present)

•  Co-founder and Chairman (present)

Inspired Capital Partners (present)

•  Co-founder and Chairman (present)

Artemis Real Estate Partners (present)

•  Co-founder (present)

The Parking Spot (1998-2011)

•  Co-founder and Chairman (1998-2011)

Vi Senior Living (1987-2011)

•  Founder and Chairman (1987-2011)

 

 

    

Microsoft Committees:

•  Environmental, Social, and Public Policy (Chair)

 

Other Public Company Directorships:

•  None

 

Former Public Company Directorships

Held in the Past Five Years:

•  None

 

Other Positions:

•  Co-founder, Pritzker Traubert Foundation

    

 

 

24   

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1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

  LOGO    Carlos A. Rodriguez    
  
  

Age: 60 | Director since: 2021 | Birthplace: Cuba | Independent

 

 

LOGO    LOGO    LOGO    LOGO    LOGO

 

       

Experience:

Automatic Data Processing, Inc. (1999-present)

(human capital management solutions provider)

•  Director (2024-present)

•  Executive Chair (2023-2024)

•  Chief Executive Officer and Director (2011-2022)

•  President, Chief Operating Officer, and Director (2011)

•  Various positions of increasing authority (1999-2011)

Vincam Group, Inc. (1996-1999)

(acquiredby Automatic Data Processing, Inc. in 1999)

•  Senior Vice President Finance and Chief Financial Officer (1997-1999)

•  Vice President, Mergers & Acquisitions (1996-1997)

•  Vice President, Operations (1996)

 

    

Microsoft Committees:

•  Audit

•  Compensation (Chair)

 

Other Public Company Directorships:

•  Automatic Data Processing, Inc.

 

Former Public Company Directorships

Held in the Past Five Years:

•  None

    

 

  LOGO    Charles W. Scharf    
  
  

Age: 59 | Director Since: 2014 | Birthplace: United States | Independent

 

 

LOGO    LOGO    LOGO    LOGO    LOGO    LOGO

 

       

Experience:

Wells Fargo & Company (2019-present)

(banking and financial services company)

•  Chief Executive Officer, President, and Director (2019-present)

The Bank of New York Mellon Corporation (2017-2019)

•  Chairman and Chief Executive Officer (2018-2019)

•  Chief Executive Officer and Director (2017)

Visa Inc. (2012-2016)

•  Chief Executive Officer and Director (2012-2016)

JPMorgan Chase & Co. (2004-2012)

•  Managing Director, One Equity Partners, private investment arm (2011-2012)

•  Chief Executive Officer of Retail Financial Services (2004-2011)

Bank One Corporation (2000-2004)

•  Chief Executive Officer of the Retail Division (2002-2004)

•  Chief Financial Officer (2000-2002)

Citigroup Inc. (1999-2000)

•  Chief Financial Officer of the Global Corporate and Investment Bank Division (1999-2000)

 

    

Microsoft Committees:

•  Compensation

•  Governance and Nominating

 

Other Public Company Directorships:

•  Wells Fargo & Company

 

Former Public Company Directorships

Held in the Past Five Years:

•  None

    

 

    LOGO   Board Diversity   LOGO   Financial       LOGO   Global
Business
      LOGO   Leadership       LOGO   Mergers and
Acquisitions
      LOGO   Sales and
Marketing
      LOGO   Technology

 

 

2024 PROXY STATEMENT

  25


1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

  LOGO    John W. Stanton    
  
  

Age: 69 | Director Since: 2014 | Birthplace: United States | Independent

 

 

LOGO    LOGO    LOGO    LOGO    LOGO

 

       

Experience:

Trilogy Partnerships (2005-present)

(investment company)

•  Founder and Chairman (2005-present)

Clearwire Corp. (2008-2013)

•  Chairman of the Board (2011-2013)

•  Interim Chief Executive Officer (2011)

•  Board member (2008-2011)

Western Wireless Corporation (1992-2005)

•  Founder, Chief Executive Officer, and Chairman (1992-2005)

VoiceStream Wireless Corporation (1995-2003)

•  Chief Executive Officer and Chairman (1995-2003)

    

Microsoft Committees:

•  Audit

•  Environmental, Social, and Public Policy

 

Other Public Company Directorships:

•  Costco Wholesale Corporation

 

Former Public Company Directorships

Held in the Past Five Years:

•  Trilogy International Partners, Inc.

 

Other Positions:

• Chairman, First Avenue Entertainment LLLP, owner of Seattle Mariners (2016-present)

 

 

    

 

  LOGO    Emma N. Walmsley    
  
  

Age: 55 | Director Since: 2019 | Birthplace: United Kingdom | Independent

 

 

LOGO    LOGO    LOGO    LOGO    LOGO

 

       

Experience:

GSK plc (2010-present)

(healthcare company)

•  Chief Executive Officer and Director (2017-present)

•  Chief Executive Officer, Consumer Healthcare (2015-2016)

•  President, Consumer Healthcare (2012-2015)

•  President, Consumer Healthcare Europe (2010-2012)

L’Oreal, S.A. (1994-2010)

•  General Manager, Consumer Products, China (2007-2010)

•  Global Brand Head, Maybelline, USA (2002-2007)

•  UK General Manager, Garnier/Maybelline (1999-2002)

•  Various positions of increasing authority (1994-1999)

 

 

    

Microsoft Committees:

•  Compensation

•  Environmental, Social, and Public Policy

 

Other Public Company Directorships:

•  GSK plc

 

Former Public Company Directorships

Held in the Past Five Years:

•  None

    

 

    LOGO   Board Diversity   LOGO   Financial       LOGO   Global
Business
      LOGO   Leadership       LOGO   Mergers and
Acquisitions
      LOGO   Sales and
Marketing
      LOGO   Technology

 

 

26   

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1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

How to Communicate with our Board

We will transmit shareholder communications related to corporate governance and other Board matters to the Board, a committee of the Board, or a director as designated in your message. Communications relating to other topics, including those that are primarily commercial in nature, will not be forwarded.

 

@ 

 

 

 

askboard@microsoft.com

   

LOGO

 

  MSC 123/9999

  Office of the Corporate Secretary

  Microsoft Corporation

  One Microsoft Way

  Redmond, WA 98052-6399

  

Concerns about accounting or auditing matters or possible violations of our Standards of Business Conduct should be reported under the procedures outlined in the Microsoft Standards of Business Conduct, which is available on our Microsoft integrity website at microsoft.com/legal/compliance/integrity.

Director Independence Guidelines

Our Board has adopted director independence guidelines to assist in determining each director’s independence. These guidelines are available on our website at aka.ms/policiesandguidelines. The guidelines either meet or are more restrictive than the definition of “independent director” in the listing requirements of Nasdaq and applicable laws and regulations. The guidelines identify categories of relationships the Board has determined would not affect a director’s independence and therefore are not considered by the Board in determining director independence.

Following the director independence guidelines, each year and before a new director is appointed, the Board must affirmatively determine a director has no relationship that would interfere with the exercise of independent judgment in carrying out their responsibilities as a director. Annually, each director completes a detailed questionnaire that provides information about relationships that might affect the determination of independence. Management provides the Governance and Nominating Committee and Board with relevant known facts and circumstances of any relationship bearing on the independence of a director or nominee that is outside the categories permitted under the director independence guidelines. The Committee then completes an assessment of each director considering all known relevant facts and circumstances concerning any relationship bearing on the independence of a director or nominee. This process includes evaluating whether any identified relationship otherwise adversely affects a director’s independence and affirmatively determining that the director has no material relationship with Microsoft, another director, or as a partner, shareholder, or officer of an organization that has a relationship with our Company.

The Governance and Nominating Committee also considers the tenure of a director, and for longer serving directors, whether the duration of service impacts the director’s independence from management, as demonstrated by the director’s relationship with management and the director’s participation in Board and committee deliberations. The Board seeks to maintain an average tenure of 10 years or less for its independent directors as a group.

Based on the review and recommendation by the Governance and Nominating Committee, the Board analyzed the independence of each director and nominee. The Board determined that Mses. List, MacGregor, Peterson, Pritzker, and Walmsley, and Messrs. Hoffman, Johnston, Mason, Rodriguez, Scharf, and Stanton (as well as Padmasree Warrior and John Thompson, whose Board service ended on December 7, 2023) meet the standards of independence under our Corporate Governance Guidelines, the director independence guidelines, and applicable Nasdaq listing standards, including that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment. In making its independence determination, the Committee and Board considered ordinary course transactions between Microsoft and certain related entities, for instance the purchase of software licenses by companies of which a director is an executive officer, and purchases by Microsoft of goods and services from such companies.

Certain Relationships and Related Transactions

We are a global company with extensive operations in the U.S. and many foreign countries. Every year, we spend billions of dollars for goods and services purchased from third parties. The authority of our employees to purchase goods and services is widely dispersed. Because of these wide-ranging activities, there may be transactions, business arrangements, or relationships with businesses and other organizations in which one of our directors, executive officers, nominees for director, or an owner of 5% or more of our stock (“5% shareholders”) or their immediate families, may also be a director, executive officer, or investor, or have

 

 

2024 PROXY STATEMENT

  27


1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

some other direct or indirect material interest (“related entities”). We will refer to these transactions with related entities as related-party transactions where the amount involved exceeds $120,000 and a director, executive officer, nominee for director or 5% shareholders, or immediate family member has a direct or indirect material interest.

Related-party transactions have the potential to create actual or perceived conflicts of interest between Microsoft and its directors, executive officers, nominees for director or 5% shareholders, or their immediate family members. The Audit Committee has established a written policy and procedures for review and approval of related-party transactions. If a related-party transaction subject to review involves directly or indirectly a member of the Audit Committee (or an immediate family member or domestic partner), the remaining Committee members will conduct the review. In evaluating a related-party transaction, the Audit Committee considers, among other factors:

 

 

The goods or services provided by or to the related party

 

 

The nature of the transaction and the costs to be incurred by Microsoft or payments to Microsoft

 

 

The benefits associated with the transaction and whether comparable or alternative goods or services are available to Microsoft from unrelated parties

 

 

The business advantage Microsoft would gain by engaging in the transaction

 

 

The significance of the transaction to Microsoft and to the related party

 

 

Management’s determination that the transaction is in the best interests of Microsoft

To receive Audit Committee approval, a related-party transaction must have a Microsoft business purpose and be on terms that are fair and reasonable to Microsoft and be as favorable to Microsoft as would be available from non-related entities in comparable transactions. The Audit Committee also requires that the transaction meet the same Microsoft standards that apply to comparable transactions with unaffiliated entities.

During fiscal year 2024, there were ordinary course transactions between Microsoft and certain related entities, for instance the purchase of software licenses by companies of which a director is an executive officer and purchases by Microsoft of goods and services from such companies. None of these transactions constituted a related-party transaction that required approval by the Audit Committee. In March 2024, the Company entered into an agreement with Inflection AI, Inc. (“Inflection”), pursuant to which Microsoft obtained a non-exclusive license to Inflection’s intellectual property. Mr. Hoffman is a co-founder of and serves on the board of directors of Inflection. As of the date of the agreement with Inflection, Reprogrammed Interchange LLC (“Reprogrammed”) and entities affiliated with Greylock Ventures (“Greylock”) each held less than a 10% equity interest in Inflection. Mr. Hoffman may be deemed to beneficially own the shares held by Reprogrammed and Greylock by virtue of his relationship with such entities. Mr. Hoffman did not participate in any portions of the meetings of our Board or any committee thereof to review and approve the transaction with Inflection.

 

 

28   

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1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

 

Director Compensation

The Compensation Committee periodically reviews the regular annual retainer paid to non-employee directors and makes recommendations for adjustments, as appropriate, to the full Board. Our objective for compensation to non-employee directors is to award the majority of compensation in equity to further align the interests of our Board with those of our shareholders and to make meaningful adjustments every few years, rather than smaller adjustments that are more frequent. There was no change in fiscal year 2024. Our CEO, Mr. Nadella does not receive pay for serving as a director or as Board Chairman.

 

Fiscal Year 2024 Compensation Structure for Non-Employee Directors

Regular Retainers

    

 

Annual Base Retainer (TOTAL)

   $360,000

Cash

   $125,000

Stock Award

   $235,000
   

Committee Retainers (cash except stock award for Governance and Nominating Committee)

    

 

Annual Audit Committee Chair Retainer

   $45,000

Annual Audit Committee Non-Chair Member Retainer

   $15,000

Annual Compensation Committee Chair Retainer

   $35,000

Annual Environmental, Social, and Public Policy Committee Chair Retainer

   $25,000

Annual Governance and Nominating Committee Chair Retainer

   $25,000
   

Lead Independent Director Retainer (stock award in addition to other retainers)

   $40,000

The Company reimburses reasonable expenses incurred for Board-related activities. Directors may participate in our corporate matching gift program for charitable donations.

Director retainers are paid quarterly in arrears. Quarterly periods are measured beginning with the annual shareholders meeting. At the end of each quarterly period, we pay 25% of the total annual retainer to each director. The number of shares awarded each quarterly period is determined by dividing the dollar value of the stock award by the market price of our common stock as of the last business day of the period. Retainers are pro-rated for directors who join or leave the Board or have a change in Board role during a quarterly period.

Directors may elect to defer and convert to deferred stock awards all or part of their annual cash retainer, and to defer receipt of all or part of their annual stock awards retainer under the Deferred Compensation Plan for Non-Employee Directors. Amounts deferred are maintained in bookkeeping accounts that are deemed invested in Microsoft common stock, and dividends paid on deemed investments are also deemed to be invested in our common stock. We calculate the number of shares credited by dividing the amount deferred by the closing market price of our common stock on the originally scheduled payment date. Accounts in the plan are distributed in shares of Microsoft common stock, with payments either in installments beginning on separation from Board service or in a lump sum paid no later than the fifth anniversary after separation from Board service. The Company donates, in the director’s name, $25,000 to charity upon death or retirement. The charity is selected by the retiring director (or family in the case of death).

 

 

2024 PROXY STATEMENT

  29


1  

 

GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

Director Compensation

This table describes the cash and stock award portions of the annual retainer paid to each non-employee director who served in fiscal year 2024. Mr. Nadella received no compensation as a director or Board Chairman. He is excluded from the table because we fully describe his compensation in Part 2 – Named Executive Officer Compensation.

 

Name

  

Fees Earned or

Paid in Cash¹

($)

      

Stock Awards²

($)

      

All Other

Compensation3

($)

       Total
($)
 

Reid G. Hoffman4

     125,000          235,000         

 

 

 

 

 

       360,000  

Hugh F. Johnston5

     170,000          235,000         

 

 

 

 

 

       405,000  

Teri L. List

     140,000          235,000          15,000          390,000  

Catherine MacGregor6

     62,500          117,500         

 

 

 

 

 

       180,000  

Mark A. L. Mason

     62,500          117,500         

 

 

 

 

 

       180,000  

Sandra E. Peterson7

     125,000          300,000          15,000          440,000  

Penny S. Pritzker8

     150,000          235,000         

 

 

 

 

 

       385,000  

Carlos A. Rodriguez9

     175,000          235,000         

 

 

 

 

 

       410,000  

Charles W. Scharf

     125,000          235,000         

 

 

 

 

 

       360,000  

John W. Stanton

     140,000          235,000         

 

 

 

 

 

       375,000  

John W. Thompson10

     62,500          117,500         

 

 

 

 

 

       180,000  

Emma N. Walmsley11

     125,000          235,000         

 

 

 

 

 

       360,000  

Padmasree Warrior12

     62,500          117,500          25,000          205,000  

 

(1)

The value of fractional shares under stock awards that are paid in cash are reported in the Stock Awards column.

 

(2)

The aggregate award value in the “Stock Awards” column for each director represents four quarterly awards representing a grant date fair value under FASB ASC Topic 718 of $58,750, with exceptions as follows: (i) Ms. Peterson received four quarterly awards with a grant date fair value of $75,000; (ii) Ms. MacGregor and Mr. Mason joined the Board effective December 7, 2023 and, as a result, were not eligible to receive stock awards in respect of the first two quarters of fiscal year 2024; and (iii) Mr. Thompson and Ms. Warrior each retired from the Board effective December 7, 2023 and, as a result, were not eligible to receive stock awards in respect of the last two quarters of fiscal year 2024. No directors held any unvested stock awards as of the end of fiscal year 2024.

 

(3)

Amounts in this column represent (i) matching charitable contributions under our corporate giving program in fiscal year 2024, which matches director gifts up to $15,000 per calendar year and, (ii) for Ms. Warrior, $25,000 donated by the Company to a charity she selected in her name in connection with her retirement from the Board.

 

(4)

Mr. Hoffman elected to defer his cash and stock compensation. The compensation deferred converted into 949 shares of our common stock.

 

(5)

Mr. Johnston elected to defer his cash and stock compensation starting February 1, 2024. The compensation deferred converted into 238 shares of our common stock.

 

(6)

Ms. MacGregor joined the Board effective as of the shareholder meeting on December 7, 2023. She elected to defer her cash and stock compensation. The compensation deferred converted into 438 shares of our common stock.

 

(7)

Ms. Peterson elected to defer her cash and stock compensation. The compensation deferred converted into 1,121 shares of our common stock.

 

(8)

Ms. Pritzker elected to defer her cash and stock compensation. The compensation deferred converted into 1,015 shares of our common stock.

 

(9)

Mr. Rodriguez elected to defer his cash and stock compensation. The compensation deferred converted into 1,080 shares of our common stock.

 

(10)

Mr. Thompson retired from the Board effective December 7, 2023. He elected to defer his cash and stock compensation. The compensation deferred converted into 333 shares of our common stock.

 

(11)

Ms. Walmsley elected to defer her stock compensation starting February 1, 2024. The compensation deferred converted into 138 shares of our common stock.

 

(12)

Ms. Warrior retired from the Board effective December 7, 2023. She elected to defer a portion of her cash compensation. The compensation deferred converted into 88 shares of our common stock.

 

 

30   

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GOVERNANCE AND
OUR BOARD OF

DIRECTORS

 

   2  

 

NAMED
EXECUTIVE OFFICER   
COMPENSATION

  3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

       

 

Lead Independent Director Compensation

In March 2023, the independent directors elected Sandra Peterson as Lead Independent Director. The Lead Independent Director Retainer reflects the additional time commitment for the Lead Independent Director role given the unique responsibilities of the Lead Independent Director detailed in Part 1 of this Proxy Statement on page 15, which includes:

 

 

Leads the Board meetings when the Chairman and CEO is not present

 

 

Reviews and approves the agenda and schedule for Board meetings

 

 

Calls meetings of the independent directors

 

 

Chairs executive sessions and coordinates activities of the independent directors

 

 

Leads the Board’s annual CEO performance evaluation

 

 

Coordinates Board oversight of CEO succession planning, including maintenance of an emergency succession plan

 

 

Chairs the annual shareholders meeting

 

 

Acts as liaison between the independent directors and the Chairman and CEO

 

 

Authorizes retention of outside counsel, advisors, or other consultants who report directly to the Board

 

 

When requested, represents the Board with internal and external audiences including shareholders

 

 

2024 PROXY STATEMENT

  31


1  

 

GOVERNANCE AND  
OUR BOARD OF
DIRECTORS

 

  2  

 

NAMED
EXECUTIVE OFFICER
COMPENSATION

   3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

 

     

 

2. Named Executive Officer Compensation

 

 

A Letter from the Compensation Committee

Dear Shareholder,

Our executive compensation program is designed to strongly align the development and execution of Microsoft’s long-term strategic goals with the interests of our shareholders, while providing a competitive total pay opportunity to attract and retain the key executives who lead our business and develop the next generation of leaders.

During fiscal year 2024, we created meaningful year-over-year growth, led artificial intelligence (“AI”) innovation, and managed our cost structure responsibly. In fiscal year 2024, the Company grew revenue 16% and operating income 24%, which supported total shareholder return of 32%. As a result of this performance, the financial metric-based portion of our annual cash incentives achieved a 138.08% payout as a percentage of target, and the performance stock award core strategic metrics for the fiscal year achieved a 119.69% payout as a percentage of target, demonstrating our compensation program’s alignment with our pay-for-performance philosophy. We are committed to continuously reviewing our compensation program to maintain that alignment.

Our Company maintained its active shareholder outreach program during fiscal year 2024, engaging investors representing approximately 50% of our outstanding shares. The Lead Independent Director and Compensation Committee chair also engage in ongoing discussions on governance and executive compensation topics with a cross-section of Microsoft’s large institutional investors, most recently in the first quarter of fiscal year 2025.

During fiscal year 2024, we continued to address shareholders’ desire to recognize the ongoing criticality of Mr. Nadella’s leadership of the business and focus on developing our next generation of leaders. The Board maintains its support of delivering 100% of Mr. Nadella’s equity compensation via performance stock awards that tie the overwhelming majority of his earning opportunity to long-term value creation. Under his compensation structure, over 95% of Mr. Nadella’s annual target compensation opportunity is performance-based. Again, for fiscal year 2024, we set Mr. Nadella’s target performance stock award at $50,000,000, which we believe is the appropriate level of equity compensation for a leader with his extraordinary capabilities, responsibilities, and in recognition of Microsoft’s extraordinary scale, complexity, and performance. The $50,000,000 target value appears in the compensation tables at a higher value solely due to the required accounting model for reporting purposes.

For Mr. Nadella’s fiscal year 2024 annual cash incentive, 70% was aligned to Microsoft’s financial performance and 30% was aligned to operational performance. In fiscal year 2024, the Company’s exceptional financial results were at 138.08% payout as a percentage of target, and the Board assessed Mr. Nadella’s operational performance at 151.67% payout as a percentage of target based on Mr. Nadella’s performance across the three operational performance categories as described further on page 48. Over the course of the year, in recognition of the growing number of cybersecurity threats and attacks from criminal enterprises and well-resourced nation state actors on governments, businesses, and institutions around the world, including Microsoft itself, Mr. Nadella led the organization to prioritize fundamentals and drove rapid improvements in security practices, reaffirming security as the Company’s top priority above all else. We are confident in Mr. Nadella’s leadership and ability to continue to strengthen the quality and capabilities of Microsoft’s products and services to protect our customers and build a safer world for all. Based on this assessment of operational and financial performance, Mr. Nadella would be eligible for a cash incentive of $10.66 million for fiscal year 2024.

Mr. Nadella agreed that the Company’s performance was extremely strong, but reflecting on his personal commitment to security and his role as the CEO, asked the Board to consider departing from the established performance metrics and reduce his cash incentive to reflect his personal accountability for the focus and speed required for the changes that today’s cybersecurity threat landscape showed were necessary.

The Board reviewed the Company’s performance and firmly believes that Mr. Nadella provided exceptional leadership and was both critical in achieving the extremely strong performance of the Company and personally responsible for the ongoing repositioning of its investments and priorities. It also considered the factors that Mr. Nadella raised in requesting a reduction of his cash incentive and concluded that such an adjustment was appropriate. The Board approved a fiscal year 2024 cash incentive of $5.2 million, which represents a more than 50% reduction compared to what he would have been awarded based on the combined assessment of strong financial and operational performance.

 

 

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Recognizing Microsoft’s leadership in the ongoing AI platform shift and the related challenges and opportunities, we have enhanced the fiscal year 2025 executive compensation program to align the specific connection of compensation to this key strategic priority. We also maintained our focus on addressing investor expectations and best practices for environmental, social, and governance matters, while establishing a new performance category based on driving cybersecurity accountability as part of our Secure Future Initiative. Our Committee believes that our executive compensation program is well-designed to incentivize the Company’s management to deliver long-term growth and is aligned with investor expectations that we drive innovation, deliver for our customers, and achieve our environmental and social objectives.

We continue to appreciate your support and welcome your feedback on our compensation program reflected in the following pages and look forward to continued dialogue in the future.

Sincerely,

The Compensation Committee

Carlos A. Rodriguez (Chair)

Sandra E. Peterson

Charles W. Scharf

Emma N. Walmsley

 

 

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Compensation Discussion and Analysis

This Compensation Discussion and Analysis provides information about our fiscal year 2024 compensation program for our fiscal year 2024 Named Executives (“NEOs”), who are: Satya Nadella, Amy Hood, Judson Althoff, Bradford Smith, and Christopher Young. The content of this Compensation Discussion and Analysis is organized into seven sections:

Table of Contents

 

Section 1 – Performance Update   p. 34
Section 2 – Executive Compensation Program   p. 39
Section 3 – Pay Setting Governance and Process   p. 40
Section 4 – Fiscal Year 2024 Compensation Program Design   p. 43
Section 5 – Fiscal Year 2024 Compensation Decisions and Results   p. 47
Section 6 – Fiscal Year 2025 Executive Compensation Program Changes   p. 52
Section 7 – Other Compensation Policies and Information   p. 53

 

 

 

Microsoft’s executive compensation program is thoughtfully designed by our Compensation Committee and Board of Directors to align to Microsoft’s long-term strategy. Over the years, we have evolved our executive pay system to enhance the performance orientation of the program and adopt best practices while maintaining an overarching compensation philosophy aimed at achieving strong alignment between our long-term strategic goals and our shareholders’ interests.

Each year, the Compensation Committee reviews the existing incentive structure, taking into consideration investor feedback, business performance, our significant scale and growth, and our strategic roadmap, when considering the efficacy of further enhancements.

 

 

Section 1 – Performance Update

Achieving Strong Financial Results

Our strong business execution throughout fiscal year 2024 achieved the following financial performance:

Fiscal Year 2024 Business Performance Highlights

Percentages are year-over-year

 

     

Revenue

( LOGO 16%)

 

Operating Income

( LOGO 24%)

 

Net Income

( LOGO 22%)

 

Diluted Earnings per Share

( LOGO 22%)

     

$245 billion

  $109 billion   $88 billion   $11.80

Selected highlights from fiscal year 2024 include the following metrics. Percentages are year-over-year.

 

 

Microsoft Cloud revenue increased 23% to $137.4 billion

 

 

Office Commercial products and cloud services revenue increased 14%

 

 

LinkedIn revenue increased 9%

 

 

Dynamics products and cloud services revenue increased 19%

 

 

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Server products and cloud services revenue increased 22%

 

 

Windows revenue increased 8%

 

 

Xbox content and services revenue increased 50% driven by 44 points of net impact from the Activision Blizzard Inc. (“Activision Blizzard”) acquisition. The net impact reflects the change of Activision Blizzard content from third-party to first-party.

A complete list of our fiscal year 2024 key performance metrics and their definitions is available in our Form 10-K for the fiscal year ended June 30, 2024.

Superior Shareholder Returns

 

Cumulative Total Shareholder Return

during Mr. Nadella’s CEO tenure: MSFT vs. S&P 500

Feb. 4, 2014 through June 30, 2024

(includes reinvestment of dividends)

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Driving Business Success

 

 

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Since the Board of Directors appointed Mr. Nadella as the third Chief Executive Officer in its history in 2014, Microsoft has nearly tripled revenue to $245.1 billion, nearly quadrupled net income to $88.1 billion, and more than quadrupled diluted earnings per share to $11.80. In addition to another year of consistently strong financial performance, Mr. Nadella and his leadership team have positioned Microsoft to continue to drive performance for years to come. As discussed in more detail below, they have achieved this through:

 

 

Growing and diversifying the business through leading-edge innovation

 

 

Delivering on our ambition to reinvent productivity and business processes and multiplying opportunities for customers to realize value

 

 

Partnering with other technology providers to remove friction and accelerate customers’ digital transformations and executing strategic acquisitions to broaden our reach

Continued Innovation and Growth

As we move further into the era of ubiquitous computing and ambient intelligence, Microsoft remains committed to its mission of empowering every person and every organization on the planet to achieve more. While maintaining his focus on the Company’s culture, Mr. Nadella and his leadership team have enhanced the offerings and capabilities of our products and services. Under Mr. Nadella’s leadership, Microsoft is leading the innovation of artificial intelligence (“AI”) to define and seize additional opportunities to create positive impacts for customers and partners across the globe and further drive the adoption and utilization of unprecedented AI capabilities.

Below are examples of growth and innovation across our products, services, and partnerships that have furthered Microsoft’s leadership.

Azure. Azure cloud computing is perhaps the most powerful example of how Microsoft’s innovation is driving growth. Azure is a natural outgrowth of Microsoft’s DNA as a platform company. It was built to unlock a vast array of infrastructure-as-a-service (“IaaS”), platform-as-a-service (“PaaS”), and software-as-a-service (“SaaS”) solutions. We have developed – and continue to create – scores of offerings that build on Azure’s capabilities and multiply its usefulness. Offerings include AI services, such as Azure OpenAI Service; Azure Arc for management; Azure Synapse Analytics and Microsoft Fabric for data storage, integration, and analytics; and Power BI to glean and access data insights from across the enterprise.

Mr. Nadella has stated we aimed to build Azure as the “world’s computer.” We’ve built a global footprint, with over 60 operating regions in 24 countries. Microsoft Cloud revenue, which includes other cloud offerings such as Office 365 Commercial and Dynamics 365, increased 23% year-over-year.

Security. In response to the evolving and challenging cybersecurity threat landscape, Microsoft launched the Secure Future Initiative (“SFI”) in November 2023 and expanded the scope of SFI in May 2024, making security our top priority and committing us to continuous improvement by ensuring that security underpins every layer of our tech stack. We serve as a security vendor for over 1.2 million customers, offering comprehensive solutions built to work across platforms and cloud environments. We continue to drive innovations, including through Security Copilot, an AI-powered security analysis tool that combines an advanced large language model with a security-specific model informed by our 78 trillion daily signals.

Microsoft 365. Our Microsoft 365 solutions continue to empower employees in organizations of all sizes as we bring together the best of Office 365, Windows, and advanced cybersecurity to deliver complete cloud-based experiences tailored to the needs of our users. Commercial paid seats of Office 365 have grown to more than 400 million as customers opt for greater productivity in conjunction with a more secure experience. We have brought those same benefits to over 82 million consumers who have subscribed to Microsoft 365. AI will further enhance our ability to help make customers more productive. Microsoft 365 Copilot brings together next-generation AI with business data in the Microsoft Graph, all within the applications that millions of people use every day as it transforms work, workflow, and work artifacts.

Power Platform. Power Platform is making it even easier for teams of professional and citizen developers to build end-to-end business solutions together. With 48 million monthly active users, Power Platform comprises an end-to-end suite of tools to automate workflows, create apps, build virtual agents, and analyze data. Because non-IT professionals can learn and use Power Platform, subject matter experts who are closest to the workflow can use low-code or no-code tools to improve business processes. Our Copilot for Power Platform enables no-code development. More than 480,000 organizations have used AI-powered capabilities in Power Platform.

 

 

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GitHub. GitHub is a source of dynamic innovation and a key element of Microsoft’s position as the premier developer platform. GitHub Copilot is a first-of-its-kind AI-based programmer that helps developers write better code faster. When enabled, GitHub Copilot writes up to 46% of the code, greatly increasing developer productivity. We now have over 1.8 million paid GitHub Copilot subscribers and over 77,000 organizations utilize GitHub Copilot for Business. GitHub expanded features to transform it from simply a source code management platform to an entire suite for development, security, and operations, with features such as continuous integration/continuous delivery and package management in our Codespaces service. GitHub Advanced Security allows developers to scan code for vulnerabilities, secrets, tokens, and other issues that can compromise secure code, and ensure all dependencies and open-source components are up to date.

Reinventing Productivity

Microsoft is continually building connections between our products and services in ways that create powerful new levels of utility.

Microsoft Teams. Microsoft Teams, our premier communication and collaboration application which surpassed 320 million monthly active users, is one example of how we develop these synergies. Teams Premium, which meets enterprise demand for advanced features like end-to-end encryption and AI-powered intelligent recaps, has surpassed 3 million seats.

Intelligent data. A foundational element of the Microsoft Cloud is data storage and management. That is, however, only a first step toward the comprehensive digital transformation that companies need to remain competitive. We designed our Intelligent Data Platform to unlock productivity, value, and insights from an enterprise’s data estate. Microsoft Fabric, which has over 14,000 paid customers, enables the unification of data and analytics tools in one environment, establishing a single source of truth, integrated with Power BI and designed for the utilization of AI tools and integrations. Our analytics and machine learning tools drive productivity gains by transforming unstructured data into actionable information that supports operational reliability, effective supply chain management, and rapid product innovation.

Advertising. Our advertising business continues to grow through differentiated offerings across our online properties and through strategic acquisitions. Our global reach and product breadth allows us to serve the needs of digital advertisers across both business-to-consumer advertising with Bing search engine and business-to-business advertising with LinkedIn Marketing Solutions. The new Bing, which now has over 140 million daily active users, brings the power of AI directly into the search experience, driving increased relevance for users and creating new monetization opportunities for marketers and publishers on the web.

Partnering and Integrating

We partner with many of the leading enterprise technology companies to empower customers and grow market opportunities together. Our AI innovation continues to build on our strategic partnership with OpenAI. More than 65% of the Fortune 500 now use Azure OpenAI Service. We partner broadly, including with Cohere, Databricks, Deci, Meta, Mistral, and Snowflake, to support a wide array of models on Azure, including models in many different languages. We remain the hyperscale cloud of choice for SAP and Oracle workloads, allowing customers to manage workloads how they choose. Our deep partnership with Nvidia spans the entirety of the Copilot stack, across both their hardware innovation as well as their software innovation, including Nvidia’s DGX cloud natively integrating with Microsoft Fabric. These partnerships allow us to serve our customers with products and services that are designed to merge seamlessly. We also seek to drive economic growth, innovation, and connectivity globally, investing, for example, $5 billion in cloud and AI infrastructure in Indonesia, Malaysia, and Thailand, as well as in Kenya, together with our partners G42. Our strategic collaborations and investments are paving the way for a more connected and innovative future.

Mr. Nadella has been bold and visionary in finding strategic acquisitions that build on and enhance our core offerings. LinkedIn, with its services that help both employers and workers network, grow professionally, and find one another, has shown consistent and strong growth since we acquired it in 2016. LinkedIn, with its services that help both employers and workers network, grow professionally, and find one another, nearly tripled revenue in the first five years following the acquisition and total annual revenue now exceeds $16 billion. Similarly, GitHub has continued to strengthen its position as the preferred platform for developers since its acquisition in 2018 and is used by over 100 million developers and 90% of the Fortune 100. Our acquisition of Activision Blizzard has made it easier for people to play great games wherever, whenever, and however they want, with gaming now having over 500 million active users across platforms and devices. We expect the transaction will increase innovation in content creation and reduce constraints on distribution. It also significantly expands our presence in mobile, the largest segment in the gaming business.

These examples of innovation, synergy, and partnership are far from exhaustive. They provide a view, however, into the diverse and innovative set of technologies and products Microsoft has built under Mr. Nadella’s leadership. It is a multi-faceted engine of growth that provides more avenues for continued success. The uses for Microsoft’s technology toolbox are as expansive as our customers’ imaginations. Mr. Nadella has quite intentionally conditioned Microsoft’s success on that of our customers – while

 

 

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providing the platform and technologies on which our customers will achieve it. This is a durable strategy that can thrive through economic cycles, business disruptions, and the ever-increasing pace of change that characterizes the current global marketplace, precisely because Microsoft enables companies and individuals to successfully address those very challenges.

Environmental and Social Leadership

At Microsoft, we focus on our enduring commitments that are central to meeting our mission and that become even more important in the era of AI: to expand opportunity, earn trust, protect fundamental rights, and advance sustainability. As we described in Part 1 – Governance and our Board of Directors, we believe Microsoft’s public and strategic environmental and social commitments play an important role in fostering Microsoft’s long-term success and value creation for our shareholders. We provide extensive public reporting on our environmental and social performance and progress at microsoft.com/transparency.

Among just a few of this year’s highlights:

 

 

Responsible AI. Microsoft continues to advance our Responsible AI principles into practice across the Company to develop and deploy AI that will have a positive impact on society. In fiscal year 2024, we published our inaugural annual Responsible AI Transparency Report that provides insight into how we build applications that use generative AI; make decisions and oversee the deployment of those applications; support our customers as they build their own generative applications; and learn, evolve, and grow as a responsible AI community.

 

 

Cybersecurity. Microsoft plays a critical role in the digital ecosystem, for ourselves, for our customers, and for the world. Our SFI establishes three core principles – secure by design, secure by default, and secure operations – to which we have committed the entirety of our organization. Through SFI, we are evolving our practices, policies, and governance structures so that every employee prioritizes security above all else and applies a growth mindset, resulting in continuous improvement. We have instilled accountability to the SFI by making security a dimension of rewards decisions across the Company, including for our senior leadership team.

 

 

Sustainability. Microsoft continues transparently tracking and reporting annually on our progress towards our sustainability commitments, sharing our progress, challenges, and learnings as we pursue our commitments to become carbon negative, water positive, zero waste, and protect more land than we use. In fiscal year 2024, we reported that in fiscal year 2023, Microsoft was on track in four key areas to meet our goals and identified two areas work is needed to identify and pursue additional breakthroughs. In fiscal year 2024 as in past years, we heard from a significant number of institutional investors commending Microsoft for its environmental and social leadership and citing our reporting as examples of best practice.

 

 

Privacy. Microsoft is a strong advocate for privacy protection around the globe and offers both our commercial and individual customers tools to help protect and manage their data. We enable our individual customers around the globe to exercise their core data protection rights through our privacy dashboard, where 3 million monthly active users control their data and make meaningful choices about how their data is used. We also offer commercial and public sector customers enterprise grade solutions to help them protect and defend their data.

 

 

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Section 2 – Executive Compensation Program

Executive Compensation Philosophy

We design our executive compensation program to attract, motivate, and retain the key executives who drive our success and industry leadership while considering Company and individual performance and alignment with the long-term interests of our shareholders. We achieve our objectives through a compensation program that:

 

 

Provides a competitive total pay opportunity that takes into account our significant scale and performance

 

 

Delivers a majority of our executives’ pay through performance-based incentives and 100% of our CEO’s stock plan award is performance-based

 

 

Provides strong alignment with our shareholders, with 83% of the annual target compensation opportunity for our CEO and 81% of the annual target compensation opportunity for our NEOs (on average) delivered in the form of equity awards

 

 

Grants equity awards with multi-year vesting or performance requirements to maintain long-term alignment with shareholders

 

 

Does not encourage unnecessary and excessive risk-taking, assisted by our stock ownership policy and executive compensation recovery (“clawback”) policy

Compensation Best Practices

 

What We Do

 

  

What We Don’t Do

 

•  Maintain a stock ownership policy that reinforces the alignment of executive officer and shareholder interests (including requiring stock ownership of 15x base salary for our CEO)

 

•  Have an executive compensation recovery (“clawback”) policy that allows for recoupment in the event of a restatement or misconduct to ensure accountability

 

•  Promote long-term focus through multi-year vesting and performance requirements

 

•  Use a combination of absolute and relative performance measures

 

•  Prohibit pledging, hedging, and trading in derivatives of Microsoft securities

 

•  Retain an independent compensation consultant

 

•  Solicit investor feedback on our compensation program and potential enhancements through an extensive shareholder engagement program

 

•  Annual assessment of compensation-related risks

 

•  Settle all long-term incentives in Microsoft stock

  

•  No extraordinary perquisites

 

•  No “golden parachute” tax gross-ups

 

•  No employment agreements

 

•  No change in control payments or benefits

 

•  No executive-only pension or supplemental executive retirement plans

 

•  No guaranteed bonuses, compensation increases, or multi-year equity grants

 

•  No dividends paid on unvested stock awards

 

•  No encouragement of unnecessary and excessive risk taking

  

 

 

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Shareholder Engagement

   

 

Engaged with shareholders

owning approximately 50%

of shares in FY24

 

   
   

 

 

Compensation Committee chair and Lead Independent Director regularly engage with large institutional shareholders

 

 

   

Our executive compensation program is grounded in a compensation philosophy aimed at achieving strong alignment between our long-term strategic goals and our shareholders’ interests. Feedback received from our shareholders through ongoing engagement discussions informs our Compensation Committee’s deliberations as it reviews the incentive structures in place on an ongoing basis.

Our Board and our Compensation Committee deeply value the continued interest of and feedback from our shareholders on our executive compensation program and are committed to maintaining an active dialogue with them to ensure their perspectives are thoughtfully taken into account.

We carefully consider both the level of voting support from our shareholders on our say-on-pay vote, as well as comments from shareholders, when evaluating our executive compensation program. At the 2023 Annual Meeting, over 93% of the votes cast supported our advisory resolution on the compensation of our Named Executives (“say-on-pay” vote).

As in prior years, in fiscal year 2024 we continued our active shareholder engagement program, discussing compensation and a broad range of environmental, social, and governance (“ESG”) issues with shareholders representing approximately 50% of our outstanding shares. The Lead Independent Director and Compensation Committee chair also have ongoing consultations on governance and executive compensation topics with a cross-section of Microsoft’s large institutional investors, most recently in the first quarter of fiscal year 2025.

In evaluating our compensation practices in fiscal year 2024, our Compensation Committee was mindful of the support our shareholders expressed for our philosophy and practice of linking executive compensation to operational objectives and shareholder value creation and did not make any substantial changes to our executive compensation program.

 

 

Section 3 – Pay Setting Governance and Process

Our Compensation Committee establishes the design of our executive compensation program. After considering Mr. Nadella’s recommendations, our Compensation Committee also approves the annual target compensation (base salaries, target cash incentives, and equity incentive compensation) for our Named Executives, except Mr. Nadella. After considering the recommendation of our Compensation Committee, the independent members of our Board approved Mr. Nadella’s base salary, target cash incentive, and target performance stock award, providing no time-based stock awards for fiscal year 2024.

Our Compensation Committee also retains, and seeks the advice of, Pay Governance, an executive compensation consulting firm that is independent of management. See Part 1 – Governance and our Board of Directors – Board Committees for more information on Pay Governance’s role and independence as an advisor to the Compensation Committee.

Competitive Pay

We compete for senior executive talent with global information technology companies, large market capitalization U.S. companies, and smaller, high-growth technology businesses, depending on the role. The current technology labor market is hyper-competitive with demand growing faster than the supply of specialized technical talent, resulting in significant increases in compensation at many of the companies with which we compete for this talent. The same conditions exist in the market for executive-level talent that can provide innovative leadership in a rapidly evolving AI environment while managing at a global scale across several complex businesses. We expect these trends to continue and will work to ensure our approach to executive compensation is responsive to evolving market conditions.

Approach to Compensation Benchmarking

To ensure that our Board and Compensation Committee have current information to set appropriate compensation levels, we conduct an executive compensation market analysis each year that draws from third-party compensation surveys and publicly available data for a group of peer companies. We supplement this analysis with additional market information specific to each executive’s role and responsibilities, including information gleaned from our experience recruiting for executive positions at Microsoft. While this market analysis and supplemental data inform the decisions of the independent members of our Board and our Compensation Committee on the range of compensation opportunities, we do not tie Named Executive compensation to

 

 

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specific market percentiles. Further, because other companies actively recruit our executives to fill CEO and other senior leadership positions, we supplement market information with data on external opportunities potentially available to our executives. We also consider the relationship of annual target compensation among internal peers.

In setting our fiscal year 2024 executive compensation program design and compensation levels, we considered pay practices at the largest technology and general industry companies. The Compensation Committee believes these companies’ executives have comparably complex roles and responsibilities. Even so, our scale is multiple times larger than our median peer as shown in the charts below. Our Compensation Committee also screened these companies to ensure they had a significant presence outside the U.S. and excluded companies in the financial services sector because of the different regulatory environment in which they operate.

Peer Group Used for Fiscal Year 2024 Pay Analysis

For fiscal year 2024, the Compensation Committee reviewed the evolution of our business against our historical peer group, and as a result approved the use of two peer groups to better reflect the differentiated business, talent and, in some cases, pay models, across sectors:

 

 

Primary Peer Group of bellwether technology companies, which reflect Microsoft’s more direct competitors for executive talent

 

 

Secondary Peer Group of “large cap” general industry companies, which reflect the complexities of operating large, global, innovative businesses and Microsoft’s broader competition for executive talent

The companies in the fiscal year 2024 peer groups are:

Primary Peer Group – Technology

 

Adobe

Alphabet

  

Amazon    

Apple    

  

Cisco Systems    

IBM    

  

Intel

Meta

  

Nvidia

Oracle

  

Qualcomm

Salesforce

Secondary Peer Group – General Industry

 

Accenture

AT&T

  

Comcast    

Johnson & Johnson    

  

Merck

Netflix

  

Pfizer

Procter & Gamble  

  

Tesla

Verizon

   Walt Disney

Microsoft is meaningfully larger than almost every company in both peer groups in terms of market capitalization and revenue. Our significant size, scale, and growth is a material factor when we set executive pay. The following charts show Microsoft’s position within the combined peer groups on the two screening criteria and the degree to which Microsoft is larger than the median peer. Data are presented in billions as of August 1, 2024, with annual revenue based on the most recent publicly reported fiscal year-end data.

 

 

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Performance-Based Pay and Goal Setting

Our incentive compensation arrangements are tied to specific performance measures that drive long-term performance and value creation. For fiscal year 2024:

 

 

Over 95% of our CEO’s annual target compensation opportunity was performance-based and over 50% of the total pay opportunity for other Named Executives was performance-based

 

 

70% of our CEO’s annual cash incentive was tied to achieving pre-established financial metric targets (50% for our other Named Executives)

 

 

100% of our CEO’s annual target equity opportunity was delivered in the form of a performance-based stock award (50% for our other Named Executives), with payouts based on achievement against pre-established quantitative performance metrics

 

 

Management and our Compensation Committee discussed in detail the metrics that determine performance stock awards to ensure they are leading indicators that will drive long-term performance and value creation. The Committee establishes rigorous goals for each metric that require significant year-over-year improvement in order for target awards to be earned

 

 

Performance stock awards include a relative total shareholder return (“TSR”) modifier to strengthen the alignment of the interests of our Named Executives with the long-term interests of our shareholders; in order for the TSR modifier to affect the performance stock awards positively, our relative TSR must be above the 60th percentile of the S&P 500

Our Compensation Committee sets cash incentive and performance stock award (“PSA”) metric targets, after review and engagement by the Board, for internal budgeting purposes. These targets are intended to be challenging but achievable. Our Compensation Committee then determines thresholds, maximums, and interim payout levels after considering historical data, upside/downside scenarios, sensitivity analysis, and year-over-year growth comparisons, to ensure rigorous alignment of payouts to performance. We set thresholds that we believe are reasonably achievable and maximums that we believe can be reached only with exceptional performance. Our Compensation Committee actively reviews the appropriateness of payout thresholds and maximums for each metric. Our Compensation Committee focuses on ensuring that our challenging goals, when achieved, will result in long-term shareholder value creation and, historically, our performance against these challenging goals has led to substantial returns to our shareholders.

Focus on Pay for Performance

Over 95% of the annual target compensation opportunity for our CEO is performance-based and over 50% for our other Named Executives. All Named Executive Officers had at least 70% of the annual target compensation delivered in the form of equity awards, with average across all Named Executives over 80%, to incentivize a long-term focus and align their interests with those of our shareholders.

 

 

 

 Fiscal Year 2024 Pay Mix 

 

  
  

 

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AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
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THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

 

     

 

 

Section 4 – Fiscal Year 2024 Compensation Program Design

Consistent with our philosophy, the compensation program for our Named Executives in fiscal year 2024 consisted of an annual base salary plus annual cash and equity incentives awarded under our Executive Incentive Plan (“Incentive Plan”).

Annual cash incentives were performance-based, with 70% determined formulaically based on achievement against pre-established financial targets for our CEO (50% for our other Named Executives) and 30% determined based on operational performance in three weighted performance categories for our CEO (50% for our other Named Executives). Our Compensation Committee and the independent members of our Board believe this allocation strengthens our CEO’s accountability to achieving results on the objective financial metrics that most closely align with our business strategy and provides a strong incentive for our other Named Executives to drive performance on those key initiatives, which we believe strongly contributes to our success.

Equity incentives under the Incentive Plan were allocated 100% to target PSAs for our CEO. Equity incentives under the Incentive Plan were allocated 50% to target PSAs and 50% to stock awards with four-year vesting (“SAs”) for our other Named Executives. Our Compensation Committee and the independent members of our Board believed the 100% PSA level for our CEO fully aligned his pay with Microsoft’s long-term performance, while the 50/50 balance between PSAs and SAs appropriately supported our long-term business goals and long-term retention incentives for our other Named Executives, while also aligning their interests with those of our shareholders.

Base Salaries

Our Named Executives’ base salaries are set to align with the scope and complexity of their roles, their capabilities, and competitive market conditions.

Annual Cash Incentives

Cash incentives are determined in two performance categories for our CEO and other NEOs, as follows:

 

 

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*

“Incentive Plan Revenue” and “Incentive Plan Operating Income” are non-GAAP financial measures defined on page 47.

Financial

We include financial performance measures in our cash incentives to measure our success in meeting internal annual financial performance goals for revenue and profitability which we believe drive long-term value creation.

For fiscal year 2024, the financial portion of the annual cash incentives was determined based on meeting pre-established performance targets for Incentive Plan Revenue and Incentive Plan Operating Income. All financial performance goals required meaningful year-over-year growth in order for the target awards to be achieved. The fiscal year 2024 Incentive Plan Revenue and Incentive Plan Operating Income performance targets were based on the Company’s fiscal year 2024 internal operating budget.

 

 

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COMMITTEE  
MATTERS

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PROPOSALS TO
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THE MEETING

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INFORMATION   
ABOUT THE
MEETING

 

 

     

 

Operational Assessment

The operational assessment portion of each Named Executive’s fiscal year 2024 annual cash incentives was determined based on evaluation of their individual contributions to the furtherance of financial, operational, strategic, and ESG indicators in three performance categories. The performance indicators varied based on the Named Executive’s responsibilities and the function or group he or she leads, and may have included (in alphabetical order in each category):

 

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Product & Strategy  

 

      

 

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Customers & Stakeholders  

 

      

 

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Culture, Diversity &   Sustainability

 

         

 

• Efficiency and productivity

 

• Innovation

 

• Product development and implementation of strategic roadmap

 

• Quality

 

• Revenue, consumption, and market share

      

 

• Customer and partner engagement and outreach

 

• Customer satisfaction

 

• Developer engagement

 

      

 

• Compliance and integrity

 

• Culture

 

• Diversity and inclusion

 

• Organizational health

 

• Sustainability and carbon reduction

                   

As described further in Section 6, for fiscal year 2025, Product & Strategy and Customers & Stakeholders will be combined into a single category and the new category of Security will be added to emphasize the criticality of the contributions of our Senior Leadership Team members relating to cybersecurity.

For Mr. Nadella, the independent members of our Board also considered:

 

 

Input from Microsoft’s senior executives about Mr. Nadella’s leadership

 

 

Mr. Nadella’s evaluation of Microsoft’s and his individual performance over the past fiscal year

Equity Compensation

Under the Incentive Plan, each year, our Named Executives receive PSAs and our Named Executives, other than Mr. Nadella, receive SAs.

Performance Stock Awards

PSAs are designed to encourage our executives to achieve rigorous, growth-oriented goals in key performance metrics to drive long-term performance and value creation.

Due to the dynamic nature of our business and the specificity of the performance metrics that are chosen under our PSA program, we believe that measuring performance annually over our three-year performance period and modifying the actual awards eligible to be earned based on our three-year relative TSR provides the most accurate and holistic assessment of Microsoft’s long-term trajectory and performance achievements.

 

 

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COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

 

     

 

Fiscal Year 2024 Performance Stock Award Metrics and Weights

For fiscal year 2024, we updated our PSA core metrics to further align with our key long term strategic priorities. The approved fiscal 2024 PSA metrics reflect a significant business shift to AI through key product focus areas represented by Azure and Other Cloud Services Revenue Growth, Microsoft Cloud Revenue Growth, excluding Azure and Other Cloud Services, and Search and News Advertising Revenue, excluding Traffic Acquisition Costs (“TAC”) Growth while removing Windows 10/11 Monthly Active Device (“MAD”) Growth and Teams Monthly Active Usage Growth.

 

FY23 PSA Metrics

   Weights  

Microsoft Cloud Revenue

     30%  

Microsoft Cloud Subscribers Growth

     20%  

Teams Monthly Active Usage Growth

     20%  

Xbox Content and Services Revenue Growth

     10%  

Windows 10/11 MAD Growth

     10%  

LinkedIn Sessions

     10%  

 

FY24 PSA Metrics

   Weights  

Azure and Other Cloud Services Revenue Growth

     35%  

Microsoft Cloud Revenue Growth, excluding Azure and Other Cloud Services

     35%  

Search and News Advertising Revenue (ex TAC) Growth

     10%  

Xbox Content and Services Revenue Growth

     10%  

LinkedIn Sessions

     10%  
 

 

Targets for the PSA metrics are set at the target levels established under Microsoft’s fiscal year business plan and are intended to be difficult but attainable, and additional information about our goal-setting process is on page 51. All PSA metric goals required year-over-year growth in order for the target to be achieved. Additional details regarding the metrics and weights used for fiscal year 2024 are in the table below.

Fiscal Year 2024 PSA Metric Descriptions

 

 Performance Metrics    

 

   Description    Weights

 Azure and Other Cloud Services

 Revenue Growth

       Revenue from Azure, Enterprise Mobility and Security, Power BI, Nuance Cloud, GitHub Commercial Cloud, and other cloud services    35%

 Microsoft Cloud Revenue

 Growth, excluding Azure and

 Other Cloud Services

       Revenue from Office 365 Commercial, the commercial portion of LinkedIn, Dynamics 365 and other cloud services    35%

 Search and News Advertising

 Revenue (ex TAC) Growth

       Revenue from search and news advertising excluding TAC paid to Bing Ads network publishers and news partners    10%

 Xbox Content and Services

 Revenue Growth*

       Revenue from Xbox content and services, comprising first- and third-party content (including games and in-game content), Xbox Game Pass and other subscriptions, Xbox Cloud Gaming, advertising, third-party disc royalties, and other cloud services    10%
 LinkedIn Sessions        Measure of member visits as a leading indicator of the overall quality of the LinkedIn member experience and opportunity for members to realize their economic opportunity    10%

* Xbox Content and Services Revenue Growth metrics were established in September 2023 prior to the acquisition of Activision Blizzard

 

  

 

 

2024 PROXY STATEMENT

  45


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GOVERNANCE AND  
OUR BOARD OF
DIRECTORS

 

  2  

 

NAMED
EXECUTIVE OFFICER
COMPENSATION

   3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

 

     

 

The fiscal year 2024 PSA metrics were used to establish performance goals for (i) year 3 of the 2022 PSAs, (ii) year 2 of the 2023 PSAs, and (iii) year 1 of the 2024 PSAs, as shown below.

 

 

 PSA Metric Year 

 

 
 

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Our fiscal year 2024 PSA metric results can be found on page 51.

Results for the three years may be modified based on our Relative TSR percentile ranking as compared to the S&P 500, as shown below. Microsoft’s absolute TSR must be positive to apply an above target (100%) modifier payout.

 

3-year Relative TSR Ranking1

   Modifier  

20th Percentile & Below

     75.00%  

30th Percentile

     87.50%  

40th to 60th Percentile

     100.00%  

70th Percentile

     125.00%  

80th Percentile & Above

     150.00%  

 

(1)

Relative TSR percentile ranking as compared to the S&P 500 results in the above payout modifiers with linear interpolation applied between respective amounts.

As described further in Section 6, for fiscal year 2025, given the focus and investments in our Consumer business, we expanded Search and News Advertising Revenue (ex TAC) Growth to Consumer Services Revenue Growth, and we also removed LinkedIn Sessions as this metric is represented in both the Cloud Revenue and Consumer Services Revenue metrics.

Stock Awards

Stock awards were granted under the Incentive Plan in September 2023 for shares of Microsoft common stock to Named Executives other than Mr. Nadella. These stock awards vest over four years, with 25% vesting on August 31, 2024 and 12.5% each six-months thereafter, to support long-term focus and align with shareholders’ interests as the value of such awards is dependent on our stock price and vesting is subject to continued employment, except as described on pages 53-54 below.

No Other Fiscal Year 2024 Compensation

During fiscal year 2024, the Compensation Committee and independent members of our Board awarded no other compensation to our Named Executives.

 

 

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COMPENSATION

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AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

 

     

 

 

Section 5 – Fiscal Year 2024 Compensation Decisions and Results

Our Named Executives were awarded the following compensation in fiscal year 2024:

Fiscal Year 2024 Base Salaries

As part of the annual review of target compensation opportunities, our Compensation Committee and, for Mr. Nadella, the independent members of our Board, reviewed the base salaries of our Named Executives in September 2023. The independent members of our Board did not increase the base salary of Mr. Nadella, which it continued to believe was reasonable and appropriate given his role, capabilities, and experience, as well as the Company’s relative scale and performance. Our Compensation Committee also did not increase the base salaries of any of the NEOs based on a competitive market review.

Fiscal Year 2024 Cash Incentive Awards

We did not increase our target cash incentive opportunities in fiscal year 2024 as a percentage of base salary for the same reasons that we did not increase base salaries. For fiscal year 2024, these opportunities were: Mr. Nadella – 300%; Ms. Hood – 250%; Mr. Althoff – 250%; Mr. Smith – 250%; and Mr. Young – 200%.

Our Compensation Committee and, for Mr. Nadella, the independent members of our Board, determined the design and payouts of fiscal year 2024 cash incentive awards. These were based on two performance categories: financial results and operational performance results.

Financial Results

The fiscal year 2024 financial performance measures are shown below, resulting in a weighted payout of 138.08% as a percentage of target. We note that our Incentive Plan Revenue result was 119.79% of target and Incentive Plan Operating Income result was 156.37% of target, which equated to a 13.44% and 24.32% fiscal year 2024 growth rate, respectively, further demonstrating our commitment to rigorous goal setting.

 

Financial Results

($ in billions)1

  

FY23

Actual

     FY24
Threshold
    

FY24

Target

    

FY24

Maximum

    

FY24

Actual

    

FY24

Growth Rate

 

FY24 Incentive Plan Revenue2

     $216.96        $228.86        $243.47        $256.86        $246.12        13.44%  

FY24 Incentive Plan Operating Income3

     $89.18        $94.52        $103.30        $116.73        $110.87        24.32%  

 

(1)

“Incentive Plan Revenue” and “Incentive Plan Operating Income” are non-GAAP financial measures. For each of these measures we exclude the effect of foreign currency rate fluctuations on a “constant dollar” basis by converting current period non-GAAP results for entities reporting in currencies other than U.S. dollars into U.S. dollars using constant exchange rates, which are determined at the outset of the fiscal year, rather than the actual exchange rates in effect during the respective periods. These financial metrics differ from the non-GAAP financial results we report in our quarterly earnings release materials. They should not be considered as a substitute for, or superior to, the measures of financial performance prepared in accordance with GAAP.

 

(2)

We calculate Incentive Plan Revenue by adjusting as reported Revenue calculated in accordance with GAAP for (i) the net impact of revenue deferrals, credits, and incentives, (ii) the net impact of the October 2023 acquisition of Activision Blizzard, and (iii) the effect of foreign currency rate fluctuations. The aggregate net impact of these adjustments is $0.99 billion.

 

(3)

We calculate Incentive Plan Operating Income by adjusting as reported Operating Income calculated in accordance with GAAP for (i) the net impact of the Activision Blizzard acquisition and (ii) the effect of foreign currency rate fluctuations. The aggregate net impact of these adjustments is $1.44 billion.

 

 

2024 PROXY STATEMENT

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GOVERNANCE AND  
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DIRECTORS

 

  2  

 

NAMED
EXECUTIVE OFFICER
COMPENSATION

   3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

 

     

 

Operational Results

Satya Nadella

The key results influencing the Compensation Committee and the independent members of our Board decisions on the operational performance portion of Mr. Nadella’s cash incentive are set forth below. Results are out of a possible 200% in each category.

 

Average Financial:

138.08%

  +  

Average Operational:

151.67%

  =  

Overall Bonus:

142.16%

 

     

Product & Strategy (10%)

 

    150%

Mr. Nadella’s leadership, decisiveness, and determination to advance the business enabled Microsoft to capitalize on opportunities in product and strategy during fiscal year 2024 and maintained the Company’s position as the leader in AI innovation, while reaffirming security as the top priority above all else.

 

•  Rethought the core platforms and technology stack with incredible vision, agility, and speed, resulting in innovation across all three platforms – CoPilot, Copilot+PCs, and Copilot stack.

•  Seized the opportunity to be a voice of integrity and responsible deployment of AI and cloud resources globally to put Microsoft in a different league than others.

•  Pioneered the development of AI and innovated its role across Microsoft’s Customer Solution Areas.

•  Adapted the organization to meet the AI opportunity and navigated headwinds associated with such rapid growth while facing advancing cybersecurity challenges.

•  Successfully integrated Activision Blizzard, providing Gaming with a quantum leap forward in scale and offerings.

 

Customers & Stakeholders (10%)

 

    160%

Mr. Nadella improved Microsoft’s position as the preferred cloud partner for organizations globally, furthered the Company’s success in consumer products and services, and continued to champion AI innovation and transformation for our customers.

 

•  Led our ability to attract new partners and customers in fiscal year 2024, with an increasing number of major global brands choosing Microsoft as their platform of choice.

•  Microsoft actively identified ways to put its innovations in AI and infrastructure to work for our customers.

•  Created focus on winning in AI design, bringing together infrastructure, data and AI, and app services to help build the next generation of AI applications.

•  Increased developer engagement leading to the creation of a significant number of new AI apps for the Azure Marketplace.

 

Culture, Diversity & Sustainability (10%)

 

   

145%

Mr. Nadella furthered our high-performing culture while evolving responsible practices and upholding our commitments to diversity, inclusion, and sustainability.

 

•  Developed new thinking about how to lean-out the organization to reduce friction and marginal operating expenses to make room for critical investments (both capital and people).

•  Evolved Responsible AI practices, messaging, and public policy issues. Provided momentum for the tech sector to adopt, and governments to support, an AI Tech Accord at the Munich Security Conference.    

•  Recruited world class talent from outside the organization to diversify and accelerate the Company’s thinking and path forward.

•  Launched a global initiative to strengthen our relationships with key governments, including partnerships with 12 governments to announce over $30 billion of investments; developed and launched partnership with G42, including the largest commercial agreement in Microsoft’s history.

•  Furthered our commitment to the broader world, including a more effective strategy to meet our 2030 climate goals and setting a course to reduce water intensity by 40% by 2030.

•  Sustained/re-achieved high-water marks for employee inclusion and employee commitment to a diverse workplace.

 

 

 

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MATTERS

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PROPOSALS TO
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INFORMATION   
ABOUT THE
MEETING

 

 

     

 

Other Named Executives

The key results influencing our Compensation Committee’s decisions on the operational performance category portion of the cash incentive for the other Named Executives are summarized below.

 

 

Amy E. Hood, Executive Vice President and Chief Financial Officer

 

Delivered strong double-digit revenue and operating income growth, while returning over $34 billion in total cash to shareholders in the form of dividends and share repurchases.

 

Focused investment on Company priorities such as security and led effective allocation of capital to ensure a continued leadership position in AI and long-term performance.

 

Directed effective communication to investors regarding the Company’s strategic focus and momentum throughout the year, driving total shareholder return of over 32%, which outperformed Nasdaq (up 29%) and S&P 500 (up 23%) over the course of the fiscal year.

 

Continued investments through the Climate Innovation Fund to accelerate the global development of carbon reduction and removal technologies.

 

Consistent focus on diversity and inclusion, including investing in growing senior level diverse talent in the organization.

 

 

Judson B. Althoff, Executive Vice President and Chief Commercial Officer

 

Strong and successful leadership of Microsoft Customer & Partner Solutions organization to deliver strong performance contributing to double-digit revenue growth while navigating through a complex macro-economic climate.

 

Led customer and partner engagements focused on earning trust with security, reliability, and quality of our products and services.

 

Drove AI adoption across customer segments with a focus on accelerating AI digital transformation responsibly and securely.

 

Strengthened the sales leadership bench by recruiting and promoting individuals with deep industry and sales leadership expertise from diverse backgrounds.

 

Continued investments and focus on diversity, culture, talent, and organizational effectiveness to drive a high-performance organization.

 

 

Bradford L. Smith, Vice Chair and President

 

Played a key role in developing the Secure Future Initiative, helping to bring together teams across the Company to prioritize and drive accountability for cybersecurity protection across both new products and legacy infrastructure.

 

Led Microsoft efforts on AI practices and public policy issues, including launching AI Access Principles to help govern how the Company operates our AI datacenter infrastructure.

 

Continued leadership in combatting disinformation and foreign cyber influence operations.

 

Championed Microsoft’s partnership with G42 leading to a ground-breaking business partnership and an Intergovernmental Assurance Agreement committed to world-leading standards in AI safety and security.

 

Led cross-organization sustainability efforts focused on new carbon reduction steps.

 

Steady focus on advancing diversity and inclusion efforts, growing diverse representation at senior levels.

 

 

Christopher D. Young, Executive Vice President, Business Development, Strategy, and Ventures

 

Increased M12 Venture Fund engagements across emerging growth areas such as AI and Data Infrastructure

 

Demonstrated leadership in customer and partner engagements, strengthening existing relationships, and growing business opportunities with emerging technology company leadership.

 

Closed strategic partnership to fill product gaps, build ecosystems, and deliver transformational opportunities to support growth opportunities across Microsoft businesses.

 

Identified opportunities, strategic partnerships, and drove solid progress and alignment on sustainability objectives for data centers, energy procurement, and other critical initiatives.

 

Championed diversity and inclusion within the business development organization and across the Company.

 

 

 

 

2024 PROXY STATEMENT

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GOVERNANCE AND  
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  2  

 

NAMED
EXECUTIVE OFFICER
COMPENSATION

   3  

 

AUDIT
COMMITTEE  
MATTERS

  4  

 

PROPOSALS TO
BE VOTED ON DURING  
THE MEETING

  5  

 

INFORMATION   
ABOUT THE
MEETING

 

 

     

 

Fiscal Year 2024 Cash Incentive Payout Percentages

Final results under each portion of the cash incentive, and the resulting awards, were as follows:

 

  

 

     Nadella        Hood        Althoff        Smith        Young  

Financial results (% of target)
(weight: 70% CEO / 50% other NEOs)

       138.08%          138.08%          138.08%          138.08%          138.08%  

Operational results (% of target)
(weight: 30% CEO / 50% other NEOs)

       151.67%          153.34%          153.34%          153.34%          100.00%  

Total FY24 cash incentive (% of target)

       142.16%          145.71%          145.71%          145.71%          119.04%  

Total FY24 cash incentive earned

       $10,662,000          $3,642,750          $3,497,040          $3,642,750          $2,023,680  

Total FY24 cash incentive paid

       $5,200,000          $3,642,750          $3,497,040          $3,642,750          $2,023,680  

As discussed in the Committee’s letter, the Board reviewed the Company’s performance and strongly believes that Mr. Nadella provided exceptional leadership and was both critical in achieving both the extremely strong performance of the Company and personally responsible for the ongoing repositioning of its investments and priorities. Mr. Nadella proposed, and the Board agreed, that given the focus and speed required for the changes that today’s cybersecurity threat landscape showed were necessary, it was appropriate to reduce Mr. Nadella’s cash incentive award. The Board approved a fiscal year 2024 cash incentive of $5.2 million, which represents more than a 50% reduction from the $10.66 million he would have been awarded based on the combined assessment of strong financial and operational performance.

Fiscal Year 2024 Stock Awards

The fiscal year 2024 PSAs and SAs granted to our Named Executives under the Incentive Plan are listed below. We did not increase our target award values for our Named Executives, except in the case of Mr. Althoff whose target award value increased from $14,640,000 to $16,640,000 based on a competitive market review.

 

Named Executive

   PSAs
(Target Number
of Shares)¹
     SAs
(Number
of Shares)²
     Aggregate
Target
Award Value³
($)

Satya Nadella

     152,551        0      50,000,000

Amy E. Hood

     26,697        26,697      17,500,000

Judson B. Althoff

     25,385        25,385      16,640,000

Bradford L. Smith

     23,646        23,646      15,500,000

Christopher D. Young

     11,442        11,442      7,500,000

 

(1)

The PSAs vest in full following the end of the three-year performance period, with the number of shares earned determined based on performance against goals set for each year in the period and relative TSR results for the period.

 

(2)

The SAs vest 25% on August 31, 2024, and 12.5% each six months thereafter until fully vested. Vesting is subject to continued employment except as described on pages 53-54 below.

 

(3)

Awarded value (in dollars) was converted to shares using the closing share price on August 31, 2023, rounded up to a whole number.

The amounts listed in the table above for fiscal year 2024 PSAs do not match the amounts in the “Stock Awards” column in the Summary Compensation Table or the Grants of Plan-Based Awards table. Because the grant date of a PSA for financial reporting purposes occurs when the performance targets are set, and targets under our PSA awards are established annually, PSAs listed in the Summary Compensation Table and Grants of Plan-Based Awards table include portions of current and prior year PSA awards. In the Summary Compensation Table the value of PSAs is calculated using a Monte-Carlo simulation valuation performed as of the date of grant for financial reporting purposes. For fiscal year 2024, the stock price appreciation and corresponding relative TSR outperformance resulted in a grant date fair value higher than target value. Changes in Microsoft’s stock price and other inputs in the Monte-Carlo simulation may cause awards to be above or below target in any given year.

 

 

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COMMITTEE  
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  4