At Microsoft, the world really is flat – at least its stock price for the past few years. Yet, the company's executives are getting paid as if they are really improving stockholder value.
In fact the overall performance bonuses amount to almost $1 billion, according to recent SEC filings. Yes, it's an unusual definition of performance. Then again, in Corporate America, it seems that executives get bonuses whether they perform or not.
In the case of Microsoft the bonuses are in the form of stock. The idea is that the executives' interests will be aligned with the shareholders'. Well so far it hasn't worked out very well.
How about firing some of these executives? Maybe that will be an incentive to get better performance?
Ironically, these bonuses were the result of a compensation plan Microsoft established three years ago. Because of the steep fall in the company's stock after the dot-com boom, the company's stock options were severely out-of-the-money. So, the company moved to restricted stock grants. These grants vest over time, and now we are seeing this happen.
Here are just some of the payouts: Jeff Raikes, the president of Microsoft Business Division, got $7.5 million; Kevin Johnson, the co-president, Platforms & Services Division, got $6 million; and Brad Smith, general counsel, got $2.3 million.
This is definitely a cool gig if you can get it.
Tom Taulli is the author of various books, including the Complete M&A Handbook and operates InvestorOffering.com.