By Don Clark and Joann S. Lublin
An influential adviser to institutional investors is
recommending shareholders vote against the pay package for new
Microsoft Corp. Chief Executive Satya Nadella in a nonbinding vote
at the software company's annual meeting in early December.
Institutional Shareholder Services criticized what it called a
"mega" grant of restricted stock to Mr. Nadella, which ISS valued
at $65 million.
None of the shares vest until 2019; some don't vest until 2021.
The number of shares Mr. Nadella ultimately receives will depend on
Microsoft's shareholder return over the next seven years.
But ISS said the conditions would allow Mr. Nadella to sell
one-fourth of the shares even if Microsoft underperforms other big
companies through the vesting period.
The advisory firm also found it "concerning" that Microsoft
plans to grant Mr. Nadella additional shares annually. The CEO
received the first of those, a $13.6 million restricted-stock
award, in August, which was early in Microsoft's 2015 fiscal
year.
Mr. Nadella also had received a "special retention stock award"
valued at $13.5 million in August 2013, before he was named CEO.
Including that award, ISS estimated Mr. Nadella's compensation for
the fiscal year ended June 30 at $90.8 million.
Mr. Nadella was named CEO in February, succeeding Steve Ballmer
as Microsoft planned to acquire Nokia Corp.'s handset business. ISS
noted that, unlike Mr. Ballmer and his predecessor Bill Gates, Mr.
Nadella wasn't a big Microsoft shareholder.
"Even in consideration of these challenges," ISS wrote,
"significant concerns are raised by Nadella's new compensation
package."
A Microsoft spokesman referred to a letter to shareholders from
Chairman John Thompson explaining the rationale for Mr. Nadella's
compensation package. He wrote that the long-term equity grant
"motivates our CEO to create sustainable long term shareholder
value by providing him with the opportunity to share in those gains
and build ownership in the company over the next seven years."
It is unusual for ISS, the biggest U.S. proxy adviser, to
recommend shareholders vote against a company's executive pay
practices, which are held in nonbinding "say on pay" elections at
annual meetings. Through Nov. 1, the firm this year has urged that
its clients vote against pay packages at 12.6% of companies in the
Russell 3000 Index, an ISS spokesman said Tuesday. Such advisory
votes are required by the Dodd-Frank financial overhaul law.
Glass, Lewis & Co., another big proxy adviser, urged
shareholders to support Microsoft's executive-compensation
plan.
Write to Don Clark at don.clark@wsj.com and Joann S. Lublin at
joann.lublin@wsj.com
Access Investor Kit for Nokia Oyj
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=FI0009000681
Access Investor Kit for Nokia Oyj
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US6549022043
Subscribe to WSJ: http://online.wsj.com?mod=djnwires