An influential shareholder advisory group is urging Microsoft Corporation stock owners to vote down a proposed pay package for CEO Satya Nadella scheduled for consideration at the company's annual shareholder meeting next month. Institutional Shareholder Services said that the $65 million in restricted stock Nadella would receive is excessive.
ISS, which is paid by hedge funds, mutual funds and multinational corporations to provide insight on shareholder votes, wrote, according to the Wall Street Journal, that Microsoft shareholders should avoid providing Nadella with a “mega” grant of restricted stock.
His shares would vest in 2019 and 2021, with the number of shares he receives ultimately resting on Microsoft shareholders' return through the next seven years and the award doesn't begin vesting until 2019 at the earliest. In ISS' view, the conditions of the payout make it possible for Nadella to sell one-quarter of the shares even if Microsoft underperforms the market.
Chairman of the Board John Thompson defended the pay package in a letter to shareholders.
"To attract and motivate a world-class CEO that could lead Microsoft through its strategic transformation, the Board designed a compensation structure comprising competitive annual compensation and a one-time long-term equity grant that 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,” he wrote.
The advisory board’s recommendation comes only months after Eric Jackson, an influential Yahoo shareholder, complained that CEO Marissa Mayer was due to receive a $250 million compensation package regardless of how much money the company makes during her tenure.
ISS estimated that Nadella’s total compensation for the fiscal year ending on June 30 was $90.8 million, though that calculation includes a seven-year long-term performance award. He was first named CEO in February, stepping into the role after Steve Ballmer resigned. “Significant concerns are raised by Nadella’s new compensation package,” ISS wrote, as quoted by the Journal.
ISS’ complaints come after Nadella, after being named one of the technology industry’s top earners, controversially remarked that female Microsoft employees should rely on “karma” when they desire increased pay rather than ask for a raise.
“It’s not really about asking for a raise, but knowing and having faith that the system will give you the right raise,” he said before later retracting his comments on Twitter.
This story has been updated to include John Thompson's letter to shareholders.