Update 7:30 p.m. EST:

Satya Nadella will earn $1.2 million in salary for his first year as CEO of Microsoft, the company announced Tuesday afternoon, PCWorld reports.

The paycheck is a hefty step up from Nadella's previous salary of $675,000, and from the $700,000 earned by former CEO Steve Ballmer in Microsoft’s previous financial year. Ballmer's pay was below the norm for CEOs of such companies at his request.

In addition to the salary, Nadella, who is 46, will be eligible for a cash bonus of up to $3.6 million, dependent on business performance. He’ll also get a stock award of $13.2 million starting in Microsoft’s 2015 fiscal year, the company said in a regulatory filing.

Original story:

Along with the official announcement from Microsoft Corp. (NASDAQ:MSFT) that Satya Nadella would be its next chief executive officer, the Redmond, Wash.-based company also announced Tuesday that founder Bill Gates was stepping down as chairman of the Microsoft board of directors.

The announcement confirms a Monday rumor that Gates was accepting a new role that would have him working closely with Nadella as technology innovation advisor. According to the Microsoft blog, Gates will “devote more time to the direction of the company’s products and technology.”

“I’m thrilled that Satya’s asked me to step up, substantially increasing the time that I spent at the company,” Gates said in a YouTube video discussing Nadella’s new role as Microsoft CEO. “I’ll have over a third of my time available to meet with product groups, and it’ll be fun to define this next round of products working together.”

John Thompson, a current Microsoft board member and former Symantec CEO, will replace Gates as the new chairman. Gates will remain on Microsoft’s board of directors, as will Microsoft’s current CEO, Steve Ballmer.

Microsoft’s board has been calling for Gates to step down for months, thinking that the founder is blocking Microsoft from making radical changes that would please investors.