Microsoft revamps way it pays top executives

Microsoft is changing the way it compensates its top executives, but details on the new plan were scant Thursday.

Most of the company's senior leadership team — 11 positions — will get a fixed percentage of an "incentive pool" that could be up to 0.35 percent of Microsoft's operating income for the 2009 fiscal year, according to a Securities and Exchange Commission filing Thursday.

Based on the company's latest forecasts, fiscal 2009 operating income will be between $26.3 billion and $26.9 billion, making the pool as large as $94.2 million.

However, it is up to the Compensation Committee of Microsoft's board of directors to reduce or eliminate awards based on performance.

The plan sets a $20 million cap on the amount paid to any participating executive in a given year.

Microsoft is not changing its existing compensation targets for the executives and it does not anticipate paying out the maximum in any one year, according to a company statement late Thursday.

"Previously, Microsoft had two separate compensation programs for executive officers, one providing cash bonuses and one providing stock awards," the statement said.

"They are consolidating these two separate executive compensation programs into a single program and establishing a maximum amount that could be paid in any one year."

The new plan is meant to "streamline" and "simplify" executive compensation "while ensuring continued compliance with IRS regulations."

According to the filing, the board's compensation committee can establish award programs linked to "performance periods" of "one or more fiscal years."

At the same time it made these changes, Microsoft amended its corporate bylaws primarily relating "to the requirements for advance notice and additional information that a shareholder must provide when making a director nomination or proposal at the company's annual meeting of shareholders."

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com