Monday, October 3, 2011

STeve Ballmer makes - and earns - more than one dollar

Last week, I blogged about the empty symbolism of the one dollar salary. Meanwhile, Bloomberg has written about Steve Ballmer's annual salary, based upon a recent SEC filing.

First, it should be noted that Ballmer is the CEO of Microsoft, but is not the Chairman - the Chairman is some guy named Gates. At Microsoft, the roles of Chairman and CEO have been separate for years.

Ballmer's compensation is set by independent members of the Board of Directors. Here, for all of us to read, is their performance review.

Performance Review Process for Mr. Ballmer

The independent members of our Board of Directors conduct Mr. Ballmer’s performance review. This review includes an evaluation of Mr. Ballmer’s performance based on:

• Mr. Ballmer’s self-evaluation of his performance over the past fiscal year and over a multi-year period;

• a summary of Microsoft’s performance for the just-completed fiscal year using a wide range of quantitative and qualitative financial, operational, and strategic measures, which includes key measures that were developed by management and reviewed with our Board of Directors at the beginning of the fiscal year as part of Microsoft’s annual business planning process; and

• the results of in-depth interviews conducted by the independent members of our Board of Directors with Mr. Ballmer’s direct reports.

After the Board completes its assessment of Mr. Ballmer’s performance, the Committee recommends Mr. Ballmer’s Incentive Plan award for the just completed fiscal year and any base salary adjustment. The Committee, which meets in executive session to develop its recommendations, does not apply a formula to determine these amounts. Instead, the Committee exercises its business judgment in making its recommendations, taking into consideration the evaluation of Mr. Ballmer’s performance, the amounts that are being awarded to the other executive officers for their performance for the same period and the advice of the Committee’s compensation consultant.

Fiscal Year 2011 Awards for Mr. Ballmer . For fiscal year 2011, the Compensation Committee recommended and the independent members of our Board of Directors approved an Incentive Plan award of $682,500, which was 100% of his target award. The award was based on his performance successful product launches including Kinect for Xbox and Office 365, enhancements to Windows Azure and Bing; continued progress positioning the company as a leader in the cloud and cloud-based infrastructure; key partnerships with Facebook and Nokia; significant progress in development of the next generation of Windows; work toward the successful acquisition of Skype; lower than expected initial sales of Windows Phone 7; the 2% decline in revenue for the Windows and Windows Live Division; the need for further progress in new form factors; and an overall strong financial year in which Microsoft reported record revenue of $69.9 billion, record operating income of $27.1 billion, and record earnings per share of $2.69 representing 12%, 13%, and 28% growth, respectively.

So why did Ballmer get 100% of his target award when there were problems with Windows Phone 7, et al? Because, as Bloomberg notes, he was eligible for a 200% award - and didn't get it.
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