MoneyWatch Tech

Microsoft Interest in Say-On-Pay Clearer, May Have Been Dodge

By Erik Sherman

Updated on: September 22, 2009 / 9:19 AM EDT / MoneyWatch

Yesterday I noted that Microsoft's board approved a say-on-pay plan, in which shareholders can make their feelings about compensation known in a non-binding vote. I saw it as an interested strategic move, but the context is clearer now. Yesterday, the Conference Board recommended strong changes in executive compensation, and a number of tech companies backed it -- but they didn't include Microsoft. And now it seems that Microsoft may have been trying to soften the blow over a raise for Steve Ballmer.

Given the corporate orientation of the Conference Board, the recommendations were harsh, driven by both "real -- and perceived -- abuses in executive compensation" that has resulted in a loss of trust among shareholders. Some of the suggestions included:

clearly linked pay, performance, and strategy
fair and affordable compensation aligned with performance
end of controversial practices such as large golden parachutes, "overly generous" severance, and coverage of taxes on compensation "unless specific justification exists"
credible board oversight of compensation
transparency in compensation practices and communication between boards and shareholders

Not that these goals haven't been stated before by various parties. And some things, like stock options, were supposed to help ensure alignment between compensation and corporate goals. But the problem is that there are different views of what helps shareholders. For every Warren Buffet there's a Kirk Kerkorian.

But the perception battle lines are drawn, and some of the tech companies signing on were AT&T, Cisco, and HP. So who won the perception battle? Well, doing a quick check on Google News over the past day for "conference board", cisco, and compensation as search terms, I found about 60-70 articles, with similar results using AT&T or HP instead. Search for Microsoft and "say on pay" and there were between 390 and 400. From a one-day PR perspective, Microsoft seems to have received the benefit.

However, not all attention is good, and it's clear as well that Microsoft's board was trying to soften the news that it had given CEO Steve Ballmer a 4 percent raise, even though Microsoft's financial and operational performance has been lackluster at best. So maybe the move wasn't strategic -- set Microsoft up well in the long term â€" so much as tactical -- keep the shareholders from roasting our bottoms over the raise.

Image via stock.xchng user lusi, site standard license.