8-KMaterial Agreements

MICROSOFT CORP 8-K Report, Material Agreement (Jan 20, 2006)

Filed January 20, 2006For Securities:MSFT

Summary

Microsoft Corporation (MSFT) announced on January 16, 2006, significant modifications to the compensation structure for its non-management directors. This filing (8-K) details a new annual retainer of $200,000, with a substantial portion, approximately $120,000, to be paid in the form of stock awards under the company's existing stock plan for directors. This move emphasizes a greater alignment of director compensation with shareholder interests through increased equity ownership. Further details of the updated compensation include additional annual retainers for committee chairs ($10,000) and Audit Committee members ($10,000), along with reimbursement for board-related expenses. Additionally, Microsoft's Board of Directors has increased the stock ownership guideline for directors to three times the base annual retainer amount, reinforcing the commitment to long-term value creation. A new deferred compensation plan was also approved, offering directors flexibility in managing their compensation by deferring cash and equity awards.

Key Highlights

  • 1New annual retainer for non-management directors increased to $200,000.
  • 2Approximately $120,000 of the annual retainer will be paid in stock awards.
  • 3Directors' stock ownership guidelines increased to three times the base annual retainer.
  • 4Additional annual retainers of $10,000 for committee chairs.
  • 5Additional annual retainers of $10,000 for Audit Committee members.
  • 6Reimbursement for reasonable board-related expenses is provided.
  • 7A new deferred compensation plan allows directors to defer cash and equity compensation.

Frequently Asked Questions

The main change is an increase in the annual retainer for non-management directors to $200,000, with a significant portion ($120,000) paid in stock awards, aligning director compensation more closely with shareholder interests.

Microsoft has increased the stock ownership guideline for directors to three times the base annual retainer amount, encouraging them to hold a substantial amount of company stock.

Yes, directors who chair Board committees and members of the Audit Committee will receive an additional annual retainer of $10,000 each. Reasonable expenses related to board activities will also be reimbursed.

The new deferred compensation plan provides flexibility for non-management directors, allowing them to elect to defer receipt of their annual equity retainer and to defer and convert their annual cash retainer into equity.