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Microsoft Pri0

Welcome to Microsoft Pri0: That's Microspeak for top priority, and that's the news and observations you'll find here from Seattle Times reporter Sharon Chan.

E-mail Sharon| RSS feeds Subscribe | Blog Home| Brier Dudley's Blog

February 23, 2009 3:12 PM

Microsoft lets 25 laid-off employees keep severance overpayment

Posted by Benjamin J. Romano

monopoly.jpg

After asking 25 laid-off Microsoft employees to return an overpayment of severance benefits, Microsoft's top human resources executive decided to let them keep the money. Calling it a "unique circumstance," Lisa Brummel, senior vice president of human resources, said the employees will not have to repay the overpayment, which ranged from a couple hundred dollars to over $5,000, but averaged about $4,000 to $5,000 across the 25 employees. [Parker Brothers Monopoly card via Bankrate.com]

An additional 20 laid-off employees were underpaid severance. They will receive received checks making up the correct amount.

All 45 individuals are part of the group of 1,400 people notified of layoffs on Jan. 22.

Updated, 3:55 p.m.: Brummel did a round of interviews this afternoon in a bid to quickly put to rest an issue that has drawn negative attention to the company's handling of the layoffs. TechCrunch broke the story on Saturday, posting a letter from Microsoft to a laid-off employee seeking repayment of the extra severance. Other media picked it up over the weekend and today.

She said the issue came to her attention through "internal channels."

"This was brought to my attention just recently in the past two days that we had done this and I said, 'You know, this is a unique population. This is a unique circumstance. I think our normal course of business action is the wrong one to take in this case. We should in fact not pursue repayment from those employees and I am going to call each of them personally and let them know that, which I have done,'" she said.

"I can tell you universally they were quite happy," Brummel said. "I just felt like it was--- this is a unique circumstance where normal course of business doesn't really apply."

Asked if the attention the story was getting played into her decision to let the laid-off employees keep the extra severance, Brummel said, "Honestly, I didn't see any of the media coverage." She said she reads the papers but was "more interested in the Seattle Opera review today than anything else."

The severance payment errors were due to a "clerical mistake on our end," she said.

Severance benefits varied by country. Most U.S. employees were eligible for at least 60 days of pay, and additional severance based on tenure and level.

What do you think of Microsoft's decision?

Comments | Category: Compensation , Corporate culture , Corporate governance , Employee benefits , Microsoft layoffs |Permalink | Digg Digg | Newsvine Newsvine

September 29, 2008 7:13 AM

On the radar: Microsoft proxy statement

Posted by Benjamin J. Romano

I'm out of the office this week, so posting will be lighter than normal. But this site will not be dormant, so keep checking in. I have prepared a series of posts updating stories from the last year and pointing out upcoming events. My editor, Mark Watanabe, will also contribute links to interesting stories that pop this week and items from my colleague Brier Dudley.

For starters: Microsoft has filed each of its last four proxy statements between Sept. 20 and Oct. 4, so the annual SEC filing should arrive any day this week. (You can check for it here.)

Continue reading this post ...


Comments | Category: Corporate governance , Employee benefits , Financial |Permalink | Digg Digg | Newsvine Newsvine

September 25, 2008 2:06 PM

Microsoft tweaks executive compensation, amends bylaws

Posted by Benjamin J. Romano

Microsoft executives will share in a new compensation plan worth up to $238 million $94.2 million, based on the company's forecast for fiscal year 2009 revenue operating income.

The new plan, announced this afternoon in a filing with the SEC, replaces the existing annual cash bonus and equity award programs for the company's executive officers beginning with fiscal year 2009.

More details, from the filing: The Compensation Committee of Microsoft's board of directors can establish award programs linked to "performance periods" of "one or more fiscal years." Participating executive officers get a fixed share of an "incentive pool." For fiscal year 2009, which began July 1, "awards will be granted from an incentive pool with maximum funding of 0.35 percent of Microsoft's fiscal year 2009 corporate operating income."

Based on Microsoft's forecasts for fiscal year 2009 revenue, that pool would have between $235.6 million and $238.4 million, by my calculations. Based on Microsoft's forecasts for fiscal year 2009 operating income, that pool would have between $92.1 million and $94.2 million.

More details:

"Awards may be further reduced or eliminated in the discretion of the Compensation Committee (or in the discretion of the Board of directors, for awards to the Company's chief executive officer, Steven A. Ballmer). The Plan specifies a maximum amount of $20,000,000 that may be paid under the Plan to a participating executive officer for one or more performance periods that end during a fiscal year. Award amounts under the Plan may be made in either or both stock awards issued under the Microsoft Corporation 2001 Stock Plan and cash. Vesting of stock awards will be determined by the Compensation Committee. The 2001 Stock Plan generally requires that stock awards vest over at least a three-year period."

I'm checking on how many executives this applies to. A past Microsoft executive compensation plan, outlined in 2006, went to the most senior 1.3 percent of the company, or about 900 people. The award under that plan was 37 million shares of company stock over three years.

(Update, 6:20 p.m.: The new plan applies to the company's eleven most senior employees:

-- Steve Ballmer, chief executive officer, (although given his large ownership of Microsoft stock, Ballmer does not receive equity compensation).

-- Ray Ozzie, chief software architect.
-- Craig Mundie, chief research and strategy officer.
-- Chris Liddell, chief financial officer.
-- Kevin Turner, chief operating officer.
-- Brad Smith, general counsel.
-- Lisa Brummel, senior vice president, human resources.
-- Robbie Bach, president, Entertainment and Devices Division.
-- Stephen Elop, president, Microsoft Business Division.
-- Bob Muglia, senior vice president, Server and Tools business. (Note, my earlier report omitted this name.)
-- The yet-to-be named president of the Platforms and Services Division is the eleventh plan participant.

More information on the group is available here).


At the same time, 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."

I'll update later with more on the new compensation plan and bylaws changes.

Comments | Category: Corporate governance , Corporate organization , Employee benefits , Financial |Permalink | Digg Digg | Newsvine Newsvine

September 22, 2008 7:42 AM

Microsoft authorizes debt, boosts dividend, extends share repurchases

Posted by Benjamin J. Romano

For the first time, Microsoft is issuing significant corporate debt -- up to $6 billion -- as part of a broad set of financial changes announced this morning.

The company also increased the size of its dividend by 18 percent to 13 cents a share, payable Dec. 11 to shareholders of record Nov. 20.

Finally, Microsoft's board of directors authorized the company to buyback $40 billion of its own stock in the next five years.

Many on Wall Street were looking for Microsoft's board of directors to pull some of these financial levers to help juice the stock. The company's shares were up about $1.09, more than 4.3 percent, in trading Monday to $26.25.

Continue reading this post ...


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August 6, 2008 9:29 AM

'Significant' data and storage announcement; buyback talk; Yahoo recount

Posted by Benjamin J. Romano

Microsoft veep Ted Kummert will make a "significant" announcement relating to the company's Data Platform and Storage Division at 10 a.m., a spokesman said. We'll be covering the teleconference. (Update, 10:02 a.m.: The "significant" news is that Microsoft has released SQL Server 2008, its database and business intelligence server software.)

Meanwhile, Bloomberg is quoting top-rated software analyst Heather Bellini, who thinks Microsoft will rev up its share buyback engine in the coming months.

Continue reading this post ...


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April 11, 2008 8:13 AM

Microsoft wants 'self-regulation' of consumer privacy in online advertising

Posted by Benjamin J. Romano

In the midst of the maelstrom of online deals rumored to be in the works, Microsoft proposed a major plan for companies to self-regulate consumer privacy practices.

Continue reading this post ...


Comments | Category: Advertising , Corporate governance , Legal issues , Online Communities , Online services , Public policy & issues , Security & privacy , Yahoo acquisition |Permalink | Digg Digg | Newsvine Newsvine

February 15, 2008 9:24 AM

New York Post: Yahoo's board of directors splitting

Posted by Benjamin J. Romano

Yahoo's board of directors could be starting to fragment, if a report in today's New York Post is to be believed. A faction, including new Chairman Roy Bostock and billionaire Ron Burkle, is emerging in opposition to another group sympathetic to co-founder and CEO Jerry Yang's desire to fight off the Microsoft bid, the Post reported this morning, quoting "one source close to the situation."

"The emotional part of Yang would rather do anything but sell to Microsoft, but he doesn't have the cards to come up with a value-creating, competitive alternative for shareholders," the source said.

The Post writes that the Bostock contingent "is worried that the Yang group might act out of emotion rather than their fiduciary duty, thereby exposing the board to shareholder lawsuits."

I discussed Microsoft's options for pressing ahead, after the Yahoo board rejected the initial $44.6 billion offer on Monday, with Richard Rafferty, a corporate and securities lawyer with Dallas-based Strasburger & Price. Here's a relevant part of our talk that didn't make the print story:

Among other widely reported options, Rafferty suggested Microsoft could try to persuade Yahoo board members individually.

"I hate to say this, but Microsoft could take a divide and conquer-type approach," he said, adding at the time that this was not a likely approach. "There's nothing that keeps them from contacting individual directors. They don't have to talk to the whole board."

He added that if those board members are well advised, they will refuse to talk individually and channel all communications through Yang. "Now, that won't stop the phone calls," he said.

It's also interesting that the Post's tipster references concern about "exposing the board to shareholder lawsuits," some of which have already emerged.

Continue reading this post ...


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February 12, 2008 4:01 PM

UW finance professor puts MSFT+YHOO in interesting context

Posted by Benjamin J. Romano

University of Washington finance professor Jarrad Harford, who helped me outline Microsoft's options after Yahoo's board of directors rejected its $44.6 billion buyout offer Monday, has conducted interesting research relevant to two aspects of mergers and acquisitions, and this deal in particular.

In one paper, he looked at how cash-rich companies fare when they go shopping (not all that well). In another, he researched how directors at a company targeted for acquisition balance shareholder interests with their own.

Cash-rich acquirers
Microsoft, with more than $21 billion in cash and short-term investments on its balance sheet on Dec. 31, is certainly cash rich, though less so than it was just a few years ago, thanks to stock repurchases and dividends.

Here's how Harford described his research, which looked at a broad set of companies and was published in the Journal of Finance, December 1999: "When managers have a lot of cash available to them, they don't have to go out and raise the capital and so they're not getting vetted at that point. They're not really being monitored by the capital market.

"You could very broadly paraphrase this as [cash] sort of burning a hole in their pocket," he said.

Companies in that situation, he found, are less careful about their acquisition targets and "their own natural optimism doesn't get put in check." As a result, "cash-rich firms are more active as acquirers and the acquisitions they make tend to be worse than average." He also found, quoting now from the abstract of his paper, that the targets of cash-rich acquirers tend not to attract other bidders and "mergers in which the bidder is cash-rich are followed by abnormal declines in operating performance."

Microsoft's proposal to buy Yahoo includes a combination of stock and cash from the balance sheet, as well as outside financing -- a departure from the company's norm. I asked Harford if that, plus the added scrutiny because the deal is particularly large and high-profile, means that it wouldn't fit the pattern described in his research.

"It certainly mitigates it in these extremely high-profile [cases]. This particular case actually does fit the pattern in the sense that they were cash rich and the market reacted pretty negatively to the offer" -- Microsoft shares are down about 13 percent since the proposal was made public Feb. 1 -- "But that doesn't mean that's what's going on. There's so much that goes into the market's initial reaction to a bid that you really need a large sample to kind of say what the trends are."


Directors at acquisition targets

Harford points out, in a paper published in the Journal of Financial Economics, July 2003, that company directors, like most people, have a natural drive for self preservation. Voting to accept an acquisition proposal could mean no more sitting in the big leather chairs.

"When a target director votes to accept a bid, he or she is basically voting him or herself out of a job," Harford said. The acquiring company usually brings only one or two key people from the target on to its board. "... A lot these [directors] are retired executives and they maybe have plenty of money, but they value the prestige of being involved in something like that."

They're supposed to be acting with the shareholders' best interests in mind, but they do face some conflict of interest in considering an acquisition, he said.

Harford's research found that if directors do the right thing -- or the thing that is perceived to be in the best interest of shareholders -- they will be rewarded in the long run. "If your company has been doing badly and you accept a takeover bid, than you will be asked on to other boards," he said.

This typically holds true for directors at firms that have been doing poorly under the current management and board, he said. The converse is also true, his research showed.

So if Yahoo's board ultimately rejects Microsoft's offer?

"Basically, they would be less likely to be invited onto other boards in the future," he said.

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