Microsoft Compensation

Discussion for:
Lewis Shepherd
Technical Evangelist, Microsoft Institute for
Advanced Technology
Note: This document is intended to be used for the sole purpose of describing the
components of a compensation package; it is not an offer or contract for employment.
 Compensation Components:
• Cash:
– Base Salary
– Annual Performance Bonus
• 60% range (30% target)
– Sign-On Bonus
• Equity
– On Hire Stock Awards
– Annual stock award grants at
review
– Employee Stock Purchase Plan
(10% discount)

• Benefits
– no deductible
– no co-pay
– no payroll contribution
 Total Five Year Compensation
$2,143,255
(given various assumptions, outlined later)

– $1,339,255 Cash

– $804,000 Stock

Microsoft does not guarantee or promise any future annual stock awards, annual performance bonuses, or merit increases—as eligibility depends
on individual employee performance, business conditions, and active service during the time period. This communication provides general
information and guidelines only. It does not create any contractual rights or guarantee specific treatment in any given situation.
 Total Annual Cash

$328,000
– $176,000 Base

– $52,800 Estimated Performance Bonus (30% target, range 0-60%)

– $100,000 Sign-On Bonus ($50K paid in your first month, $50K paid at beginning
of year 2)

Microsoft does not guarantee or promise any future annual stock awards, annual performance bonuses, or merit increases—as eligibility depends
on individual employee performance, business conditions, and active service during the time period. This communication provides general
information and guidelines only. It does not create any contractual rights or guarantee specific treatment in any given situation.
 Stock Awards (SA)
• Starting in July 2003, Microsoft changed a key element of our long-term financial incentive
program:

– We began granting Stock Awards instead of stock options, whereby employees earn
actual shares of stock over a five-year vesting period.

– As they vest, Stock Awards provide long-term value at any stock price—unlike stock
options.

– This new plan provides you highly competitive compensation today and more predictable
long-term rewards for the future.

– In addition to “on-hire” stock awards, you are eligible for annual stock awards which vest
in equal installments over a five-year period.
 On-Hire Stock Awards

15,000 Shares
$450,000 value based on $30/share

On-Hire Stock Award

Vesting 20% 20% 20% 20% 20%

On-Hire Stock Award 15,000 $90,000 $90,000 $90,000 $90,000 $90,000 $450,000

Microsoft does not guarantee or promise any future annual stock awards, annual performance bonuses, or merit increases—as eligibility depends
on individual employee performance, business conditions, and active service during the time period. This communication provides general
information and guidelines only. It does not create any contractual rights or guarantee specific treatment in any given situation.
 Estimated Annual Stock Awards
$177,000 worth of Shares
Vesting 20% one year from grant date with additional 20% vesting annually
until fully vested at 5 years.
(Actual number of shares = $177,000 / stock price on date price set)

Ongoing Vested Stock Awards $0 $35,400 $70,800 $106,200 $141,600 $354,000

End of Year 1 Grant $177,000 $35,400 $35,400 $35,400 $35,400 $141,600

End of Year 2 Grant $177,000 $35,400 $35,400 $35,400 $106,200
End of Year 3 Grant $177,000 $35,400 $35,400 $70,800
End of Year 4 Grant $177,000 $35,400 $35,400
End of Year 5 Grant $177,000 $0
Ongoing Vested Stock Awards $0 $35,400 $70,800 $106,200 $141,600 $354,000
Microsoft does not guarantee or promise any future annual stock awards, annual performance bonuses, or merit increases—as eligibility depends
on individual employee performance, business conditions, and active service during the time period. This communication provides general
information and guidelines only. It does not create any contractual rights or guarantee specific treatment in any given situation.
 Estimated Total Compensation Analysis
5-Year Value in cash and equity: $2,143,255
Assumptions: 4% annual salary increase (merit), 30% annual performance bonus
(at target; range 0-60%), $30Compensation
5 - Year MSFT share price for entire period.
Model

Cash Compensation - Detail

Detail Year 1 Year 2 Year 3 Year 4 Year 5 5-Year Total
Base Salary $176,000 $183,040 $190,362 $197,976 $205,895 $953,273
Est. Annual Performance Bonus 30% $52,800 $54,912 $57,108 $59,393 $61,769 $285,982
Total Cash $278,800 $287,952 $247,470 $257,369 $267,664 $1,339,255
Equity Compensation - Detail
Shares
Granted Year 1 Year 2 Year 3 Year 4 Year 5 5-Year Total
On-Hire Stock Award 15,000 $90,000 $90,000 $90,000 $90,000 $90,000 $450,000
Target
Value
Annual Stock Awards $0 $0 $35,400 $70,800 $106,200 $141,600 $354,000
Annual SPSA Awards $0 $0 $0 $0 $0 $0 $0
Total Equity Compensation $90,000 $125,400 $160,800 $196,200 $231,600 $804,000
Total Compensation
Year 1 Year 2 Year 3 Year 4 Year 5 5-Year Total

Total Cash + Equity Compensation $368,800 $413,352 $408,270 $453,569 $499,264 $2,143,255
Microsoft does not guarantee or promise any future annual stock awards, annual performance bonuses, or merit increases—as eligibility depends
on individual employee performance, business conditions, and active service during the time period. This communication provides general
information and guidelines only. It does not create any contractual rights or guarantee specific treatment in any given situation.
Benefits (highlights):
 100% health coverage
 Deferred Compensation Plan
 401k Plan
 Employee Stock Purchase Plan
 Paid Health Club Membership with “Stay Fit” wellness program
 Paid Parental Leave
 Adoption Assistance
 Group Legal Plan
 PRIME Discount Program
 Tuition Reimbursement Program
 …and more
– http://members.microsoft.com/careers/mslife/benefits/default.mspx
Summary:
• Impact the Company – You are a critical player in the company
and considered a key strategic thought leader, not only for the
Institute for Advanced Technology, but for Microsoft as a whole.

• Shape the Business – This position puts you in a central role to

evangelize Microsoft throughout the United States Government.

• Long-Term Career Move – Microsoft offers you the opportunity

to achieve a highly rewarding, long-term, aggressive career track
with tremendous upside, both personally and professionally.