Share price growth sees Nadella net a 65 percent pay rise, bringing home nearly $43m in the last fiscal year
Microsoft’s CEO Satya Nadella has secured himself a mammoth payout thanks to the strong performance of the software giant’s share price.
In April this year Microsoft as a company reached $1 trillion (£774 billion) in value for the first time ever, driven mostly by the continued growth of its Azure cloud business.
The company today is still worth over a trillion dollars, with its share price, which has risen steadily under Nadella’s leadership, sitting at $139.69 as of Friday morning.
This strong share price performance has helped Nadella achieve a record payout in the past fiscal year.
“We design our executive officer compensation program to attract, motivate, and retain the key executives who drive our success and industry leadership while considering individual and Company performance and alignment with the long-term interests of our shareholders,” said Microsoft in a proxy statement.
This has meant that in the past fiscal year, Nadella’s pay is up 65 percent from the year before to a staggering $42.9 million.
For comparison, Nadella made 249 times more than the company’s average employee in fiscal year 2019, who earned approximately $172,512 a year.
This rise in Nadella’s compensation was down to a combination of a simple pay rise, due to his performance since taking over in February 2014.
Nadella’s base salary went from $1.5 million up to $2.3m, and his cash and equity bonuses also rose as well.
But the biggest growth came from performance-based stock option awards related to Microsoft’s increasing market capitalisation.
This performance-based stock option award was agreed when Nadella took the job.
Essentially, because of the fact that Redmond’s market cap has gone up by over $500 billion in the five year period that Nadella has been in charge, coupled with strong shareholder returns, Nadella managed to unlock the maximum award for this 5-year period of 900,000 additional shares.
As a result, Microsoft gave Nadella $29.6m in stock awards over the year, as well as $10.8m in cash.
This was on top of his regular pay packet, and all told boosted his final payout to $42.9m.
Some may question whether such a stock performance approach to CEO compensation will influence management to make the best long-term and strategic decisions needed for a company, instead of just pleasing the stock market and investors.
But there is little doubt that Nadella’s cloud focus has helped the firm deliver solid financials in recent years.
Earlier this year for example Microsoft finally admitted there is no recovery from its ignominious retreat from the smartphone sector, after it advised Windows 10 Mobile diehards to switch to either Android or iOS handsets.
There is also concern about the future of Cortana in the consumer space, and matters were not helped when Microsoft signalled another consumer retreat in October 2018 when it confirmed that it was shutting its Groove Music service and told its users to switch to Spotify.
Microsoft has also been accused of ignoring Skype, which has been in decline against the likes of WhatsApp and Apple Facetime.