Part 2. Board of Directors

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Part 2. Board of Directors

Proposal 1: Election of Directors

Eleven directors have been nominated for election at the Annual Meeting to hold office until the 2016 Annual Meeting. Dr. Maria Klawe is not seeking re-election and her Board service will end on the date of the Annual Meeting. The Board has nominated for election Sandra Peterson and Padmasree Warrior and, if elected, their terms will begin on December 2, 2015. The Board has authorized increasing its size to eleven members coincident with their election. The nominees were evaluated and recommended by the Governance and Nominating Committee in accordance with its charter and our Corporate Governance Guidelines. For additional information about the nominees and their qualifications, please see Part 2 – “Board of Directors – Director nominations and qualifications.” You can also view our video series featuring members of our Board at www.microsoft.com/investor/board.

Each director will be elected by a vote of the majority of the votes cast, meaning that the number of shares cast “for” a director’s election exceeds the number of votes cast “against” that director.

Our Board of Directors recommends a vote FOR the election to the Board of each of the following nominees:

MSFT-T-BoDa

Director nominations and qualifications

Selection of Board members
The Company’s shareholders elect Board members annually. The Governance and Nominating Committee recommends to the Board director candidates for nomination and election at the annual shareholders meeting or for appointment to fill vacancies. The Governance and Nominating Committee annually reviews with the Board the skills and characteristics required of Board nominees, considering current Board composition and Company circumstances. In making its recommendations to our Board, the Governance and Nominating Committee considers the qualifications of individual director candidates in light of the Board membership criteria described below. The Governance and Nominating Committee retains any search firms and approves payment of their fees.

Board membership criteria
The Governance and Nominating Committee works with our Board to determine the characteristics, skills, and experiences for the Board as a whole and its individual members with the objective of having a Board with diverse backgrounds and experience in business, education, and public service. Characteristics expected of all directors include

  • independence,
  • integrity,
  • high personal and professional ethics,
  • sound business judgment, and
  • the ability and willingness to commit sufficient time to the Board.

In evaluating the suitability of individual Board members, our Board considers many factors, including general understanding of marketing, finance, and other disciplines relevant to the success of a large, publicly traded company in today’s business environment; understanding of our business and technology; educational and professional background; personal accomplishment; and geographic, gender, age, and ethnic diversity. The Board is committed to actively seeking highly qualified women and individuals from minority groups to include in the pool from which Board nominees are selected. Our Board evaluates each individual in the context of the Board as a whole, with the objective of recommending a group that can best perpetuate the success of our business and represent shareholder interests through the exercise of sound judgment using its diversity of experience.

In determining whether to recommend a director for re-election, the Governance and Nominating Committee considers the director’s past attendance at meetings, participation in and contributions to the activities of the Board, and the results of the most recent Board evaluation.

The Governance and Nominating Committee assesses its efforts to maintain an effective and diverse Board of Directors in the course of its regular responsibilities, which include annually

  • reporting to our Board on the performance and effectiveness of the Board,
  • presenting to our Board individuals recommended for election to the Board at the Annual Meeting, and
  • assessing the Governance and Nominating Committee’s own performance.

In addition to the annual review of the Board composition, the Governance and Nominating Committee works with the full Board to regularly evaluate the composition of the Board to assess whether one or more directors should be added in view of director departures, the number of directors needed to fulfill the Board’s responsibilities under the Corporate Governance Guidelines and committee charters, and the skills and capabilities that are relevant to the Board’s work and the Company’s strategy.

Shareholders previously elected all current Board members. In recruiting the two new director nominees, Mmes. Peterson and Warrior, the Governance and Nominating Committee retained the search firm of Spencer Stuart to help identify director prospects, perform candidate outreach, assist in reference and background checks, and provide other related services. The recruiting process typically involves either the search firm or a member of the Governance and Nominating Committee contacting a prospect to gauge his or her interest and availability. A candidate will then meet with several members of the Board including Mr. Nadella, and then meet with members of management as appropriate. At the same time, the Governance and Nominating Committee and the search firm will contact references for the prospect. A background check is completed before a final recommendation is made to the Board to appoint a candidate to the Board.

The table below summarizes key qualifications, skills, and attributes most relevant to the decision to nominate candidates to serve on the Board of Directors. A mark indicates a specific area of focus or expertise on which the Board relies most. The lack of a mark does not mean the director does not possess that qualification or skill. Each director biography below describes each director’s qualifications and relevant experience in more detail.

MSFT-T-Qualifications

Shareholder recommendations and nominations of director candidates

Shareholder recommendations
The Governance and Nominating Committee considers shareholder recommendations for candidates for the Board of Directors using the same criteria described above. The name of any recommended candidate for director, together with a brief biographical sketch, a document indicating the candidate’s willingness to serve if elected, and evidence of the nominating shareholder’s ownership of Company stock must be sent to the attention of MSC 123/9999, Office of the Corporate Secretary, Microsoft Corporation, One Microsoft Way, Redmond, WA 98052-6399.

Shareholder nominations
In addition, as described in Part 1 – “Corporate Governance at Microsoft – Shareholder Authority,” our Bylaws provide for proxy access shareholder nominations of director candidates. A shareholder who wishes to nominate a candidate must follow the procedures described in Article 1 of our Bylaws.

Our Directors

  • William H. Gates III

  • Teri L. List-Stoll

  • G. Mason Morfit

  • Satya Nadella

  • Charles H. Noski

  • Helmut Panke, Ph.D.

  • Sandra E. Peterson

  • Charles W. Scharf

  • John W. Stanton

  • John W. Thompson

  • Padmasree Warrior

View by Qualification:

  • View All
  • Technology

    • John W. Thompson
    • William H. Gates III
    • Satya Nadella
    • Charles H. Noski
    • Charles W. Scharf
    • John W. Stanton
    • Padmasree Warrior
    • Sandra E. Peterson
  • Leadership

    • John W. Thompson
    • William H. Gates III
    • Satya Nadella
    • Helmut Panke, Ph.D.
    • Charles W. Scharf
    • John W. Stanton
    • Charles H. Noski
    • Sandra E. Peterson
  • Global business

    • John W. Thompson
    • William H. Gates III
    • Teri L. List-Stoll
    • Satya Nadella
    • Charles H. Noski
    • Helmut Panke, Ph.D.
    • Charles W. Scharf
    • John W. Stanton
    • Padmasree Warrior
    • Sandra E. Peterson
  • Financial

    • John W. Thompson
    • William H. Gates III
    • Teri L. List-Stoll
    • G. Mason Morfit
    • Charles H. Noski
    • Helmut Panke, Ph.D.
    • Charles W. Scharf
    • John W. Stanton
  • Mergers and acquisitions

    • John W. Thompson
    • Teri L. List-Stoll
    • G. Mason Morfit
    • Charles H. Noski
    • Charles W. Scharf
    • John W. Stanton
    • Padmasree Warrior
  • Public company board service and governance

    • John W. Thompson
    • William H. Gates III
    • Teri L. List-Stoll
    • G. Mason Morfit
    • Satya Nadella
    • Charles H. Noski
    • Helmut Panke, Ph.D.
    • Charles W. Scharf
    • John W. Stanton
    • Padmasree Warrior
    • Sandra E. Peterson
  • Sales and marketing

    • John W. Thompson
    • Teri L. List-Stoll
    • Helmut Panke, Ph.D.
    • Charles W. Scharf
    • Sandra E. Peterson
  • Ethnic, gender, national or other diversity

    • John W. Thompson
    • Satya Nadella
    • Teri L. List-Stoll
    • Helmut Panke, Ph.D.
    • Padmasree Warrior
    • Sandra E. Peterson
  1. Gender
  2. More Diversity

View by years of Tenure:

  • View All
  • 0-2

  • 3-5

  • 6-10

  • 11-15

  • 15+

View by Independence:

Independent ()
Non-Independent ()

View by Committee:

  • View All
  • Audit


    Number of meetings: 9
    Chair: Charles H. Noski

    Audit Committee Financial Expert

    - Teri L. List-Stoll

    - Dr. Helmut Panke

    - Charles H. Noski

    • Teri L. List-Stoll
    • G. Mason Morfit
    • Charles H. Noski
    • Helmut Panke, Ph.D.
  • Compensation


    Number of meetings: 6
    Chair: John W. Stanton

    • Helmut Panke, Ph.D.
    • John W. Stanton
    • G. Mason Morfit
  • Governance and Nominating


    Number of meetings: 6
    Chair: John W. Thompson

    • John W. Thompson
    • Charles H. Noski
    • Charles W. Scharf
    • Teri L. List-Stoll
  • Regulatory and Public Policy


    Number of meetings: 3
    Chair: Helmut Panke

    • John W. Thompson
    • Helmut Panke, Ph.D.
    • John W. Stanton

View by Age:

  • View All
  • 0-45

  • 45-54

  • 55-64

  • 65-74

  • 75+

View by Leadership:

  • View All
  • Independent Chairman of the Board


    John W. Thompson
    • John W. Thompson
  • Chief Executive Officer


    Satya Nadella
    • Satya Nadella
Close

William H. Gates III

Co-Chair and Trustee, Bill & Melinda Gates Foundation


Age: 59
Director since: 1981
Independent: No
Board Committees:
Other Public Boards: Berkshire Hathaway, Inc.
Qualifications:

Mr. Gates, a cofounder of Microsoft, served as Chairman from our incorporation in 1981 until 2014. He currently acts as a Technical Advisor to Mr. Nadella on key development projects. Mr. Gates retired as an employee in 2008. Mr. Gates served as Chief Software Architect from 2000 until 2006, when he announced his two-year plan to transition out of a day-to-day full-time employee role. Mr. Gates served as Chief Executive Officer from 1981 until 2000, when he resigned as Chief Executive Officer and assumed the position of Chief Software Architect. As co-chair of the Bill & Melinda Gates Foundation, Mr. Gates shapes and approves grant- making strategies, advocates for the foundation’s issues, and helps set the overall direction of the organization.


Qualifications:

As a founder of Microsoft, Mr. Gates’ foresight and his vision for personal computing have been central to the success of Microsoft and the software industry. He has unparalleled knowledge of the Company’s history, strategies, and technologies. As Chairman and Chief Executive Officer of the Company from its incorporation in 1981 to 2000, he grew Microsoft from a fledgling business into the world’s leading software company, in the process creating one of the world’s most prolific sources of innovation and powerful brands. As Chief Software Architect from 2000 to 2006, and through 2008 when he retired as an employee of Microsoft, Mr. Gates set in motion technological and strategic programs that are a core part of the Company. He continues to provide technical and strategic input on our evolution as a productivity and platform company for the mobile-first and cloud-first world. His work overseeing the Bill and Melinda Gates Foundation provides global insights relevant to the Company’s current and future business opportunities and a keen appreciation of stakeholder interests.

Teri L. List-Stoll

Executive Vice President & Chief Financial Officer, DICK'S Sporting Goods, Inc.


Age: 52
Director since: 2014
Independent: Yes
Board Committees:
Other Public Boards: Danaher Corporation
Qualifications:

Ms. List-Stoll joined DICK’S Sporting Goods, Inc. as Executive Vice President and Chief Financial Officer in August 2015. From December 2013 to March 2015, Ms. List-Stoll served as Executive Vice President and Chief Financial Officer for Kraft Foods Group, and then as a senior advisor through May 2015. As CFO, she led Kraft’s finance, information services, and business process excellence organizations and was responsible for financial planning, financial accounting and reporting, internal audit, treasury, tax, acquisitions and divestitures, and investor relations. Ms. List-Stoll joined Kraft in September 2013 as Senior Vice President leading the business unit finance teams. Prior to Kraft, Ms. List-Stoll was at Procter & Gamble (“P&G”) for nearly 20 years, where she last served as Senior Vice President and Treasurer. Ms. List-Stoll started with P&G in 1994 and held finance leadership roles across a diverse range of areas including business unit management, supply chain, sales, accounting, and financial planning and analysis. From 1991 to 1993, Ms. List-Stoll was a fellow with the Financial Accounting Standards Board (“FASB”). Prior to her fellowship at FASB, she spent six years at Deloitte & Touche, providing financial counsel to large multinational companies.

Qualifications:

Ms. List-Stoll brings to the Board significant financial expertise, having spent her professional career in a broad range of finance and accounting roles. She has exceptional financial and operational experience from her two decades in consumer goods and retail industries. As Executive Vice President and Chief Financial Officer for DICK’S Sporting Goods and in her previous roles at Kraft Foods Group and P&G, Ms. List-Stoll has a proven record of accomplishment leading diverse and complex financial functions, providing an understanding of complex financial management and accounting matters similar to those Microsoft faces. Her experience involving business unit management, supply chain and sales at a major consumer products company provides valuable insights into the Company’s consumer opportunities.

G. Mason Morfit

President, ValueAct Capital


Age: 40
Director since: 2014
Independent: Yes
Board Committees:
Other Public Boards:
Qualifications:

Mr. Morfit is the President of ValueAct Capital, a significant Microsoft shareholder. He has been a non-managing member of ValueAct Capital Management, L.P. since 2003 and was an associate with ValueAct Capital from January 2001 to December 2002. Prior to joining ValueAct Capital, Mr. Morfit worked in equity research for Credit Suisse First Boston from 1999 to 2000. He has a B.A. from Princeton University, and is a former CFA charter holder.

Qualifications: 

Mr. Morfit is a seasoned investor involved in strategic planning for other public and private companies, including companies involved in significant periods of transition. His experience on the audit, governance, and compensation committees of other public companies positions him to be a valuable and versatile asset in a variety of contexts and committee roles. Mr. Morfit has substantial experience in analyzing financial statements and capital allocation decisions.

Former Public Company Directorships Held in the Past Five Years

  • C.R. Bard, Inc.
  • Immucor, Inc.
  • Valeant Pharmaceuticals International, Inc.

Satya Nadella

Chief Executive Officer


Age: 48
Director since: 2014
Independent: No
Board Committees:
Other Public Boards:
Qualifications:

Mr. Nadella was appointed Chief Executive Officer and a Director in February 2014. He served as Executive Vice President, Cloud and Enterprise since July 2013. From 2011 to 2013, Mr. Nadella served as President, Server and Tools. From 2009 to 2011, he was Senior Vice President, Online Services Division. From 2008 to 2009, he was Senior Vice President, Search, Portal and Advertising. Since joining Microsoft in 1992, Mr. Nadella’s roles also included Vice President of the Business Division.

Qualifications:

The Board of Directors chose Mr. Nadella to lead Microsoft as Chief Executive Officer and serve on the Board because he is a proven leader with masterful engineering skills, business vision, and the ability to bring people together. His understanding of how technology will be used and experienced around the world will serve us well in our next chapter of innovation and growth. Mr. Nadella’s decades-long history with Microsoft gives him deep insight into our culture, operations, and strategic direction. He spearheaded major strategy and technical shifts across the company’s products and services, most notably our move to the cloud and the development of one of the largest cloud infrastructures in the world supporting Bing, Xbox, Office 365 and other services. This experience is fundamental to the Company’s current strategic direction. The business groups he managed delivered strong, consistent growth, outperforming the market and taking share from competitors, demonstrating his ability to translate vision into business results.

Former Public Company Directorships Held in the Past Five Years

•  Riverbed Technology, Inc.

Charles H. Noski

Former Vice Chairman, Bank of America Corporation


Age: 63
Director since: 2003
Independent: Yes
Board Committees:
Other Public Boards: Avon Products, Inc.; The Priceline Group Inc.
Qualifications:

Mr. Noski served as Vice Chairman of Bank of America Corporation from June 2011 until September 2012. From May 2010 through June 2011, he served as Executive Vice President and Chief Financial Officer of Bank of America Corporation. From 2003 to 2005, Mr. Noski served as Corporate Vice President and Chief Financial Officer of Northrop Grumman Corporation and served as a director from 2002 to 2005. Mr. Noski joined AT&T in 1999 as Senior Executive Vice President and Chief Financial Officer and was named Vice Chairman of AT&T’s board of directors in 2002. Mr. Noski retired from AT&T upon completion of its restructuring in 2002. Prior to joining AT&T, Mr. Noski was President, Chief Operating Officer, and a member of the board of directors of Hughes Electronics Corporation, a publicly traded subsidiary of General Motors Corporation in the satellite and wireless communications business. He is immediate past Chairman of the Financial Accounting Standards Advisory Council of the FASB, a member of the AICPA and FEI, a past member of the Standing Advisory Group of the PCAOB, and a director of the National Association of Corporate Directors.

Qualifications:

With his extensive background in finance, accounting, risk, capital markets, and business operations, Mr. Noski has a unique portfolio of business skills. He has served as a senior executive officer or head of a business unit of a major public company in
a variety of contexts. A large part of Mr. Noski’s executive experience has been in the technology sector, including multinational telecommunications companies. His service with leading organizations in the accounting and auditing fields reflects his expertise in finance and accounting matters. Mr. Noski has served on a wide range of public company boards in the technology, industrial, and finance fields.

Former Public Company Directorships Held in the Past Five Years

  • Avery Dennison Corporation
  • Merrill Lynch & Co (wholly-owned subsidiary of Bank of America Corporation)

Helmut Panke, Ph.D.

Former Chairman of the Board of Management, BMW AG


Age: 69
Director since: 2003
Independent: Yes
Board Committees:
Other Public Boards: Singapore Airlines Limited, Bayer AG (Supervisory Board)
Qualifications:

Dr. Panke served as Chairman of the Board of Management of BMW Bayerische Motoren Werke AG from 2002 through 2006. From 1999 to 2002, he served as a member of the Board of Management for Finance. From 1996 to 1999, Dr. Panke was a member of the Board of Management for Human Resources and Information Technology. In his role as Chairman and Chief Executive Officer of BMW (US) Holding Corp. from 1993 to 1996, he was responsible for the company’s North American activities. He joined BMW in 1982.

Qualifications:

Dr. Panke brings a global perspective to the Microsoft Board of Directors. His almost 25-year career at BMW culminated in leading the company from 2002 to 2006, giving him experience as chief executive officer of a major international public corporation. In addition, his extensive résumé at BMW includes leadership roles in a variety of business disciplines including finance, information technology, worldwide human resources, and operations. Dr. Panke understands product manufacturing processes, how to manage a company through business cycles and intense competition, and how to build and sustain a globally recognized and respected brand. His service on the boards of other prominent international companies enhances his ability to contribute insights on achieving business success in a diverse range of geographies, economic conditions, and competitive environments.

Former Public Company Directorships Held in the Past Five Years

  • UBS AG

Sandra E. Peterson

Group Worldwide Chairman of Johnson & Johnson


Age: 56
Director since: 2015
Independent: Yes
Board Committees:
Other Public Boards: Dun & Bradstreet Corporation
Qualifications:

Ms. Peterson has served as the Group Worldwide Chairman and member of the Executive Committee of Johnson & Johnson, a diversified global health care company with leading consumer health, pharmaceutical and medical device businesses, since December 2012. Ms. Peterson previously served as Chairman of the Board of Management of Bayer CropScience AG (a subsidiary of Bayer AG) from 2010 to 2012 and, prior to that, as a member of Bayer CropScience AG’s Board of Management from July 2010 to September 2010. Prior to that, Ms. Peterson served as Executive Vice President and President, Medical Care, Bayer HealthCare LLC from 2009 to 2010, and as President, Diabetes Care Division, from 2005 to 2009. She was Group President of Government for Medco Health Solutions, Inc. (formerly Merck-Medco) from 2003 to 2004, Senior Vice President of Medco’s health businesses from 2001 to 2003 and Senior Vice President of Marketing for Merck-Medco Managed Care LLC from 1999 to 2001.

Qualifications: 

Ms. Peterson’s skills include extensive operating experience with global companies, product and marketing experience, and expertise with strategy development gained from her executive positions with Johnson & Johnson, Bayer CropScience, Bayer HealthCare and Medco Health Solutions. She has significant information technology experience, financial knowledge and understanding of how to run a highly regulated business. Ms. Peterson has over a decade of experience on the board of another U.S. public company, Dun & Bradstreet, including service as Chairman of the Innovation and Technology Committee and member of the Compensation and Benefits Committee.

Charles W. Scharf

Chief Executive Officer, Visa Inc.


Age: 50
Director since: 2014
Independent: Yes
Board Committees:
Other Public Boards: Visa Inc.
Qualifications:

Mr. Scharf has served as Chief Executive Officer and a Director of Visa Inc., a global payments company, since 2012. Previously, Mr. Scharf was a Managing Director of One Equity Partners, the private investment arm of JPMorgan Chase & Co., a global financial services firm. From 2004 to 2011, Mr. Scharf served as Chief Executive Officer of Retail Financial Services at JPMorgan Chase & Co. and from 2002 to 2004, served as Chief Executive Officer of the retail division of Bank One Corporation, a financial institution. Mr. Scharf also served as Chief Financial Officer of Bank One Corporation from 2000 to 2002, Chief Financial Officer of the Global Corporate and Investment Bank division at Citigroup, Inc., an international financial conglomerate, from 1999 to 2000, and Chief Financial Officer of Salomon Smith Barney, an investment bank, and its predecessor company from 1995 to 1999.

Qualifications:

Mr. Scharf, as a sitting CEO of a large global business, adds strategic and operational depth to the Microsoft board, as well as a deep understanding of how commerce is changing globally. Mr. Scharf has more than 25 years of payment systems, financial services and leadership experience from his senior executive roles in some of the leading financial services firms in the world. Throughout his career Mr. Scharf has positively impacted large and complex institutions, from building one of the premier retail banking operations in the U.S. at JPMorgan Chase, to rebuilding the consumer banking brand, improving financial discipline and developing senior talent at Bank One, to overseeing a major business transition and consolidation as a director of Visa Inc. and Visa U.S.A. Mr. Scharf’s leadership skills and knowledge of global finance and commerce position him to contribute significantly to the board’s oversight of our evolving business, operations, and strategies.

John W. Stanton

Chairman, Trilogy International Partners, Inc.


Age: 60
Director since: 2014
Independent: Yes
Board Committees:
Other Public Boards: Columbia Sportswear Company
Qualifications:

Mr. Stanton founded Trilogy International Partners, Inc., a wireless operator in Central and South America and New Zealand, and Trilogy Equity Partners, a private equity fund that invests in early-stage growth opportunities in the wireless ecosystem in 2005, and currently serves as Chairman of both enterprises. He was a director of Clearwire Corp. from 2008 to 2013 and Chairman between 2011 to 2013. He also served as Clearwire’s Interim Chief Executive Officer during 2011. Mr. Stanton founded and served as Chairman and Chief Executive Officer of Western Wireless Corporation, a wireless telecommunications company, from 1992 until shortly after its acquisition by ALLTEL Corporation in 2005. Mr. Stanton was Chairman and a director of T-Mobile USA, formerly VoiceStream Wireless Corporation, a mobile telecommunications company, from 1994 to 2004 and was Chief Executive Officer from 1998 to 2003.

Qualifications:

Mr. Stanton is a recognized pioneer in the wireless telecommunications industry. His leadership of four of the top wireless operators in the United States over the past three decades positions him to contribute significantly to the development of our mobile- first and cloud-first strategies. His experience developing and operating wireless networks in established and developing markets worldwide will assist our efforts to grow our worldwide mobile devices and services footprint as we integrate the Nokia acquisition. Mr. Stanton’s extensive background as a chief executive officer and director of public and private companies will lend valuable perspective and judgment to the Board’s deliberations. His record of accomplishment in multiple business endeavors demonstrates his acumen across the spectrum of strategic planning and financial matters.

Former Public Company Directorships Held in the Past Five Years

  • Clearwire Corp.

John W. Thompson

Chief Executive Officer, Virtual Instruments


Age: 66
Director since: 2012
Independent: Yes
Board Committees:
Other Public Boards:
Qualifications:

Mr. Thompson, previously lead independent director, became independent Chairman of our Board of Directors in February 2014. He currently serves as Chief Executive Officer of Virtual Instruments, a privately-held company whose products are designed to ensure the performance and availability of applications deployed in virtualized and private cloud computing environments. Since 2009, Mr. Thompson has been an active investor in early-stage technology companies in Silicon Valley. Mr. Thompson served as Chairman and Chief Executive Officer of Symantec Corp. beginning in 1999, helping transform Symantec into a leader in security, storage, and systems management solutions. Mr. Thompson stepped down as Chief Executive Officer of Symantec in 2009, and stepped down from Symantec’s board of directors in 2011. Previously, Mr. Thompson held leadership positions in sales, marketing, and software development at IBM, including general manager of IBM Americas. He was a member of IBM’s Worldwide Management Council.

Qualifications:

Mr. Thompson has a wealth of leadership experience in the technology industry, including areas such as cloud computing and information security that are important to Microsoft’s strategic direction. As Chief Executive Officer of Virtual Instruments, he understands the critical importance of performance and reliability in enterprises’ physical, virtual, and cloud computing environments. During his 10-year tenure as Chief Executive Officer of Symantec, Mr. Thompson oversaw its transformation into a leader in security, storage, and systems management solutions for individual consumers and large enterprises. Through his senior leadership experiences at Virtual Instruments, Symantec, and IBM, he has expertise in sales, marketing, technology and operations, including managing a large workforce and overseeing international business operations. Mr. Thompson’s experience also includes service as a director of large public companies.

Former Public Company Directorships Held in the Past Five Years

  • Seagate Technology PLC
  • Symantec Corporation
  • United Parcel Service

Padmasree Warrior

Former Strategic Advisor to Cisco Systems, Inc.


Age: 54
Director since: 2015
Independent: Yes
Board Committees:
Other Public Boards: The Gap, Inc.; Box, Inc.
Qualifications:

Ms. Warrior served as Strategic Advisor to Cisco Systems, Inc., a leading global networking equipment provider, from June to September 2015. Prior to that, she was Chief Technology and Strategy Officer from July 2012 to June 2015 and served as Chief Technology Officer, Senior Vice President Engineering and General Manager Global Enterprise segment from 2010 to 2012. She joined Cisco in 2008 as the Chief Technology Officer. Before joining Cisco, Ms. Warrior served in various executive roles at Motorola, Inc., a mobile device and telecommunications company, from 1999 to 2007, most recently as Executive Vice President and Chief Technology Officer from 2003 to 2007. Ms. Warrior currently serves on the Board of Directors of The Gap, Inc., a retail apparel company, and Box, Inc., a cloud-based, mobile-optimized enterprise content collaboration platform. Ms. Warrior holds a B.S. in Chemical Engineering from the Indian Institute of Technology in New Delhi and an M.S. in Chemical Engineering from Cornell University.

Qualifications: 

Ms. Warrior is widely recognized as a visionary business leader in technology. As a senior executive for Cisco, Ms. Warrior was responsible for worldwide business and technology strategy, mergers and acquisitions, equity investments, and innovation. Charged with aligning technology development and corporate strategy, she understands how to make high-stakes decisions in ambiguous and quickly evolving environments. She also has wide-ranging experience as a technical leader at Motorola addressing silicon, hardware and software development challenges. Ms. Warrior brings significant experience in driving technology and operational innovation across a global company, and in forging growth through strategic partnerships and new business models.

 

Director independence

Our Corporate Governance Guidelines provide that a substantial majority of our directors will be independent. Our Board of Directors has adopted director independence guidelines to assist in determining each director’s independence. These guidelines are available on our website at www.microsoft.com/investor/independenceguidelines. The guidelines either meet or exceed the independence requirements of NASDAQ. The guidelines identify categories of relationships the Board has determined would not affect a director’s independence, and therefore are not considered by the Board in determining director independence.

Under the director independence guidelines, the Board of Directors must affirmatively determine a director has no relationship that would interfere with the exercise of independent judgment in carrying out his or her responsibilities as a director. Annually, each director completes a questionnaire that provides information about relationships that might affect the determination of independence. Management provides the Governance and Nominating Committee and Board with relevant known facts and circumstances of any relationship bearing on the independence of a director or nominee that is outside the categories permitted under the director independence guidelines.

Based on the review and recommendation by the Governance and Nominating Committee, the Board of Directors analyzed the independence of each director and determined that Messrs. Morfit, Noski, Scharf, Stanton, and Thompson, Mmes. List-Stoll, Peterson and Warrior, and Drs. Klawe and Panke meet the standards of independence under our Corporate Governance Guidelines, the director independence guidelines, and applicable NASDAQ listing standards, including that each member is free of any relationship that would interfere with his or her individual exercise of independent judgment.

Meetings and meeting attendance

Our Board of Directors holds regularly scheduled quarterly meetings. Typically, committee meetings occur the day before the Board meeting. During one quarter each year, the committee and Board meetings occur on a single day so the evening and following day can be devoted to the Board’s annual retreat, which includes presentations and discussions with senior management about Microsoft’s long-term strategy. Besides the quarterly meetings, typically there are two other regularly scheduled meetings and several special meetings each year. At each quarterly Board meeting, time is set aside for the independent directors to meet without management present. Our Board met eight times during fiscal year 2015.

Each director nominee who is a current director attended at least 75% of the aggregate of all fiscal year 2015 meetings of the Board and each committee on which he or she served. David Marquardt, who retired from the Board at the expiration of his term following the 2014 Annual Meeting, attended less than 75% of meetings during his partial term from July 1 to December 3, 2014.

Directors are expected to attend the Annual Meeting. All of our directors attended the 2014 Annual Meeting, with the exception of Mr. Gates who was unable to attend.

Board committees

Our Board has four standing committees: an Audit Committee, a Compensation Committee, a Governance and Nominating Committee, and a Regulatory and Public Policy Committee. Each committee has a written charter, which can be found on our website at http://aka.ms/committees. The table below provides current membership for each Board committee.

MSFT-T-Committees

* Dr. Maria Klawe will not seek re-election at the 2015 Annual Meeting. Dr. Klawe currently serves on the Compensation Committee and Regulatory and Public Policy Committee. Sandra Peterson and Padmasree Warrior are both nominated for election to the Board at the Annual Meeting. The Board will consider committee appointments for Mmes. Peterson and Warrior following election to the Board.

Below is a description of each standing committee. Each committee has authority to engage legal counsel or other advisors or consultants as it deems appropriate to carry out its responsibilities.

Audit Committee

The Audit Committee assists our Board of Directors in overseeing the quality and integrity of our accounting, auditing, and reporting practices. The Audit Committee’s role includes:

  • overseeing the work of our accounting function and internal control over financial reporting,
  • overseeing internal auditing processes,
  • inquiring about significant risks, reviewing our policies for enterprise risk assessment and risk management, and assessing the steps management has taken to control these risks,
  • overseeing business continuity programs,
  • reviewing with management policies, practices, compliance, and risks relating to our investment portfolio,
  • overseeing, with the Regulatory and Public Policy Committee, cybersecurity and other risks relevant to our information technology environment, and
  • reviewing compliance with significant applicable legal, ethical, and regulatory requirements, including those relating to regulatory matters that may have a material impact on our financial statements or internal control over financial reporting.

The Audit Committee is responsible for the appointment, compensation, retention, and oversight of the independent auditor engaged to issue audit reports on our financial statements and internal control over financial reporting. The Audit Committee relies on the expertise and knowledge of management, the internal auditor, and the independent auditor in carrying out its oversight responsibilities. The Audit Committee Responsibilities Calendar accompanying the Audit Committee Charter describes the Committee’s specific responsibilities.

The Board of Directors has determined that each Committee member has sufficient knowledge in financial and auditing matters to serve on the Audit Committee. In addition, the Board has determined that Ms. List-Stoll, Mr. Noski, and Dr. Panke are “audit committee financial experts” as defined by SEC rules.

Compensation Committee

The primary responsibilities of the Compensation Committee are to:

  • assist our Board of Directors in establishing the annual goals and objectives of the chief executive officer,
  • recommend to the independent members of our Board the compensation of the chief executive officer,
  • oversee an evaluation of the performance of the Company’s other executive officers and approve their compensation targets and awards,
  • oversee and advise our Board on the adoption of policies that govern executive officer compensation programs and other compensation-related polices,
  • assist the Board in overseeing plans for executive officer development and succession,
  • oversee administration of our equity-based compensation and retirement plans, and
  • review and advise our Board and management about policies, programs, and initiatives for diversity and inclusion and workforce management.

Our senior executives for human resources and compensation and benefits support the Compensation Committee in its work. The Compensation Committee delegates to senior management the authority to make equity compensation grants to employees who are not executive officers and to administer the Company’s equity-based compensation plans. The Compensation Committee periodically reviews the compensation paid to non-employee directors, and makes recommendations to our Board of Directors for any adjustments.

The Compensation Committee Charter describes the specific responsibilities and functions of the Committee.

Compensation consultant
The Compensation Committee retains Semler Brossy Consulting Group, LLC (“Semler Brossy”) to advise the Committee on marketplace trends in executive compensation, management proposals for compensation programs, and executive officer compensation decisions. Semler Brossy also evaluates compensation for the next levels of senior management and equity compensation programs generally. The firm also consults with the Compensation Committee about its recommendations to the Board of Directors on chief executive officer and director compensation.

Consultant independence
Semler Brossy is directly accountable to the Compensation Committee. To maintain the independence of the firm’s advice, Semler Brossy does not provide any services for Microsoft other than those described above. The Compensation Committee has adopted Compensation Consultant Independence Standards, which can be viewed at www.microsoft.com/investor/compconsultant. This policy requires that the Compensation Committee annually assess the independence of its compensation consultant. A consultant satisfying the following requirements will be considered independent. The consultant (including each individual employee of the consultant providing services):

  • is retained and terminated by, has its compensation fixed by, and reports solely to the Compensation Committee,
  • is independent of the Company,
  • will not perform any work for Company management except at the request of the Compensation Committee chair and in the capacity of the Committee’s agent, and
  • does not provide any unrelated services or products to the Company, its affiliates, or management, except for surveys purchased from the consultant firm.

In assessing the consultant’s independence, the Compensation Committee considers the nature and amount of work performed for the Committee during the year, the nature of any unrelated services performed for the Company, and the fees paid for those services in relation to the firm’s total revenues. The consultant annually prepares for the Compensation Committee an independence letter providing assurances and confirmation of the consultant’s independent status under the policy. The Compensation Committee believes that Semler Brossy has been independent during its service for the Committee.

Governance and Nominating Committee

The principal responsibilities of the Governance and Nominating Committee are to:

  • annually establish the process for reviewing the chief executive officer’s performance,
  • determine and recommend the slate of director nominees for election to our Board of Directors at the annual shareholders meeting,
  • identify, recruit, and recommend candidates for the Board,
  • review and make recommendations to the Board about the composition of Board committees,
  • annually evaluate the performance and effectiveness of the Board,
  • monitor adherence to, review, and recommend changes to our corporate governance framework, and
  • review and provide guidance to the Board and management about the framework for the Board’s oversight of and involvement in shareholder engagement.

The Governance and Nominating Committee annually reviews the charters of Board committees and, after consultation with the respective Committees, makes recommendations, if necessary, about changes to the charters. The Governance and Nominating Committee Charter describes the specific responsibilities and functions of the Committee.

Regulatory and Public Policy Committee

The principal responsibilities of the Regulatory and Public Policy Committee are to:

  • review and advise the Board of Directors and management about legal, regulatory, and compliance matters concerning competition and antitrust, data privacy, cybersecurity, workforce and immigration laws and regulation,
  • with the Audit Committee, review risks relevant to our information system architecture and controls and cybersecurity,
  • with the Compensation Committee, review policies, programs, and initiatives for workforce management and diversity and inclusion, and
  • review our policies and programs that relate to matters of corporate citizenship, including human rights, corporate social responsibility, environmental sustainability, supply chain management, and political activities and expenditures.

The Regulatory and Public Policy Committee Charter describes the specific responsibilities and functions of the Committee.

Director Compensation

The Compensation Committee periodically reviews compensation paid to non-employee directors and makes recommendations for adjustments, as appropriate, to the full Board of Directors. Our objective for compensation to non-employee directors is to pay at or near the median of the Dow 30, to award the majority of compensation in equity, and to make meaningful adjustments every few years, rather than smaller adjustments that are more frequent. The Audit Committee chair retainer increased from $15,000 to $30,000 effective December 3, 2014 in consideration of the time commitment associated with this role. There were no other changes to director compensation for fiscal year 2015.

Non-employee director compensation structure

MSFT-T-retainers

* In December 2014, Mr. Gates waived his future cash and equity retainers.

The Company pays for reimbursement of reasonable expenses incurred in connection with Board-related activities.

Director retainers are paid quarterly in arrears. Quarterly periods are measured beginning with the Annual Meeting. At the end of each quarterly period, we pay 25% of the total annual retainer to each director. Retainers are pro-rated for directors who join or leave the Board or have a change in Board role during a quarterly period.

Directors may elect to defer and convert to equity all or part of their annual cash retainer, and to defer receipt of all or part of their annual equity retainer under the Deferred Compensation Plan for Non-Employee Directors. Amounts deferred are maintained in bookkeeping accounts that are deemed invested in Microsoft common stock, and dividends paid on the deferred equity are deemed to be invested in our common stock. We calculate the number of shares credited by dividing each quarterly amount deferred by the closing market price of our common stock on the originally scheduled payment date. Accounts in the plan are distributed in shares of Microsoft common stock, with payments either in installments beginning on separation from Board service or in a lump sum amount paid no later than the fifth anniversary after separation from Board service.

Non-executive Chairman compensation

The independent members of the Board appointed John Thompson as independent non-executive Chairman of the Board. Mr. Thompson’s pay reflects the additional time commitment for this role compared to other non-employee directors, which includes: (i) managing meetings of the Board of Directors, leading the work to set the agenda for Board meetings, leading the Board’s annual chief executive officer performance review, and representing the Board at the annual shareholders meeting, (ii) meeting with the Company’s investors, (iii) acting as an advisor to Mr. Nadella on strategic aspects of the chief executive officer role with regular consultations on major developments and decisions that are likely to be of interest to the Board, and (iv) at the request of Mr. Nadella, interacting with external audiences. To compensate Mr. Thompson for the greater responsibilities of the non-executive Chairman role, he receives the annual chairman retainer in lieu of the regular Board retainers.

Director stock ownership policy

To align the interests of our directors and shareholders, our Board of Directors believes that directors should have a significant financial stake in Microsoft. Under the Corporate Governance Guidelines, each director should own Microsoft shares equal in value to a minimum of three times the base annual retainer payable to a director. Each director must retain 50 percent of all net shares (post tax) from the retainer until reaching the minimum share ownership requirement. Stock deferred under the Deferred Compensation Plan for Non-Employee Directors counts toward the minimum ownership requirement. Each of our directors complied with our stock ownership policy at the end of fiscal year 2015.

Fiscal year 2015 director compensation
This table describes the cash and equity portions of the annual retainer paid to each non-employee director in fiscal year 2015.¹

MSFT-T-Directorcomp

(1) Mr. Nadella received no compensation as a director. He is excluded from the table because we fully describe his compensation in Part 3 – “Named Executive Officer compensation.”
(2) The value of fractional shares is excluded.
(3) Mr. Ballmer retired from the Board on August 19, 2014.
(4) Ms. Dublon retired from the Board on December 3, 2014.
(5) In December 2014, Mr. Gates waived his future cash and equity retainers.
(6) Ms. List-Stoll’s compensation began October 1, 2014 when she joined the Board. She elected to defer a portion of the cash component of her compensation. The stock award value converted into 2,459 shares of our common stock.
(7) Mr. Marquardt retired from the Board on December 3, 2014.
(8) Mr. Noski’s compensation was increased as a result of the Audit Committee chair retainer increase effective December 3, 2014. He elected to defer the stock award component of his compensation. The stock award value converted into 3,328 shares of our common stock.
(9) Mr. Scharf’s compensation began October 1, 2014 when he joined the Board.
(10) Mr. Stanton’s compensation began July 30, 2014 when he joined the Board.
(11) Mr. Thompson elected to defer the stock award component of his compensation. The stock award value converted into 12,763 shares of our common stock.

Certain relationships and related transactions

We are a global company with extensive operations in the United States and many foreign countries. Every year we spend tens of billions of dollars for goods and services purchased from third parties. The authority of our employees to purchase goods and services is widely dispersed. Because of these far-reaching activities, there may be transactions and business arrangements with businesses and other organizations in which one of our directors, executive officers, or nominees for director, or their immediate families, or a greater than 5% owner of our stock, may also be a director, executive officer, or investor, or have some other direct or indirect material interest. We will refer to these relationships generally as related-party transactions.

Related-party transactions have the potential to create actual or perceived conflicts of interest between Microsoft and its directors and executive officers or their immediate family members. The Audit Committee has established a written policy and procedures for review and approval of related-party transactions. If a related-party transaction subject to review directly or indirectly involves a member of the Audit Committee (or an immediate family member or domestic partner), the remaining Committee members will conduct the review. In evaluating a related-party transaction, the Audit Committee considers, among other factors:

  • the goods or services provided by or to the related party,
  • the nature of the transaction and the costs to be incurred by Microsoft or payments to Microsoft,
  • the benefits associated with the transaction and whether comparable or alternative goods or services are available to Microsoft from unrelated parties,
  • the business advantage Microsoft would gain by engaging in the transaction,
  • the significance of the transaction to Microsoft and to the related party, and
  • management’s determination that the transaction is in the best interests of Microsoft.

To receive Audit Committee approval, a related-party transaction must have a Microsoft business purpose and be on terms that are fair and reasonable to Microsoft, and as favorable to Microsoft as would be available from non-related entities in comparable transactions. The Audit Committee also requires that the transaction meet the same Microsoft standards that apply to comparable transactions with unaffiliated entities.

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