MS Shareholders Have 'Say-On-Pay', but Not Binding

It seems as if Microsoft investors will be receiving more than just dividend checks in the near future. The company will soon give shareholders the opportunity to voice their opinion on executive salaries.

Shareholders will be allowed to vote every three years on the fairness of financial compensation doled out to Microsoft executives. The first vote is set for the company's annual meeting in November.

"Say-on-Pay" Votes

The decision to adopt the system, known as "say-on-pay" votes, comes after a call for more shareholder involvement in certain aspects of the company's affairs, especially in the midst of the current economic decline. Now, more than ever, major American companies the size of Microsoft cannot afford to make any miscalculations. (Source: go.com)

This past summer, the U.S. House of Representatives approved a bill to give Microsoft shareholders annual votes on executive compensation, but legislation has been at a standstill.

Votes Non-Binding

Microsoft did announce that the votes of shareholders would not be binding. Rather, the votes will serve as indicators for problem areas in the company's payment structure.

For example, if the shareholders provide an almost unanimous negative vote against one executive, Microsoft would consult voters towards understanding the decision. If the reasons suffice, corrective actions would be taken.

Turbulent 2009 Fiscal Year

Despite a recent announcement that Win7 is expected to renew belief in MS Windows franchise, Microsoft did suffer much turbulence during the fiscal year of 2009. The company experienced its first-ever decline in annual revenue, while operating profit fell to $20.4 billion (an actual decrease of about 9 per cent). Worse yet, over the entire 12-month period, shares dropped a whopping 13.6 per cent. (Source: yahoo.com)

In January, Microsoft found themselves to be the bearers of bad news, announcing that all employees and executives would not be receiving merit-based salary increases for the fiscal year of 2010.