Executive Compensation - Microsoft's Risk-return Tradeoff



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Code : GOV0006

Year :
2004

Industry : Internet and e-commerce

Region : USA

Teaching Note:Not Available

Structured Assignment :Not Available

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Abstract: In the corporate America, owners, co-founders and top executives have been compensated with stock options, a profit sharing concept since the 1800s.

Microsoft has extended stock options to the rank-and-file employees since its public offering in 1986. During the IT boom, when Microsoft's stock prices soared, stock options had created the so called 'Microsoft millionaires'.

Stock options helped create a culture of employee ownership and entrepreneurial spirit. But with the decline in stock prices and growing anguish among employees, Microsoft shifted to restricted stock. The pay package was also seen as maintaining a balance between shareholders and employees' interests

Pedagogical Objectives:

  • To discuss the accounting, human resource and corporate governance perspectives of the shift in the compensation strategy by Microsoft.

    Keywords : Corporate Governance Case Study, Employee stock options, Microsoft's stock options, Restricted stock options, Expensing options, Profit sharing concept, Executive compensation, FASB (Financial Standards Accounting Board), Wealth sharing concept, Microsoft millionaires, Underwater stock options, Non-qualified options, Cost of options, Capital gains, Pay for performance

    Contents :
    » Stock Options: The Birth and the Death
    » Restricted Stock Options – Microsoft’s Initiatives


    Case Introduction >>


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