Microsoft promises Nadella up to $18M for fiscal year 2015

Gets big raise to go along with the big promotion to CEO

Microsoft this week set Satya Nadella's annual base salary at $1.2 million, nearly twice his predecessor's but right on the average of CEOs in the technology industry, an executive compensation expert said today.

"His base salary is pretty much right on market," said Bob Buford, a Portland, Ore.-based compensation consultant. "If you look at their peer companies, those in technology average $1.2 million, while those in what they call the 'Dow 30' peer group is about $1.4 million."

The technology firms that Microsoft uses for compensation comparison purposes include Amazon, Apple, Dell, Google, IBM, Intel and others. The out-of-industry group includes American Express, Coca-Cola, ExxonMobil, Pfizer, Wal-Mart and 20 other American corporations, according to a filing with the U.S. Securities & Exchange commission last October.

"Microsoft is playing it safe, but certainly placing more emphasis on cash, but that's understandable for a guy who has far less equity than Ballmer," said Buford.

Former CEO Steve Ballmer's annual salary was $697,500, or 42% less than Nadella's. Ballmer, however, hardly needed the money, since he's one of the world's richest, with an estimated net worth of $15.2 billion, most of it in Microsoft stock, according to Forbes.

Nadella's previous salary as head of Microsoft's cloud-computing division was $669,167; he got a big bump -- a 79% increase -- with the promotion to CEO. His total compensation package for the 2015 fiscal year, which starts July 1, could be as much as $18 million, or 144% higher than the $7.6 million he received in fiscal 2013.

On Tuesday Microsoft named Nadella, 46, as its third-ever CEO, replacing Ballmer, who last year announced he would retire. Ballmer may not have been fired, but he was certainly pushed out, analysts have said, because he was either not unwilling or unable to accelerate changes at the Redmond, Wash. company. Microsoft faces an historic downturn in new PC sales and struggles in the now-booming mobile device and services markets.

Last year, Microsoft's board reduced Ballmer's bonus, citing the poor performance of Windows 8 and the $900 million Surface RT write-off. It was the second year running that the board paid Ballmer less than the maximum bonus he could have earned.

Like all the top executives at Microsoft, Nadella is eligible for a bonus. The bonus, paid in cash rather than stock, can be as high as 300% of his base salary, or $3.6 million in fiscal year 2015.

For the remainder of fiscal year 2014, Nadella would be paid up to three times as much as his CEO salary was between Feb. 4 and June 30.

Nadella compensation
The bulk of Nadella's $18 million compensation package for the 2015 fiscal year will come from a stock-based bonus. (Data: Microsoft.)
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