This is one of the most refreshing ideas in business today, have managers actually held accountable for how well their divisions are doing, and how much money they are making. In the only instance I have seen of this phenomenon in a long time, Microsoft top leaders all took a pay cut because of the recession.
When you look at over compensated executives (See “Top 5 over compensated executives” over at CNN Money), and it seems after the banking meltdown and how compensation has become a huge issue that is getting the G-20’s attention, it is refreshing to see senior management being held accountable for anything. Microsoft has done a good deed by setting an example that it is possible to hold senior management accountable for the performance of their company without people running out the doors because they got a few hundred thousand less in overall compensation.
While many of us love to bash Microsoft for everything and anything, this is a great move on the part of the company when the appearances of senior management is more “looting the company” (see this article and this article) rather than fostering long term strategic goals, and then making sure that the company gets there. We have strayed from the idea of long term survival into the realm of month to month or quarter to quarter thinking running a business rather than ensuring that the business is truly viable.
Techflash reports that:
For fiscal year 2009, Mr. Ballmer’s Incentive Plan award was $600,000 which was 90% of his base salary. This amount was recommended by the Compensation Committee to the Board based on his performance appraisal by the independent members of the Board and other information deemed relevant, including Mr. Ballmer’s performance against his individual commitments. Source: Techflash
Business Insider and Paid Content also chime in on the overall effect that taking a pay cut can have on senior management. With all the real issues with the economy right now, and the 9.7% unemployment rate amongst the general population (with a “real” unemployment rate of something over 16% according to the Democratic Underground) seeing someone in the senior management levels taking a pay cut is a feel good measure. It is also brilliant Public Relations, especially if the focus on the number is “Steve Ballmer took a 10% pay cut in 2009” rather than Steve only make 600K in bonuses this year (which is well above the median average income in the USA). In all, it is a good thing to see that at least one company is behaving responsibly when it comes to executive compensation.
With that and Windows 7, maybe Microsoft will have a much better FY 2010. Well that and if they can get Courier going, and windows mobile released, and a few other things that are totally cool, but still vaporware.
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- Microsoft reports executive salaries, bonuses (seattlepi.com)
- Microsoft chief executive Steve Ballmer’s pay cut as sales fall (telegraph.co.uk)
- Microsoft makes business case for Windows 7 (news.cnet.com)
- Microsoft pushes business efficiency with event Tuesday (seattlepi.com)
- Microsoft discloses exec salaries, sort of (seattletimes.nwsource.com)
- Microsoft’s Top Executives Get A Paycut (paidcontent.org)
(Cross-posted @ TechWag)
