It's common practice for companies to give their big executives equally big bonuses. Microsoft's CFO Amy Hood got $2.3 million for the last fiscal year, for example, while President Brad Smith received 1.9.
Of course, Nadella's role is much more encompassing, so his bonus is pretty hefty. In total, the CEO got around 17.7 million, including base salary and stock options. There's no denying that it's a lot of money, but it's also significantly less than last year.
According to the Microsoft board, this is due to an assessment of Nadella's performance. The SEC filing reveals that the CEO reached 124% of his bonus filing, which is 16% less than last year.
The board assesses Nadella on many factors, including input from executives, his personal thoughts on his performance, how Microsoft has fared against competitors and the board's thoughts as a whole.
The board was generally very impressed with Nadella's, performance, thus the significant 124% of the compensation target.
However, the board also noted that he fell short on the following:
- “Revenue was slightly below target due to our change in phone strategy.
- Windows 10 MAD fell short of expectations for the year, in part because of the change in phone strategy, pushing the goal to achieve 1 billion Windows 10 MAD beyond fiscal year 2018.
- Mobile devices fell short of plan and execution against competitors could have been stronger.”
Despite this, Nadella performed very well most areas, and the board mostly praised his role. They noted that the change in phone strategy “created the opportunity to reprioritize assets to growth areas.”
This led to a 3.2% gross margin increase year over year, among other things. Commercial Office 365 seat growth was 45% under Nadella, while Commerical Cloud APR also grew by 50%.
Of course, the heart of a good CEO is his ability to inspire employees, and the board notes:
“Mr. Nadella made very significant progress developing and asserting the aspire-to culture for the Company, and driving that culture change leading to a new sense of purpose at the Company. Mr. Nadella made decisions on people and processes that contributed significantly to building a strong leadership team and robust results in recruiting.”