Microsoft Adopts Plan to Keep Executives During CEO Shift

Microsoft Corp. (MSFT) is altering its compensation plan so that the company can use special equity incentives to retain executives during a transition to a new chief executive officer.

The software maker’s board approved the potential stock awards, which will vest over a term of at least 30 months, seeking to ensure “continuity of key leaders during the transition,” Microsoft said in a filing yesterday.

Steve Ballmer, Microsoft’s CEO since 2000, said last month that he will retire within a year and directors are currently looking for his replacement among internal and external candidates. The change in leadership is happening amid the company’s biggest reorganization in more than a decade, as it grapples with a decline in personal-computer sales as consumers shift to smartphones and tablets. Adding to the upheaval, Microsoft said earlier this month that it plans to acquire Nokia Oyj (NOK1V)’s handset business.

While the incentive is also aimed at making sure “key executives have sufficient unvested equity to provide alignment with shareholders,” the stock awards won’t exceed share limits previously in place, the Redmond, Washington-based company said in the filing.

Some Microsoft executives sought to reassure spooked managers by e-mailing their staff last month to say they remain committed to the CEO’s reorganization plan, even after Ballmer said he would retire, people with knowledge of the matter had said. Some executives saw an increase in outside job offers since the restructuring plan was unveiled in July, and others may be tempted to leave since stock grants and bonuses are awarded in late August, said the people.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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