Microsoft 2008 Annual Report Download - page 62

PAGE 61
NOTE 18 EMPLOYEE STOCK AND SAVINGS PLANS
Stock-based compensation and related income tax benefits were as follows:
(In millions) 2008
2007 2006
Total stock-based compensation $
1
,479 $
1
,550 $
1
,715
Income tax benefits related to stock-based compensation $ 518 $ 542 $600
Employee Stock Purchase Plan. We have an employee stock purchase plan for all eligible employees.
Compensation expense for the employee stock purchase plan is recognized in accordance with SFAS
No. 123(R). Shares of our common stock may be purchased by employees at three-month intervals at 90% of the
fair market value on the last day of each three-month period. Employees may purchase shares having a value not
exceeding 15% of their gross compensation during an offering period. Employees purchased the following shares:
(Shares In millions) 2008
2007 2006
Shares purchased 18 17 17
Average price per share $
2
6.78 $
2
5.36 $23.02
At June 30, 2008, 107 million shares were reserved for future issuance.
Savings Plan. We have a savings plan in the United States that qualifies under Section 401(k) of the Internal
Revenue Code, and a number of savings plans in international locations. Participating U.S. employees may
contribute up to 50% of their salary, but not more than statutory limits. We contribute fifty cents for each dollar a
participant contributes in this plan, with a maximum contribution of 3% of a participant’s earnings. Matching
contributions for all plans were $238 million, $218 million, and $178 million in fiscal years 2008, 2007, and 2006,
respectively. Matching contributions are invested proportionate to each participant’s voluntary contributions in the
investment options provided under the plan. Investment options in the U.S. plan include Microsoft common stock,
but neither participant nor our matching contributions are required to be invested in Microsoft common stock.
Stock Plans. We have stock plans for directors and for officers, employees, consultants, and advisors. At
June 30, 2008, an aggregate of 786 million shares were authorized for future grant under our stock plans, which
cover stock options, stock awards, and shared performance stock awards. Awards that expire or are canceled
without delivery of shares generally become available for issuance under the plans. We issue new shares to
satisfy stock option exercises.
Stock Awards and Shared Performance Stock Awards. Stock awards (“SAs”) are grants that entitle the
holder to shares of common stock as the award vests. Our SAs generally vest over a five-year period.
Shared performance stock awards (“SPSAs”) are a form of SA in which the number of shares ultimately
received depends on our business performance against specified performance targets. The performance period
for SPSAs issued in fiscal years 2004, 2005, and 2006 was July 1, 2003 through June 30, 2006 (January 1, 2004
through June 30, 2006 for certain executive officers). Following the end of the performance period, the
Compensation Committee of the Board of Directors determined that the number of shares of SAs to be issued
was 37 million, based on the actual performance against metrics established for the performance period. One-
third of the awards vested in each of the fiscal years 2007 and 2008. An additional one-third of the awards will
vest in fiscal year 2009. Because the SPSAs covered a three-year period, SPSAs issued in fiscal year 2006 were
given only to newly hired and promoted employees eligible to receive SPSAs.
The Company granted SPSAs for fiscal years 2007 and 2008 with performance periods of July 1, 2006 through
June 30, 2007 and July 1, 2007 through June 30, 2008, respectively. At the end of the fiscal year performance
period, the number of shares of stock subject to the award is determined by multiplying the target award by a
percentage ranging from 0% to 150%. The percentage is based on performance metrics for the performance
period, as determined by the Compensation Committee of the Board of Directors in its sole discretion. An
additional number of shares, approximately 15% of the total target SPSAs, are available as additional awards to
participants based on individual performance. One-quarter of the shares of stock subject to each award vest
following the end of the