Microsoft 2009 Annual Report Download - page 73

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PAGE 73
Executive Officer Incentive Plan
In fiscal year 2009, the Compensation Committee approved a new Executive Officer Incentive Plan (“EOIP”) for
executive officers of the Company. The EOIP replaced the annual cash bonus opportunity and equity award plans
for executive officers. Under the EOIP, the Compensation Committee makes awards of performance-based
compensation for specified performance periods. For fiscal year 2009, executive officers were eligible to receive
annual awards comprised of cash and SAs from an incentive pool funded based on the achievement of operating
income targets. Following approval of the awards for fiscal year 2009, 20% of the award will be paid to the executive
officers in cash, and the remaining 80% will be converted into an SA for shares of Microsoft common stock. The SA
portion of the award will vest one-quarter immediately after the award is approved following fiscal year 2009, and
one-quarter on August 31 of each of the following three years.
The Company will grant awards to the executive officers in September 2009 based on the performance period of
July 1, 2008 through June 30, 2009, from an incentive pool equal to 0.35% of the Company’s fiscal year 2009
operating income. Each executive officer will receive a fixed percentage of the pool ranging between 0 and 150% of
a target based on an assessment of the executive officer’s performance during fiscal year 2009. The number of
shares subject to the SA portion of the award will be determined by dividing the value of the award by the closing
price of Microsoft common stock on August 31, 2009.
Activity for All Stock Plans
We measure the fair value of SAs and SPSAs based upon the market price of the underlying common stock as of
the date of grant, reduced by the present value of estimated future dividends. SAs and SPSAs EOIP are amortized
over their applicable vesting period (generally four to five years) using the straight-line method. The fair value of
each award grant is estimated on the date of grant using the following assumptions:
Y
ear Ended June 30, 2009 2008
2007
Dividends per share (quarterly amounts) $0.11 - $0.13 $0.10 - $0.11
$0.09 - $0.10
Interest rates range 1.4% - 3.6% 2.5% - 4.9%
4.3% - 5.3%
During fiscal year 2009, the following activity occurred under our existing plans:
Shares
(In millions)
Weighted
Average
Grant-Date
Fair Value
Stock awards:
Nonvested balance, beginning of year 153 $26.12
Granted 91 $24.95
Vested (43 ) $25.56
Forfeited (10 ) $26.08
Nonvested balance, end of year 191 $25.69
Shared performance stock awards:
Nonvested balance, beginning of year 36 $26.14
Granted 10 $25.93
Vested (18 ) $25.07
Forfeited – –
Nonvested balance, end of year 28 $26.79