Microsoft 2012 Annual Report Download - page 75

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Stock Plans (Excluding Stock Options)
Stock awards
Stock awards (“SAs”) are grants that entitle the holder to shares of Microsoft common stock as the award vests. Our SAs
generally vest over a five-year period.
Shared performance stock awards
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.
We granted SPSAs for fiscal years 2012, 2011, and 2010 with performance periods of July 1, 2011 through June 30,
2012, July 1, 2010 through June 30, 2011, and July 1, 2009 through June 30, 2010, respectively. In August following the
end of each 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 12% 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 performance period, and an additional one-quarter of the shares vest on each of the following three
anniversaries of the grant date.
Executive officer incentive plan
Under the Executive Officer Incentive Plan (“EOIP”), the Compensation Committee awards performance-based
compensation to executive officers for specified performance periods. During the periods reported, executive officers were
eligible to receive annual awards comprising cash and SAs from an aggregate incentive pool equal to a percentage of
consolidated operating income. For fiscal years 2012, 2011, and 2010, the pool was 0.3%, 0.25%, and 0.45% of operating
income, respectively.
In September following the end of the fiscal year, each executive officer may receive a combined cash and SA award with
a total value equal to a fixed percentage of the aggregate pool. The fixed percentage ranges between 0% and 150% of a
target based on an assessment of the executive officer’s performance during the prior fiscal year. Following approval of
the awards, 20% of the award is payable to the executive officers in cash, and the remaining 80% is converted into an SA
for shares of Microsoft common stock. The number of shares subject to the SA portion of the award is determined by
dividing the value of 80% of the total award by the closing price of Microsoft common stock on the last business day in
August of each year. The SA portion of the award vests one-quarter immediately after the award is approved following
fiscal year-end and one-quarter on August 31 of each of the following three years.
Activity for all stock plans
The fair value of each award was estimated on the date of grant using the following assumptions:
Year Ended June 30,
2012
2011
2010
Dividends per share (quarterly amounts)
$
0.16 - $ 0.20
$
0.13 - $ 0.16
$
0.13
Interest rates range
0.7% - 1.7%
1.1% - 2.4%
2.1% - 2.9%