Microsoft 2010 Annual Report Download - page 68

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Stock Plans
We have stock plans for directors and for officers, employees, consultants, and advisors. At June 30, 2010, an
aggregate of 690 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 exercises and vestings of
awards granted under all of our stock plans.
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 2010, 2009, and 2008 with performance periods of July 1, 2009 through June 30,
2010, July 1, 2008 through June 30, 2009, and July 1, 2007 through June 30, 2008, respectively. In September
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
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 years 2010 and 2009, executive officers were eligible to
receive annual awards comprised of cash and SAs from an incentive pool equal to a percentage of the Company’s
operating income. For fiscal year 2010 it was 0.45% of operating income, and for fiscal year 2009 it was 0.35% of
operating income. 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 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.
We grant awards from the incentive pool to the executive officers in September following the end of the fiscal year
based on the officer’s performance during the prior fiscal year period. Each executive officer receives 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 the fiscal year. The number of shares subject to the SA portion of the award is determined by
dividing the value of the award by the closing price of Microsoft common stock on August 31 of each year.
Activity for All Stock Plans
The fair value of each award is estimated on the date of grant using the following assumptions:
Y
ear Ended June 30, 2010 2009
2008
Dividends per share (quarterly amounts) $ 0.13 $ 0.11 - $ 0.13
$ 0.10 - $ 0.11
Interest rates range 2.1% - 2.9% 1.4% - 3.6%
2.5% - 4.9%