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Submitted to: NARASIMHA RAO
Submitted by: M.Rajesh Kumar P.Rajesh.
Good corporate governance helps create a foundation from which we can continue to deliver innovative technology solutions that provide opportunities for our customers and partners. Our Board establishes. 2 MICROSOFT. and monitors the standards and policies for business practices. and a Finance Committee. a Governance and Nominating Committee. and to require accountability for stewardship of those resources Key Issues and Solutions Strong corporate governance at Microsoft starts with a Board of Directors that is independent. review. oversees internal controls over financial reporting. a Compensation Committee. the Board of Directors establishes and promotes Microsoft business and organizational objectives. an Audit Committee. ethics.Microsoft on the Topic: Corporate Governance Overview Corporate governance at Microsoft serves several purposes: • To establish and preserve management accountability to Microsoft owners by appropriately distributing rights and responsibilities among Microsoft Board members. helps to ensure the company follows responsible business practices and operates with integrity and accountability. Each committee is led by and composed solely of independent directors. and institute strong financial controls. maintains. and compliance throughout Microsoft. track performance. Board Committees—The Microsoft Board of Directors has five committees: an Antitrust Compliance Committee. and shareholders • To provide a structure through which management and the Board of Directors set objectives and monitor performance • To strengthen and safeguard our culture of business integrity and responsible business practices • To encourage the efficient use of resources. Role of the Board of Directors—Microsoft shareholders elect the Board of Directors to oversee company management and to ensure shareholders’ long-term interests are served. and oversees Microsoft business affairs. and that will produce long-term shareholder value. and counsel. and works with management to set strategic business objectives. engaged. as well as Microsoft. and is responsible for the review and oversight of company activities in the areas designated in its charter.COM/CITIZENSHIP . The Board works with Microsoft management to determine the company's mission and long-term strategy. oversees CEO succession planning. Through oversight. and assesses business risks and strategies for risk mitigation. managers. and committed to creating long-term value for our shareholders. The Board also performs the annual CEO evaluation.
directors will be elected by the vote of the majority of votes cast. in the past 12 months we have adopted policies designed to strengthen our corporate governance framework including: • Amended our Bylaws to incorporate a majority vote standard for director elections as described above on page 1 “Adoption of Majority Vote Standard for Director Elections. which provides that the Compensation Committee will use a consultant who is independent and devoid of other significant business relationships with management and Microsoft Adopting formal stock ownership and holding requirements for Company executives. and best practice developments to determine those that will best serve the interests of our shareholders. In a contested election. In support of this commitment. A contested election is one in which the number of nominees exceeds the number of directors to be elected Implementing a Policy for Compensation Consultant Independence. In an uncontested election. A contested election is one in which the number of nominees exceeds the number of directors to be elected. Examples of changes the Board of Directors has made to strengthen our corporate governance framework include: • Amending our Bylaws to implement a majority vote standard for director elections. directors will be elected by the vote of a plurality of votes cast.Corporate Governance Guidelines—Over the course of Microsoft history.” In an uncontested election. The Board periodically reviews evolving legal. • Implemented a Policy for Compensation Consultant Independence. The Board periodically reviews evolving legal. and to align shareholder and executive interests Revising our Corporate Governance Guidelines to further strengthen our Board’s annual evaluation process by adding individual director assessments in addition to the existing practice of performing Board and Committee assessments • • • Microsoft’s Board of Directors is committed to maintaining strong corporate governance principles and practices. directors will be elected by the vote of the majority of the votes cast. directors will be elected by the vote of a plurality of the votes cast. Corporate Governance Principles and Practices—The Microsoft Board of Directors is committed to maintaining strong corporate governance principles and practices. the Board of Directors has developed corporate governance policies and practices to help it fulfill its responsibilities. to ensure the Board has the necessary authority and practices in place to review and evaluate Microsoft business operations and to make decisions that are independent of company management. regulatory. whereby each executive officer is required to maintain a minimum equity stake in Microsoft to promote a long-term perspective in managing the enterprise.COM/CITIZENSHIP . These policies are set forth in the Corporate Governance Guidelines. which provides that the 3 MICROSOFT. regulatory. In a contested election. and best practice developments to determine those that will best serve the interests of our shareholders.
The guidelines are subject to future refinement or changes as the Board may find necessary or advisable for Microsoft in order to achieve these objectives. Role of the Board Shareholders elect the Board to oversee management and to assure that shareholder longterm interests are served. review. The Compensation Committee oversees risks relating compensation programs and policies. foreign exchange and other financial risks. • Revised our Corporate Governance Guidelines to further strengthen our Board’s annual evaluation process by adding individual director assessments in addition to the existing practice of performing Board and Committee assessments.Compensation Committee will use a consultant who is independent and devoid of other significant business relationships with management and Microsoft. and to align shareholder and executive interests. Introduction Over the course of Microsoft's history. and counsel. It also reviews the Company’s policies for risk assessment and assesses steps management has taken to control significant risks. assessment and mitigation. works with management to determine the Company's mission and long-term strategy. • Adopted formal stock ownership and holding requirements for Company executives whereby each executive officer is required to maintain a minimum equity stake in Microsoft to promote a long-term perspective in managing the enterprise. the Board establishes and promotes Microsoft's business and organizational objectives. These governance policies are memorialized in these guidelines to assure that the Board will have the necessary authority and practices in place to review and evaluate the Company's business operations and to make decisions that are independent of the Company's management. performs the annual Chief Executive Officer evaluation. In each case management periodically reports to the Board or relevant committee. oversees CEO succession planning. tax. the Board of Directors has developed corporate governance policies and practices to help it fulfill its responsibilities to shareholders. The Audit Committee reviews and assesses the Company’s processes to manage business and financial risk and financial reporting risk. Each committee charged with risk 4 MICROSOFT. which provides guidance on risk appetite.COM/CITIZENSHIP . The Board oversees the Company's business affairs and integrity. and establishes internal control over financial reporting. The Board exercises direct oversight of strategic risks to the Company. The Finance Committee oversees investment. Through oversight. The Antitrust Compliance Committee oversees competition law related risks.
government. In making its recommendations to the Board. including general understanding of marketing. The Board believes 8 to 11 members is an appropriate size based on the Company's present circumstances. customers. the Board takes into account many factors. education. including executive search firms and shareholder recommendations. In evaluating the suitability of individual Board members. The Governance and Nominating Committee uses a variety of sources. and the ability and willingness to commit sufficient time to the Board. providing the candidate's name and qualifications for service as a Board member. except for Board action to fill vacancies. including employees.COM/CITIZENSHIP . The Board nominates director candidates for election by the shareholders and fills any Board vacancies that occur between shareholder elections pursuant to the Company's Bylaws. The Governance and Nominating Committee works with the Board on an annual basis to determine the appropriate characteristics. Selection of Board Members. to identify director candidates. among other things. The Governance and Nominating Committee is responsible for recommending to the Board director candidates for nomination and election. A shareholder wishing to formally nominate a candidate must do so by following the procedures described in Article 1 of the Company’s Bylaws. 5 MICROSOFT. The Governance and Nominating Committee annually reviews with the Board the applicable skills and characteristics required of Board nominees in the context of current Board composition and Company circumstances. and experience for the Board as a whole and its individual members with the objective of having a Board with diverse backgrounds and experience in business. The Committee retains any search firms and approves payment of their fees. a document signed by the candidate indicating the candidate's willingness to serve. Independent Directors 1. sound business judgment. the Governance and Nominating Committee considers. the qualifications of individual director candidates in light of the Board Membership Criteria described below. high personal and professional ethics. government. Board Membership Criteria. The Board periodically evaluates whether a larger or smaller slate of directors would be preferable. if elected. and evidence of the shareholder's ownership of Company stock. suppliers. Characteristics expected of all directors include independence. The Board recognizes that the long-term interests of shareholders are advanced by responsibly addressing the concerns of other stakeholders. The Company’s shareholders elect Board members annually. integrity.oversight reports up to the board on those matters. and public service. 3. Board Composition and Selection. skills. finance. Board Size. The Governance and Nominating Committee will consider candidates recommended by shareholders. 2. Shareholders wishing to suggest director candidates should submit their suggestions in writing to the attention of the Corporate Secretary of the Company. and the public.
and the results of the most recent Board self-evaluation. In a contested election. Directors generally will not be nominated for re-election at any annual shareholder meeting following their 75th birthday. 4. should offer to resign from the Board. using its diversity of experience. or who materially changes his or her position. Term Limits. policies. 6. Election of Directors. The Board evaluates each individual in the context of the Board as a whole. and applicable laws and regulations. 5. Retirement Policy. The Board will also consider all other relevant facts and circumstances bearing on independence. as an alternative to term limits. the directors will be elected by the vote of a plurality of the votes cast. Board Composition – Mix of Management and Independent Directors. and ethnic diversity. which will either meet or be more restrictive than the definition of "independent director" in the listing standards of the Nasdaq Stock Market. and objectives.and other disciplines relevant to the success of a large publicly traded company in today's business environment. votes cast. In determining whether to recommend a director for re-election. and geographic.COM/CITIZENSHIP . in an uncontested election directors will be elected by the vote of the majority of the votes cast. 7. 6 MICROSOFT. The Board intends that. Directors with Significant Job Changes. The Board. the Governance and Nominating Committee also considers the director's past attendance at meetings. The Board does not believe it should limit the number of terms for which an individual may serve as a director. As provided in Article 2 of the Company’s Bylaws. Directors who have served on the Board for an extended period of time are able to provide valuable insight into the operations and future of the Company based on their experience with and understanding of the Company's history. 8. will then evaluate whether the Board should accept the resignation based on a review of whether the individual continues to satisfy the Board's membership criteria in light of his or her new occupational 9. personal accomplishment. educational and professional background. The Board believes that 75 is an appropriate retirement age for directors. gender. understanding of the Company's business and technology. a substantial majority of its directors will be independent. The Board believes that. with the objective of recommending a group that can best perpetuate the success of the Company's business and represent shareholder interests through the exercise of sound judgment. The Board believes that any director who retires from his or her present employment. and specifically the Governance and Nominating Committee. it can ensure that the Board continues to evolve and adopt new viewpoints through the evaluation and nomination process described in these guidelines. age. participation in and contributions to the activities of the Board. The Governance and Nominating Committee of the Board has established director independence guidelines to assist it in determining the independence of a director. except during periods of temporary vacancies.
11. the Board generally has an informal meeting each quarter to review and discuss the Company's business performance. an affiliated director. the independent directors will annually appoint from among themselves a Lead Independent Director. Meetings – Agenda. no director may serve on more than five public company boards (including the Company's Board) and no member of the Audit Committee may serve on more than three public company audit committees (including the Company's Audit Committee). When the Chairman is an affiliated director or a member of Company management. or a member of management. or the Chairman of the Board if there is no Lead Independent Director. The Board will generally hold four regularly scheduled meetings per year and will hold additional special meetings as necessary. The Lead Independent Director. and Lead Independent Director. Any Audit Committee member's service on more than three public company audit committees will be subject to the Board's determination that the member is able to effectively serve on the Company's Audit Committee and the disclosure of that determination in the Company's annual proxy statement. 10. Boards and Committees. The Governance and Nominating Committee and the Board will take into account the nature of and time involved in a director's service on other boards in evaluating the suitability of individual directors and making its recommendations to Company shareholders. In addition. Each director is expected to attend both scheduled and special meetings. coordinates with the CEO and corporate secretary to set the agenda for Board meetings. including the Company's Board. The Board does not have a policy as to whether the Chairman should be an independent director. and performs the other duties either specified in these guidelines or assigned from time to time by the Board. Service on boards and/or committees of other organizations should be consistent with the Company's conflict of interest policies. CEO. The Board selects the Company's CEO and Chairman in the manner that it determines to be in the best interests of the Company's shareholders.status. service on a board or audit committee of a parent and its substantially owned subsidiary counts as service on a single board or audit committee. directors who also serve as CEOs or in equivalent positions generally should not serve on more than two public company boards. The agenda for each Board meeting MICROSOFT. Chairman. taking into account suggestions from other members of the Board. Board Meetings.COM/CITIZENSHIP 14. Board Meetings – Frequency. or when the independent directors determine that it is in the best interests of the Company. In calculating service on a public company board or audit committee. Other 12. The Lead Independent Director coordinates the activities of the independent directors. Board 7 . Without specific approval from the Board. chairs executive sessions of the independent directors. in addition to their employer's board. coordinates with the CEO and corporate secretary to set the agenda for each Board meeting. In addition. Involvement of Senior Management and Independent Advisors 13. except if unusual circumstances make attendance impractical.
Management is encouraged to invite Company personnel to any Board meeting at which their presence and expertise would help the Board have a full understanding of matters being considered. The Compensation Committee has sole authority to retain and terminate compensation consultants that advise the Compensation Committee. The Board recognizes that certain items to be discussed at Board meetings are of an extremely sensitive nature and that the distribution of materials on these matters prior to Board meetings may not be appropriate. i. The Board may specify a protocol for making such inquiries.. Advance Distribution of Materials. The Board and its committees have the right at any time to retain independent outside auditors and financial. Sessions of Independent Directors. as it deems appropriate. management should ensure that the materials distributed are as concise as possible. as well as to cover the ordinary administrative expenses incurred by the Board and its committees in carrying out their duties. The Board should have access to Company employees to ensure that directors can ask all questions and glean all information necessary to fulfill their duties. Access 18. Executive sessions of the independent directors will be called and chaired by the Lead Independent Director. All information relevant to the Board's understanding of matters to be discussed at an upcoming Board meeting should be distributed in writing or electronically to all members in advance. 15. Each director is expected to review this information in advance of the meeting to facilitate the efficient use of meeting time. Executive Communications with Shareholders 8 MICROSOFT. including sole authority to approve the consultants’ fees and other retention terms. A consultant satisfying the Company’s Compensation Consultant Independence Standards will be considered independent for purposes of this policy.COM/CITIZENSHIP .e. The Company will provide appropriate funding. at least quarterly each fiscal year. Compensation 19.will be distributed in advance to each director. without management present. Consultant Independence. whenever feasible and appropriate. It is the policy of the Compensation Committee that any compensation consultant retained by the Compensation Committee must be independent of Company management. The independent directors of the Company will meet regularly in executive session. yet give directors sufficient information to make informed decisions. In preparing this information. These executive session discussions may include such topics as the independent directors determine. 16. to compensate those independent outside auditors or advisors. as determined by the Board or any committee. or the Chairman of the Board if there is no Lead Independent Director. Access 17. or other advisors. to Independent Advisors. to Employees. legal.
with the assistance of the Compensation Committee and working with the CEO and human resources department. or a specified Board committee or group. including the independent directors as a group.18.COM/CITIZENSHIP . WA 98052-6399 E-mail: AskBoard@microsoft. The Company will initially receive and process communications before forwarding them to the addressee. Shareholders may contact an individual director. A primary responsibility of the Board is planning for CEO succession and overseeing the identification and development of executive talent. The Governance and Nominating Committee establishes the evaluation process for the review of the CEO’s performance. Development As part of the annual officer performance evaluation process. oversees executive officer development and corporate succession plans for the CEO and other executive officers to provide for continuity in senior management. by the following means: • Mail: MSC 123/9999 Corporate Secretary Microsoft Corporation One Microsoft Way Redmond. Concerns about questionable accounting or auditing matters or possible violations of the Microsoft Standards of Business Conduct should be reported pursuant to the procedures outlined in the Standards of Business Conduct. 21. the Board as a group. Communications also may be referred to other departments within the Company. Annual CEO Evaluation. The evaluation results are reviewed and discussed with the independent directors.com • Each communication should specify the applicable addressee or addressees to be contacted as well as the general topic of the communication. Attendance at Annual Shareholder Meeting. and Succession Planning. and the results are communicated to the CEO. which are available on the Company's Web site at www.com/investor/corporategovernance. The Company generally will not forward to the directors a communication that it determines to be primarily commercial in nature or related to an improper or irrelevant topic. or that requests general information about the Company. 19. The Chairman of the Governance and Nominating Committee leads the Governance and Nominating Committee in conducting a review of the performance of the CEO at least annually. Development and Succession Planning 20.microsoft. Each director is encouraged to attend the Company's annual meeting of shareholders Performance Evaluation. the Compensation Committee works with the CEO to plan for CEO succession. The succession plan covers identification 9 MICROSOFT. Shareholder Communications to the Board. The Board.
in order to align the interests of directors and shareholders. development plans for internal candidates. In addition. 2011 or five years after the director has become a board member. directors should have a significant financial stake in the Company. The Board believes that. and following discussion and unanimous concurrence by the Board. and identification of areas in which the committee could improve its performance. and include strategic vision. The Board will evaluate whether exceptions should be made for any 24. The Board should make changes in its director compensation practices only upon the recommendation of the Compensation Committee. the committee's charter. Stock deferred under a non-qualified deferred compensation arrangement shall count towards the minimum ownership requirement. as well as identification of areas in which the Board could improve its performance. The plan identifies the individuals who would act in an emergency and their responsibilities. and as appropriate identification of external candidates. Generally. The Board may review development and succession planning more frequently as it deems necessary or desirable. The contingency plan is reviewed by the Board annually and revised as appropriate. Compensation 23. 22. Board Compensation Review. Board and Committee Self-Evaluation. each committee is responsible for conducting an annual performance evaluation. Each committee's report generally should include an assessment of the committee's compliance with the principles set forth in these guidelines.of internal candidates. Company management should periodically report to the Board how the Company's director compensation practices compare with those of other large public corporations. The Board maintains an emergency succession contingency plan should an unforeseen event such as death or disability occur that prevents the CEO from continuing to serve. the Board believes that the level of director compensation should be based on time spent carrying out Board and committee responsibilities and be competitive with comparable companies. The Governance and Nominating Committee is responsible for conducting an annual evaluation of the performance of the Board and each of its members. the Board believes that a significant portion of director compensation should align director interests with the long-term interests of shareholders. In addition. Each director should own shares equal in value to a minimum of three times the base annual retainer payable to a director and this ownership level should be achieved by the later of February 28. The Board annually reviews the Compensation Committee’s recommended development and succession plan. The Governance and Nominating Committee's report should generally include an assessment of the Board's compliance with the principles set forth in these guidelines. Evaluation results are reported to the Board.COM/CITIZENSHIP . leadership. and operational execution. The criteria used to assess potential CEO candidates are formulated based on the Company’s business strategies. Stock Ownership. Director 10 MICROSOFT.
Governance and Nominating. The Antitrust Compliance Committee oversees the Company's compliance with the Final Judgment entered by the District Court for the District of Columbia in State of New York et al. and performs other duties as described elsewhere in these guidelines. a Finance Committee. • • • • 26. Composition of Committees. Each committee will perform its duties as assigned by the Board in compliance with Company Bylaws and the Committee's charter. The Audit Committee oversees the work of the Company's financial reporting and internal audit processes.. The committee evaluates new candidates and current directors. including the hiring and performance of the compliance officer called for under the Final Judgment. No. Governance and Nominating Committee. a Compensation Committee. The committee is directly responsible for the appointment. The Compensation Committee recommends to the Board the compensation of the Chief Executive Officer and determines the compensation of the other executive officers. Committees 25. Number and Type of Committees. regulatory and stock exchange listing requirements. Committee Chairpersons. taking into account the desirability of rotation of committee members and chair. a Governance and Nominating Committee. compensation. and applicable legal. Microsoft Corp. Finance Committee. The Board has five committees: an Audit Committee. Compensation. Antitrust Compliance Committee. and an Antitrust Compliance Committee. The Governance and Nominating Committee is responsible for recommending to the Board individuals to be nominated as directors. the benefits of continuity and experience. The Audit.COM/CITIZENSHIP . The Finance Committee monitors the present and future capital requirements and opportunities pertaining to the Company's business and provides guidance with respect to major financial policies of the Company. Compensation Committee. v. The full Board considers periodic rotation of committee members and chairs. 98 1232 (the "Final Judgment"). The Board is responsible for the appointment of committee members and committee chairpersons according to criteria that it determines to be in the best interest of the Company and its shareholders. 11 MICROSOFT. and Antitrust Compliance Committees consist solely of independent directors. retention.director on whom this requirement would impose a financial hardship. The Board may add new committees or remove existing committees as it deems advisable in the fulfillment of its responsibilities. Committee duties may be described briefly as follows: • Audit Committee. and oversight of the Company's independent auditors.
The chairperson and committee members will determine the frequency and length of committee meetings consistent with the committee's charter. beta. distribution and use of computer software is illegal. or use of OEM software with PCs other than those for which they are intended. together with relevant Company managers. End User License Agreements (EULAs). distribution. We agree to bear full legal responsibility and consequences for any illegal or unauthorized copying. distribution. or use of computer software under any circumstances. Not for Resale (NFR). EULAs. or use of computer software by our company and our employees acting within the scope of their employment. infringing and/or unauthorized software and related components. This includes but is not limited to: CD-ROMs. We denounce such activities and agree to the following rules of business conduct: • We will not engage in or tolerate the unauthorized copying. • • • • 12 MICROSOFT. COAs. employees. or other versions of software programs in a manner that is inconsistent with the applicable distribution and licensing terms authorized by the software publisher. Certificates of Authenticity (COAs). and users of computer software about the proper distribution and use of the programs based on the accompanying software licenses.COM/CITIZENSHIP . or other software components in a manner that is inconsistent with the applicable distribution and licensing terms authorized by the software publisher. and use of computer software. evaluation. fulfillment. We will instruct all customers. distribution. manuals and/or other component distributed with software programs • Coping. Copying. distribution. control mechanisms. or use of OEM. and penalties that will prevent the possibility of illegal or unauthorized copying. distribution. academic. Unauthorized copying. Company will not copy. Code of ethics We recognize that computer software is protected by various intellectual property laws and treaties. or use OEM or other software programs in any manner not authorized by the software publisher. including without limitation: Copying. If software is intended for distribution on PCs other than those manufactured or distributed by this Company. distribution. the committee's general agenda and objectives and for setting the specific agenda for committee meetings. Copying. manuals.27. then this Company will not copy the software on or distribute it with its own PCs. or use of CD-ROMs. We will implement company policies. or use of counterfeit. and against the principles of our company. Committee Meetings and Agenda. distribute. distribution. The chairperson of each committee is responsible for developing. unethical.
Additionally. Edelman has Microsoft’s UK and Asia PR accounts. “The economic downturn has obviously meant that every company is taking a hard look at their spending.S. PR Week reports that similar cuts are in the works in Asia and that they are “imminent” in the United States.” which was featured prominently on the firm’s home page during Earth Week. “Given the current economic climate. A more recent survey showed that nearly 60 percent of corporate marketers expect their companies to increase environmental sustainability initiatives over the next two to three years. Microsoft is looking to”protect its business lines first. The article estimated that Microsoft was cutting European CSR promotions by 25 percent. Microsoft released a comment to Environmental Leader.” the spokesperson said. Microsoft has long been a public proponent of CSR efforts. PRWeek.” according to PRWeek. It’s estimated that Microsoft spends up to $15 million annually on PR support for its CSR efforts. Office and Xbox. A 2008 survey showed that 80 percent of the Fortune 50 companies publicly reported their CSR and environmental stewardship efforts online. The company recently has put great emphasis into green marketing for IT. Sources said not all programs would be cut entirely. It’s unclear what portion of those cuts may involve PR about environmental stewardship. Waggener-Edstrom handles PR for Microsoft’s CSR efforts. despite the poor economy. Here is the company’s mini-site on CSR. quoting Microsoft account directors at PR agencies. according to the article. but that spending and emphasis was going down. along with the Unlimited Potential community technology program. In the U. Weber Shandwick handles the rest of Europe. including the slogan “Green is the new black. we are working harder than ever to understand the needs and priorities of governments in the countries where we operate. according to PRWeek.COM/CITIZENSHIP . In responding to the economic downturn. instead applying funds to promoting products like Windows 7. reports PR Week. said the CSR PR cuts include the Imagine Cup student technology competition and communications efforts about human trafficking.” The spokesperson said Microsoft would continue to invest in its Unlimited Potential programs.Corporate Social Responsibility Microsoft is cutting its European PR budget for corporate social responsibility activities. but Microsoft remains committed to our citizenship and corporate social responsibility efforts.. 13 MICROSOFT. and to use our resources and expertise to help address those needs. a BizSpark initiative that couples business start-ups with Microsoft software is under pressure. Through a spokesperson.
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