A Microsoft investor asked why Satya Nadella's salary is 249 times more than the median employee's. Here's what Microsoft's chairman said. (MSFT)
- Satya Nadella brought in $42.9 million in total pay during the company's last fiscal year, about 249 times more than Microsoft's median employee, who, the company said, made $172,512 in the same period.
- A Microsoft investor during the company's annual shareholders meeting on Wednesday asked the board to justify the pay gap.
- Chairman John Thompson said Microsoft's market capitalization has climbed to more than $1 trillion from $300 billion since Nadella took over and that the CEO has led a cultural change within the company.
- Thompson also said Microsoft has a "competitive shortfall" compared with other companies in the industry, likely referring to others that typically pay more, but that Microsoft offers better benefits to employees.
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Microsoft CEO Satya Nadella's compensation is 249 times more than that of the median employee at the company.
And if you ask Microsoft Chairman John Thompson, it's worth every penny.
During the company's annual shareholder meeting on Wednesday, an investor asked the company to justify the hefty pay package. Thompson quickly responded by pointing to the company's supercharged stock performance under Nadella, as well as the cultural and strategic changes Nadella has spearheaded.
"The notion we are going to have a cultural expansion or change in this company would not have happen if it were not for Satya, quite frankly," Thompson said. "Strong execution of his vision around an intelligent cloud has clearly been the driver of growth for this company."
Nadella brought in $42.9 million in total pay during the company's last fiscal year, up about 65% from the year before. Nadella's fiscal year 2019 compensation was 249 times more than Microsoft's median employee, who, the company said, made $172,512 in the same period.
Nadella's compensation is largely based on the company's performance — Microsoft's market cap was around $300 billion when Nadella became CEO in February 2014 and is more than $1.14 trillion at the time of this writing — but it also has to do with Nadella's strategic leadership.
Reorgs and partnerships under Nadella
The general perception of Nadella is that he has transformed Microsoft into a friendlier, more collaborative company. While Microsoft still plays hardball sometimes, since Nadella took over, the company has forged partnerships it may not have before, including a recent deal with Salesforce to get Microsoft's Azure cloud in front of more customers.
Nadella has also made big moves to refocus Microsoft on its cloud business, including leading major reorganizations and dropping products that fail to serve his broader vision.
"While many people think we are of significant revenue scale and operating margins and what have you, the reality is we are," Thompson said. "We are, in large part, because Satya and the team have driven that performance over the last five or six years."
Thompson also said Microsoft has a "competitive shortfall" compared with other companies in the industry, likely referring to others that typically pay more, but said Microsoft offers better benefits to employees.
"One of the things people don't recognize, however, is the competitive shortfall we might have against some other companies in the industry," Thompson said. "But while our compensation for many people may be different, the reality is we have the benefit programs we have are much, much better."
In a statement, Microsoft said the $172,000 median employee salary did not include the value of benefits.
"We're proud to offer some of the best health care benefits in the industry," a company spokesperson said in a statement. "In recent years we enhanced and extended our fertility benefits, global caregiver leave, and global parental leave policies to ensure we're offering best-in-class benefits."
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