Microsoft Corporation (NASDAQ:MSFT) is having a very strong year. MSFT stock is up 36% year-to-date as a result. CEO Satya Nadella’s work to turn around the company has paid dividends for all stakeholders; naturally, Microsoft’s board will want to make sure he remains happy in his job.
Perhaps a private jet for life? Health insurance for himself and his entire family for life? Or, maybe, $50 million a year in compensation will do the trick?
These are some of the things Roger Goodell, the NFL Commissioner, is reportedly asking for in his contract extension negotiations with the league.
“In regards to [Goodell’s] contract, I just don’t think that’s respectable, in regards to the players, and just a slap in the face just due to the job that we have,” stated Pittsburgh Steelers’ player representative Ramon Foster. “It just, it doesn’t make sense, just because he’s the commissioner that he gets to make that much money and it be guaranteed. No player in this league has that opportunity and I feel like we should.”
Yes, that’s right, the same people who’ve been protesting the National Anthem by taking a knee — a protest in response to a lack of opportunity and equality for Black America — don’t receive guaranteed contracts, yet Roger Goodell wants a jet for life.
So Where Does This Put Satya Nadella?
I’m already on record as saying the Microsoft CEO is overpaid. In a July article, I highlighted that Nadella’s 2014 pay package topped out at $91 million and, regardless of what MSFT stock does in 2018 and beyond, nothing will change my opinion about his compensation.
It’s obscene… but is it Roger Goodell obscene?
Well, that depends on how you look at the performance-based incentives that Nadella is able to earn by hitting certain targets. Are they big, hard-to-reach stretch goals? Or, are they easily obtainable ones?
My experience is that they’re usually the latter.
A recent ESPN stat showed that Roger Goodell made $213 million over the ten-year period between 2006 through 2015 — more than every North American professional athlete except Kobe Bryant and Alex Rodriguez.
The last time I checked, Roger Goodell wasn’t a reason fans were paying top dollar to see these athletes. Bryant and Rodriguez were generating revenue and profits for their respective team owners, justifying their compensation.
Nadella’s no different. He’s a figurehead that was in the right place at the right time.
Don’t get me wrong, I don’t know the man, I’m sure he’s very bright and his personal integrity has never been called into question.
But consider this…
He’s in a World of His Own
Over the past five years, Nadella’s official compensation, according to Microsoft’s proxy statements, was $148 million [2017 and 2015 proxy statements in summary compensation table] or an average of $29.6 million per year. Extrapolate that over ten years and you get a pay package that’s $83 million greater than what Goodell is reported to have earned.
My biggest problem with this is that Microsoft is a public company able to offer stock options and awards that grow beyond their appraised value. Not included in the $148 million figure is money earned from vested stock. That comes to $63.2 million, bringing the average to $42.2 million/year or $422 million over ten years — almost double Goodell’s compensation.
Oh, and to top things off, Nadella’s non-qualified deferred compensation plan had a 2017 balance of $182 million, a nice tidy sum should he decide to retire (he’s 50).
Bottom Line on MSFT Stock
As I said in July, Nadella’s overpaid. No ifs, ands or buts. Obviously, the board feels differently, providing the chief executive with a pay package that puts Roger Goodell’s to shame.
Of course, why should you care as long as you make money on MSFT stock?
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
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