Is there a 'China angle' behind Microsoft CEO Satya Nadella's $5.5 million salary cut?

Microsoft CEO Satya Nadella’s compensation surged by 63% in fiscal year 2024, reaching around $79.1 million (approximately Rs 665 crore), largely due to a substantial increase in stock awards, TOI reported, citing Microsoft’s recent U.S. Securities and Exchange Commission (SEC) filing. Stock awards rose from $39 million last year to $71 million, significantly boosting his overall earnings. However, the filing also revealed that Nadella requested a reduction in his cash compensation, citing cybersecurity concerns and hinting at a possible “China angle” in the decision.

Breakdown of Nadella’s Earnings
According to the SEC filing, Nadella’s compensation for fiscal year 2024 includes:

• Stock Awards: $71.2 million (approx. Rs 600 crore)
• Non-Equity Incentive Plan: $5.2 million (approx. Rs 44 crore)
• Base Salary: $2.5 million (over Rs 21 crore)
• Miscellaneous Compensation: $170,000 (approx. Rs 15 lakh)

Nadella's cash incentive was cut to $5.2 million from an expected $10.7 million. His base salary and additional compensation bring his total cash-based earnings to approximately $7.87 million. The CEO requested this reduction due to heightened cybersecurity threats and breaches.

Nadella’s Accountability in Cybersecurity Breaches
Nadella’s decision was reportedly influenced by Microsoft’s role in several cybersecurity breaches, including a significant incident in July 2023, when a global outage impacted Windows users. Earlier in April, the U.S. Department of Homeland Security had published a report on China's breach of U.S. government officials' email accounts, which Microsoft disclosed in July. In January, Russian intelligence also accessed some of Microsoft’s top executives’ email accounts.

The SEC filing stated, “Mr. Nadella agreed that the Company's performance was extremely strong, but reflecting on his personal commitment to security and his role as the CEO, asked the Board to consider departing from the established performance metrics and reduce his cash incentive to reflect his personal accountability for the focus and speed required for the changes that today's cybersecurity threat landscape showed were necessary.”

Microsoft’s Financial Growth Since Nadella Took Over
Under Nadella’s leadership, appointed as Microsoft’s third CEO in 2014, the company has experienced robust growth:

• Revenue has nearly tripled to $245.1 billion (approx. Rs 2,060 crore).
• Net Income quadrupled to $88.1 billion (approx. Rs 740 crore).
• Diluted Earnings per Share rose to $11.80 (approx. Rs 99 crore).

The filing added, "In addition to another year of consistently strong financial performance, Mr. Nadella and his leadership team have positioned Microsoft to continue to drive performance for years to come.”

Inputs from TOI