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LinkedIn's Performance Will Be A Determinant Of Pay Of Microsoft’s Top Executives

LinkedIn's Performance Will Be A Determinant Of Pay Of Microsoft’s Top Executives
Microsoft is linking the compensation to be paid to its CEO Satya Nadella with the performance of LinkedIn which the tech company had purchased two years ago for an amount of $27 billion which is the costliest acquisition of the company so far in its history.
The amount of money that Nadella and four other top executives of the company - including Chief Financial Officer Amy Hood, would be paid in compensation would be dependent partly on the activity on LinkedIn, Microsoft said in a regulatory filing. In recent years, Microsoft has been attempting to create new sources of revenues other than its core business of software and this latest move signals the importance that the company is attaching to LinkedIn as one of its hey assets for that achieving that aim.
The conditions inked to LinkedIn, according to the filing, is the "number of times logged-in members visit LinkedIn, separated by 30 minutes of inactivity," either on desktop or mobile devices which would be evaluated over a three-year period so allow the company to identify the number of performance stock awards (PSAs) which would be given to Nadella and the other executives. The other executives also include Jean-Philippe Courtois and Peggy Johnson, both executive vice presidents, and Chief Legal Officer Brad Smith.
Those who are not included in this arrangement is the LinkedIn CEO Jeff Weiner and the billionaire co-founder Reid Hoffman – who is the a member of the company’s board.
A combination of salary, bonus and stock awards saw Nadella earn $25.8 million for fiscal year 2018. 32.5 percent of his total pay was accounted for by PSAs which is a form of equity award. This also accounts for a significant portion of the compensation given to the other top executives.
The awards that would be given to the executives on the basis of the performance of LinkedIn would not begin before 2020 because it would be evaluated over a three year period, even though Microsoft already monitors the performance of the job networking social media platform.
6 percent of total PSAs would be accounted for by LinkedIn sessions. In comparison, commercial cloud revenue performance accounts for 34 per cent of the amount of money given to the executives while 33 per cent is accounted for by performance of commercial cloud subscribers. Two other metrics make up the rest 11 per cent of the PSAs. But for 2018, the only new addition is LinkedIn out of the six metrics that make up PSAs.
According to the company regulatory filing, "driving new growth areas" is the  aim of linking compensation to particular segments.
Including a LinkedIn metric into compensation for the named executives was first suggested by company shareholders according to the company as reported in the media. The idea was approved by the board after it was debated by the board and senior leadership team and following the approval by the compensation committee of the company.
The revenues of LinkedIn for fiscal 2018 was almost double that of the previous year at $5.3 billion and accounted for almost 5 per cent of the total revenues of Microsoft.  LinkedIn reported 575 million members, and 41 percent session growth in the most recent quarter.

Christopher J. Mitchell

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