Change, or more of the same? It's up to YOU.

It's proxy season again. And thanks to new corporate compensation rules, you'll find more detail than ever in this year's document. For example, you'll learn that while CEO Steve Ballmer may have been unable to get the trains to run on time, invest in areas that actually return a profit, catch major new trends, restore confidence, or get this moribund stock moving despite record buybacks using our cash, he was paid less than most CEOs to do it. The Board, in their collective wisdom, think that constitutes being "underpaid". I think it proves the old adage "you get what you pay for". 

 

The proxy also gives the deepest glimpse yet into the mysterious formulas and metrics which underpin the so-called Shared Performance Stock Award (SPSA), indelicately referred to as the "executive feeding trough" from time to time by a certain shareholder blogger. In particular, you'll learn that senior most leadership walked away with millions each, because the company aims to pay "above the median" for such top talent (read: way above). However, that was only half what they could have received. The Board, you see, may sit idly by as you and I continue to lose money on our investment. But they want you to know they're no pushover:

 

We were satisfied with our performance in product acceptance and SMSG and MBD financial metrics. Our performance in customer satisfaction, while steady, and Internet searches, while growing, fell short of our challenging goals, and we were not satisfied with our performance in EDD financial metrics.

BTW, that last one is a euphemism for "even we understand that we can't be seen to condone another $1B loss of shareholder cash - on top of the mind-blowing $5B lost so far - even though it resulted from a strategy we approved of rushing a product to market without adequate testing". Hmm...think that disappointment translated into maybe zero SPSA payout for H&E head Robbie Bach? Doesn't say. Here's my wild-ass guess: "No".

Steve and the Board also want you to know that part of the reason for the large compensation payments is too retain these key individuals. Apparently folks who collectively can't lead, execute, or inspire, are in high demand. Go figure.

Along the way you'll learn that the stock price is not part of the extensive SPSA metrics. What's that line again about "you get the performance you request and reward"? However, rest assured that the general Compensation Philosophy includes this objective:

provides a significant portion of total compensation linked to achieving performance goals that we believe will create shareholder value in the near and long term

Just in case the stock being down 50% since 2000 and having badly underperformed all major indexes and most peers this entire decade has caused you to er... maybe question the value of their beliefs?

Also, be advised that the massive insider selling which has become the hallmark of MSFT post 2000 - and a frequent topic here - has now caused sufficient embarrassment that the usual "we don't comment on sales by our executives" is no longer sufficient. From now on, executive officers will be forced to keep a multiple of their salary in company stock (3-10X base pay depending on level). Doesn't that just fill you with confidence that the supposed "creme de la creme" of MSFT management need to be forced to hold this stock? And don't worry about our fearless leader Ballmer:

Because his interests are already closely aligned with shareholders’ interests...

Again, in case that wasn't as um...obvious from the stock's decade-to-date performance as it might be.

Also intriguing is what's not in the proxy. If you're a regular reader of it, you'll recall this chart which has appeared annually and compares MSFT to the S&P and NASDAQ (apologies for the image quality):

Apparently, even the extreme creativity that has been used to draw the scale historically is no longer sufficient to mask the chronic underperformance. And since reminding shareholders of how badly they've done while detailing how much management got paid for doing it is bad form - not to mention potentially career limiting - POOF!, it's gone. And with it, final abdication of responsibility by current leadership for the stock - something that's been evident for years, but is now seemingly official.

All in all, this proxy has all the spin, half-truths, non-sequiturs, outright fiction, and disdain for reader's intelligence worthy of say, a recent Vista "Momentum" press release. Since I want to be constructive, here's how we can radically improve and streamline it while also saving a few thousand trees. Instead of wasting pages and pages on excuses and justifications for lavish compensation in the face of abject failure on behalf of shareholders, simply provide us with one page containing two items: 

1) A 5-year stock chart comparing MSFT to the S&P and NASDAQ indices (drawn using normal scale):

2) A clear choice:

Simple, huh?

And for all those hotshot managers whom the Board is paying millions to because they're so worried about retaining them, and who have to be forced to hold the stock, I say "quit". PLEASE. In many cases, the best possible development for Microsoft would be to have some of you go to the competition and screw them up instead. I'll happily take some less-senior person who actually still believes in the company, has vision, and can inspire others.

Alternatively, if despite the demonstrated lack of confidence you're all truly convinced that your strategies - which the street hates - are actually brilliant, then march on down to your local bank consortium and pitch them on lending you $270B (less Bill & Steve's share if they're willing to go along), plus say a 20-30% premium. Then you can buy us out and take the company private. That way, if you continue to execute as you have, it will be coming out of your dime instead of ours.

Fellow shareholders, the ball's in your court. You know which way I'm voting.