Microsoft details Sinofsky's $14M golden parachute

July 4, 2013 | 09:19

Tags: #financial #golden-parachute #steven-sinofsky #stock #windows-7 #windows-8

Companies: #microsoft

Details of former Windows boss Steven Sinofsky's departure from Microsoft have been released, including the news that he is to receive a bumper $14 million payout by way of a golden parachute.

Sinofsky joined Microsoft back in 1989 as a software design engineer, before becoming personal technical assistant to company co-founder and then-chief executive Bill Gates in 1992. Seven years later, Sinofsky would be shuffled sideways into the company's Office division as senior vice president - an esteemed role, given Office's status as one of Microsoft's biggest cash-cows - but is perhaps better known for becoming the head of the Windows division in 2009.

It's here that Sinofsky oversaw the launch of Windows 7, which was relatively well received by consumers compared to its predecessor Windows Vista. Sinofsky then followed this with Windows 8, the first Windows version to be developed entirely under his auspice - and one that consumers have, by an large, treated indifferently or with open hostility thanks to its touch-centric interface and departure from the traditional windows, icons, menus and pointer (WIMP) paradigm of its predecessors.

Sinofsky left Microsoft in November last year, in an announcement that came too close to Windows 8's inauspicious début to be a coincidence. While his departure was claimed to be amicable, it was also immediate: unlike other Microsoft executives, Sinofsky was not asked to work his notice.

While being, to all intents and purposes, booted from the company might sting a little, it appears that Microsoft has something to help soften the blow: a $14 million golden parachute that will ensure Sinofsky lands on his feet.

According to financial documents filed by Microsoft with the Securities and Exchange Commission and first spotted by ZDNet, Sinofsky is to receive payment for stock granted to him as part of his employment at the company but which has not yet vested.

To explain the latter: it is common for start-up companies, like Microsoft once was, to offer employees stock in the company to make up for lower-than-average salaries. If a company does well, the stock value sky-rockets - Microsoft is particularly noted in this regard for having made many of its early employees millionaires or better thanks to its stock options programme. To prevent employees immediately selling their stock - the idea being that having a personal stake in the financial success of the company will lead to harder-working and more loyal employees - the stock options are dated in such a way that they cannot be sold until they have reached a certain age, a process known as vesting.

The unvested stock also serves as a handy set of financial shackles: traditionally, any unvested stock is lost when the employee leaves the company. In Sinofsky's case, however, all his unvested stock granted during Microsoft's 2012 financial year plus half the unvested stock granted during the company's 2013 financial year - a total of 418,361 shares, equivalent to a $14.2 million value at current prices - is to be bought back at market rates by Microsoft.

The cash is to be doled out to Sinofsky gradually, giving the former Windows head a regular salary through to August 2016. Each payment will be based on the share price on the day the payment is made, giving the $14.2 million value of the deal room to rise or fall depending on Microsoft's performance. By way of earning his keep, Sinofsky will also be working with Microsoft on its intellectual property litigation until 2017 - with details on precise cases that will involve Sinofsky's assistance not provided by the company.

The filing also revealed the terms of Sinofsky's no-compete agreement, which states that he may not work for one of Microsoft's competitors until the 1st of January 2014, that he is not to disclose details on Microsoft intellectual property or trade secrets, that he cannot poach employees or customers to any new venture, and that he can't do anything to tarnish Microsoft's public image.

Microsoft has stated that the bumper pay-out is simply reflective of Sinofsky's 23 years at the company, and should be considered 'similar to the retirement benefits we provide employees who work at least 15 years and retire at 55 or older.'
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