Why Microsoft CEO Satya Nadella Had His Pay Docked by US$5m

Satya Nadella, CEO of Microsoft, has had his bonus docked by US$5.46m (£4.2m) at his own request. 

Earlier this year, Microsoft was reprimanded for a string of security failures which exposed the US government to Russian and Chinese hackers.

The cash portion of Nadella’s 2024 bonus was cut from US$10.66m to US$5.2m at his request, Microsoft said in a filing ahead of its annual meeting.

Earlier this year the US government castigated Microsoft for a “cascade of errors” that allowed Chinese hackers to gain access to email accounts of senior officials including US commerce secretary Gina Raimondo.

Microsoft also allowed Russian hackers to break into email accounts of US government agencies and major companies.

The group of state-backed Russian hackers, named Midnight Blizzard by Microsoft, accessed the accounts in late November 2023 and were discovered in mid-January.

The US government called Microsoft’s security “inadequate” and said it “requires an overhaul”. 

Microsoft said in a statement: “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 cyber security threat landscape showed were necessary.”

Before you get your hankies out, Nadella’s pay still rose to US$79.1m, up 63% on last year.

His base salary is US$2.5m and he was awarded US$71.2m in Microsoft shares, an overall package which puts in pole position as one of the world’s highest-paid executives. 

Among other high-profile tech CEOs, Apple CEO Tim Cook earned US$63.2 million in 2023, while AI-chip giant NVIDIA CEO Jensen Huang received a pay-out of US$34.2 million in fiscal 2024.

Nadella became Microsoft’s chief executive in 2014 and the company’s share price has risen more than tenfold since then, jostling with Apple and Nvidia for the position of world’s most valuable business.

Microsoft’s stock has risen 28% this year and had a US$3.2 trillion market cap as of Friday.

Why is Satya Nadella so highly paid?

Microsoft's board views Nadella's compensation as an investment in long-term value creation for shareholders.

Under his leadership, he has steered Microsoft towards higher growth areas such as cloud and artificial intelligence, and making strategic investments, such as the significant stake in OpenAI, which has positioned Microsoft at the forefront of generative AI.  

The company’s soaring value has been tied to its ability to show Wall Street revenue growth based on the technology. Microsoft has been folding AI into its Office products and charging customers more for its AI-powered Copilot assistants.

Nadella is also highly rated for his softer skills: transforming Microsoft's corporate culture to encourage cooperation rather than competition. 

The Microsoft boss himself rates having an open mind.

He encourages employees throughout Microsoft to embrace “learn-it-all” curiosity and experiment with passion projects and innovative ideas. 

Back in 2019, he told podcast Hello Monday, “If you take two kids at school, one of them has more innate ability but is a know-it-all. The other person has less innate capability but is a learn-it-all. The learn-it-all does better than the know-it-all.”

******

Make sure you check out the latest edition of Business Chief, the monthly digital magazine for CEOs of multinational companies

******

Business Chief is a BizClik brand