Pre 14a

10/28/2016
PRE14A
PRE14A1d243670dpre14a.htmPRE14A
TableofContents
UNITEDSTATESSECURITIESANDEXCHANGECOMMISSION
Washington,D.C.20549
SCHEDULE14A
ProxyStatementPursuanttoSection14(a)ofthe
SecuritiesExchangeActof1934(AmendmentNo.__)
FiledbytheRegistrant
FiledbyaPartyotherthantheRegistrant
Checktheappropriatebox:
PreliminaryProxyStatement
Confidential,forUseoftheCommissionOnly(aspermittedbyRule14a6(e)(2))
DefinitiveProxyStatement
DefinitiveAdditionalMaterials
SolicitingMaterialPursuantto240.14a12
MicrosoftCorporation
(NameofRegistrantasSpecifiedInItsCharter)
(NameofPerson(s)FilingProxyStatement,ifotherthantheRegistrant)
PaymentofFilingFee(Checktheappropriatebox):
Nofeerequired.
FeecomputedontablebelowperExchangeActRules14a6(i)(4)and011.
(1) Titleofeachclassofsecuritiestowhichtransactionapplies:
(3)
(2)
Aggregatenumberofsecuritiestowhichtransactionapplies:
PerunitpriceorotherunderlyingvalueoftransactioncomputedpursuanttoExchangeActRule011(setforththeamountonwhichthefilingfeeis
calculatedandstatehowitwasdetermined):
(4) Proposedmaximumaggregatevalueoftransaction:
(5) Totalfeepaid:
Feepaidpreviouslywithpreliminarymaterials.
CheckboxifanypartofthefeeisoffsetasprovidedbyExchangeActRule011(a)(2)andidentifythefilingforwhichtheoffsettingfeewaspaidpreviously.
Identifythepreviousfilingbyregistrationstatementnumber,ortheFormorScheduleandthedateofitsfiling.
(1)
(2)
(3)
(4)
AmountPreviouslyPaid:
Form,ScheduleorRegistrationStatementNo.:
FilingParty:
DateFiled:
Personswhoaretorespondtothecollectionofinformationcontainedinthisformarenot
requiredtorespondunlesstheformdisplaysacurrentlyvalidOMBcontrolnumber.
TableofContents
https://www.sec.gov/Archives/edgar/data/789019/000119312516729364/d243670dpre14a.htm
1/111
10/28/2016
TableofContents
PRE14A
NoticeofAnnualShareholdersMeetingand2016
ProxyStatement
2/111
10/28/2016
PRE14A
November30,2016at8:00a.m.PacificTime
MeydenbauerCenter
11100NE6thStreet
Bellevue,Washington98004
Proofofownershiprequiredforadmission
SeePart7InformationaboutthemeetingfordetailsonadmissionrequirementstoattendtheAnnualMeeting.
TableofContents
Letterfromour
October18,2016
DearShareholder,
WeinviteyoutoattendtheAnnualShareholdersMeetingofMicrosoftCorporation(Annual
3/111
10/28/2016
PRE14A
Letterfromour
Independent
Chairmanand
ourCEO
WeinviteyoutoattendtheAnnualShareholdersMeetingofMicrosoftCorporation(Annual
Meeting),whichwillbeheldatMeydenbauerCenter,11100NE6thStreet,Bellevue,Washington
98004,onNovember30,2016at8:00a.m.PacificTime.Doorsopenat7:00a.m.Wewillfeaturea
MicrosoftStoreatourproductshowcasetogiveyoutheopportunitytoexperienceMicrosoftslatest
consumerproductsincludingthelatestdevicesrunningWindows10.Drivingdirectionsto
MeydenbauerCenterareonpage79.ParkingwillbevalidatedonlyforMeydenbauerCenter
garage.Parkingislimited,soplanaheadifyouaredrivingtothemeeting.
TheattachedNoticeofAnnualShareholdersMeetingandProxyStatementcontaindetailsofthe
businesstobeconductedattheAnnualMeeting.
WhetherornotyouattendtheAnnualMeeting,itisimportantthatyoursharesberepresentedand
votedatthemeeting.WeurgeyoutopromptlyvoteandsubmityourproxyviatheInternet,by
phone,orbysigning,dating,andreturningtheenclosedproxycardintheenclosedenvelope.Ifyou
attendtheAnnualMeeting,youcanvoteinpersonevenifyoupreviouslysubmittedyourproxy.
Thisyearsshareholderquestionandanswersessionwillincludebothlivequestionsandquestions
submittedinadvance.YoumaysubmitaquestioninadvancethroughtheShareholderForum
availableatwww.theinvestornetwork.com/forum/msft/default.aspxwewillrespondtoasmany
inquiriesastimeallows.
Weagainareofferingavirtualshareholdermeetingthroughwhichyoucanviewthemeeting,
submitquestions,andvoteonline,atmicrosoft.onlineshareholdermeeting.com.Wewillalsoprovide
alivewebcastoftheAnnualMeetingfromtheMicrosoftInvestorRelationswebsiteat
www.microsoft.com/investor.AtranscriptwithvideoandaudiooftheentireAnnualMeetingwillbe
availableontheInvestorRelationswebsiteafterthemeeting.Wehopethiswillallowthosewho
cannotattendthemeetinginpersontohearMicrosoftexecutivesdiscusspastyearsresultsandour
plansforthefuture.Inaddition,wemakeavailableatourInvestorRelationswebsiteavarietyof
informationforinvestors.OurgoalistomaintaintheInvestorRelationswebsiteasaportalthrough
whichinvestorscaneasilyfindornavigatetopertinentinformationaboutus.
OnbehalfoftheBoardofDirectors,thankyouforyourcontinuedinvestmentinMicrosoft.Welook
forwardtogreetingasmanyofyouaspossible.
4/111
10/28/2016
PRE14A
TableofContents
Letterfromthe
BoardofDirectors
October18,2016
DearShareholder,
AsstewardsofMicrosoft,theBoardofDirectorsgreatlyvaluesitsengagementwithour
shareholders.Withthisproxyfiling,wewouldliketohighlightkeyelementsthatdemonstrateour
ongoingcommitmenttocorporategovernance.
Shareholderengagement
IthaslongbeenapriorityofourBoardtomaintainanactivedialoguewithour3.5million
5/111
10/28/2016
PRE14A
IthaslongbeenapriorityofourBoardtomaintainanactivedialoguewithour3.5million
shareholdersaroundtheglobe.Inadditiontodirectcommunicationswithshareholders,wereusing
arangeoftechnologiestorealizethevalueofonetomanycommunicationwithourshareholdersin
ourincreasinglydigital,dispersedworld.
InteractiveProxy.Aninteractiveversionofour2016ProxyStatementmakesiteasyforyouto
efficientlyaccessandconsumetheProxyStatementcontentusinganintuitiveandeasily
navigableframework.Thisisimportant,becauseitputsourproxydirectlyinyourhands,soyou
canimmediatelyaccessthespecificinformationyouwant,when,how,andwhereyouwantit.
VirtualShareholdersMeeting.ForthosewhocannotattendourAnnualMeetinginperson,we
provideavirtualshareholdersmeetingthroughwhichinvestorscanviewthemeeting,submit
questions,andvoteonline.AlivewebcastoftheAnnualMeeting,aswellasatranscriptand
archivedwebcastafterthemeetingwillbeavailableontheInvestorRelationswebsitesothe
meetingisaccessibletoallourshareholders,nomatteryourlocation,availability,orformat
preferenceforaccessingthemeeting.
DirectorVideoSeries.WeprovideanopportunityforyoutogettoknowourBoardofDirectors,and
learnhowweapproachservingshareholdersthroughourdirectorvideoseries.Werecently
releasedtwonewinstallmentsfeaturingJohnThompsonandPadmasreeWarrior.
AdditionalinformationaboutourshareholderengagementeffortscanbefoundintheCorporate
GovernanceatMicrosoftsectionoftheproxy.
Governanceenhancements
WeroutinelyevaluateMicrosoftsgovernancepracticestomaintainstrongBoardaccountabilityand
shareholderrights,andtransparentpoliciesthatenhanceinvestorandpublictrust.Ontheballotat
ourAnnualMeetingisaproposedchangetotheArticlesofIncorporationthatwouldreducethe
percentageofoutstandingsharesrequiredforshareholderstocallaspecialmeetingto15%.The
Boardbelievesreducingthepercentageisinthebestinterestsofourshareholders,andillustrates
ourcommitmenttogovernancebestpractices.
ThisactionfollowslastyearsadoptionofaProxyAccessforDirectorNominationsbylaw,which
permitsashareholderoragroupofupto20shareholdersowningthreepercentormoreof
Microsoftsoutstandingsharescontinuouslyforatleastthreeyears,tohavetheabilitytonominate
twoindividualsor20%oftheBoardsseats(whicheverisgreater),providedtheshareholdersand
nomineessatisfytherequirementsspecifiedinthebylaws.Werecentlyamendedourproxyaccess
bylawtorefineourapproachbasedonperspectivesofferedbyinstitutionalshareholdersoverthe
pastyear.
ThecontinuingevolutionofpayatMicrosoft
ii
Ourexecutivecompensationprogramcontinuestoevolvetobetteralignwithourbusiness
strategiesandrewardlongtermbusinesssuccess.
TableofContents
Throughourongoingshareholderengagement,wereceiveconsistentfeedbackthatour
investorsfavorincentivecompensationarrangementstiedtospecificperformance
measuresthatdrivelongtermperformanceandvaluecreation.Weagree,andhavebeen
refiningourprogramoverthepastthreeyearstodevelopadesignthatincorporates
performanceelementsdirectlylinkedtoachievingourthreestrategicambitionsReinvent
ProductivityandBusinessProcesses,BuildtheIntelligentCloudPlatform,andCreateMore
PersonalComputing.Ourfiscalyear2016IncentivePlanawardsforexecutiveofficers
includesignificantelementstiedtospecificperformanceobjectivesintendedtodrivelong
termperformance.Beginningin2017,50%oftheannualcashincentivewillbetiedto
financialobjectives,andtheoutcomewillbedeterminedformulaicallyusingpre
establishedtargetsforfinancialperformance(companywiderevenueandoperating
income).
AdditionaldetailscanbefoundunderProposal2:Advisoryvoteonnamedexecutive
6/111
10/28/2016
PRE14A
AdditionaldetailscanbefoundunderProposal2:Advisoryvoteonnamedexecutive
officercompensation.
Boardcompositionandrefreshment
WearecommittedtohavingourBoardincludeadiverserangeofperspectivesand
experiences.Thisyear,ourBoardismorediversethanever,withwomenandethnic
minoritiesholdingfiveof11Boardpositions.Whilethereisstillmoreworktobedone,we
arepleasedthatoureffortshavecreatedabalancedBoardwithdifferentviewpointsand
backgrounds,deepexpertise,andstrongtechnologyspecificknowledge.Welookforward
tobuildingonthisfoundationaswecontinuetoidentifyandattractnewdirectorstohelpus
advanceourpositionasoneoftheworldsleadingtechnologycompanies.
Corporatesocialresponsibility
Microsoftscorporatesocialresponsibilitycommitmentscontributelongtermvaluetoour
business,ourshareholders,andcommunitiesaroundtheworld.Achievingourmissionto
empowereverypersonandeveryorganizationontheplanettoachievemorerequiresthat
webethoughtfulabouttheimpactofourownbusinesspracticesandpoliciesandour
investmentsincommunities.Knowingourdecisionscanaffectouremployees,customers,
partners,shareholders,suppliers,andcommunities,weseektoensuretheirperspectives
areconsideredinwaysthathelpusearnandmaintaintheirtrust.Formoreabout
Microsoftscommitmentsandperformance,pleasevisit:http://www.microsoft.com/csr.
EarlierthisyearweintroducedMicrosoftPhilanthropiestobuildonthefoundationof
Microsofts30plusyearsofgiving,seekingnewwaystoachievegreateroutcomesfora
broadersegmentoftheworldspopulation.MicrosoftPhilanthropiesisinvestingMicrosofts
greatestassetstodrivegreaterdigitalinclusionandempowermentofpeoplewhodonot
haveaccesstotechnologyandtheopportunitiesitoffersandenables.
Oneofourfirstinitiativesisthedonationof$1billioninMicrosoftcloudservicesto
nonprofitsanduniversityresearchersoverthenextthreeyears.Ourobjectiveistohelp
recipientsaroundtheworldobtaintheaccesstheyneedanddeservetopursuecutting
edgesolutionstosocietysmostpressingproblems.FormoreinformationaboutMicrosoft
Philanthropies,pleasevisit:https://www.microsoft.com/about/philanthropies/.
CommunicatingwiththeBoard
Wedeeplyvaluethecontinuedinterestofandfeedbackfromourshareholders,andare
committedtomaintainingouractivedialoguewithyoutoensureadiversityofperspectives
arethoughtfullyconsidered.AswemoveclosertoourAnnualMeeting,weinviteyouto
writeusatAskBoard@microsoft.comabouttheBoardofDirectorsorcorporategovernance
atMicrosoft.
2016PROXYSTATEMENTiii
TableofContents
Thankyouforthetrustyouplaceinus.WeappreciatetheopportunitytoserveMicrosoftonyour
behalf.
Sincerely,
BillGates
SandraE.Peterson
TeriL.ListStoll
CharlesW.Scharf
7/111
10/28/2016
iv
PRE14A
G.MasonMorfit
JohnW.Stanton
SatyaNadella
JohnW.Thompson
CharlesH.Noski
PadmasreeWarrior
HelmutPanke
TableofContents
Noticeof2016AnnualShareholdersMeeting
Date
November30,2016
Time
8:00a.m.PacificTime
Place
MeydenbauerCenter,11100NE6thStreetBellevue,Washington98004
September30,2016.Onlyshareholdersofrecordatthecloseofbusinessontherecorddateareentitledtoreceive
noticeof,andtovoteat,theAnnualMeeting.
Makeyourvotecount.PleasevoteyoursharespromptlytoensurethepresenceofaquorumattheAnnualMeeting.
VotingyoursharesnowviatheInternet,bytelephone,orbysigning,dating,andreturningtheenclosedproxycardor
votinginstructionformwillsavetheexpensesandextraworkofadditionalsolicitation.Ifyouwishtovotebymail,we
haveenclosedanaddressedenvelope,postageprepaidifmailedintheUnitedStates.Submittingyourproxynowwill
notpreventyoufromvotingyoursharesattheAnnualMeeting,asyourproxyisrevocableatyouroption.
Recorddate
Proxyvoting
Itemsof
business
Toelectthe11directornomineesnamedinthisProxyStatement
Toapprove,onanonbindingadvisorybasis,thecompensationpaidtoourNamedExecutiveOfficers
ToratifytheselectionofDeloitte&ToucheLLPasourindependentauditorforfiscalyear2017
ToapproveanamendmenttoourAmendedandRestatedArticlesofIncorporation
ToapproveaFrenchSubPlanunderthe2001StockPlan
ToconsiderandvoteontwoshareholderproposalsdescribedintheaccompanyingProxyStatement,ifproperly
8/111
10/28/2016
PRE14A
ToconsiderandvoteontwoshareholderproposalsdescribedintheaccompanyingProxyStatement,ifproperly
presentedattheAnnualMeeting
TotransactotherbusinessthatmayproperlycomebeforetheAnnualMeeting
Virtualmeeting
Admissionto
meeting
YoualsomayvoteattheAnnualMeetingviatheInternetbyvisiting
microsoft.onlineshareholdermeeting.comandfollowingtheinstructions.
ProofofshareownershipwillberequiredtoentertheAnnualMeeting.
SeePart7Informationaboutthemeetingfordetails.
ImportantnoticeregardingtheavailabilityofproxymaterialsfortheAnnualMeetingtobeheldonNovember30,2016.Our2016
ProxyStatementandAnnualReporttoShareholdersareavailableatwww.microsoft.com/investor.
ByorderoftheBoardofDirectors
JohnA.Seethoff
Secretary
Redmond,Washington
October18,2016
TheuseofcamerasattheAnnualMeetingisprohibitedandtheywillnotbeallowedintothemeetingoranyotheradjacentareas,exceptby
credentialedmedia.Werealizethatmanymobilephoneshavebuiltincameraswhilethesephonesmaybebroughtintothevenue,the
camerafunctionmaynotbeusedatanytime.
2016PROXYSTATEMENTv
TableofContents
ProxyStatementtableofcontents
Proxysummary
1
Corporategovernanceprinciplesandpractices
Corporategovernance
atMicrosoft
Ourcorporategovernancecyclepromoteseffectiveshareholder
engagement
Ourprogressivecorporategovernanceframework

WehaveanindependentChairmanoftheBoard

OurBoardisindependent

WehaveindependentBoardcommitteeswithappropriateexpertise

Shareholderrights

Ourapproachtoriskoversight

Compensationaccountability

Directororientationandcontinuingeducation

AnnualBoardandcommitteeevaluations


Politicalcontributionstransparency

HowtocommunicatewithourBoard
Proposal1:ElectionofDirectors

Directorselectionandqualifications
Shareholderrecommendationsandnominationsofdirector

candidates
Ourdirectornominees
Determiningdirectorindependence
Directorattendance
Boardcommittees

AuditCommittee
BoardofDirectors
7
7
8
8
9
9
9
10
10
10
10
10
11
11
12
12
14
15
20
21
21
21
9/111
10/28/2016
PRE14A
AuditCommittee
CompensationCommittee
GovernanceandNominatingCommittee
RegulatoryandPublicPolicyCommittee
Directorcompensation
NonexecutiveChairmancompensation
Directorstockownershippolicyalignsinterestswith

shareholders
Certainrelationshipsandrelatedtransactions
Proposal2:AdvisoryvoteonNamedExecutiveOfficercompensation

Statementinsupport
Compensationdiscussionandanalysis

Section1ThecontinuingevolutionofpayatMicrosoft

Section2Executivecompensationoverview

Section3Fiscalyear2016compensationdecisions

Section4Compensationdesignprocessforfiscalyear2016

Section5Othercompensationpoliciesandinformation
CompensationCommitteereport
Fiscalyear2016compensationtables

Summarycompensationtable

Grantsofplanbasedawards

OutstandingequityawardsatJune30,2016

Stockvested

Nonqualifieddeferredcompensation

Equitycompensationplaninformation
CompensationCommitteeinterlocksandinsiderparticipation
Stockownershipinformation
PrincipalShareholders
Section16(a)beneficialownershipreportingcompliance
21
22
23
23
24
25
25
26
27
27
29
29
34
36
42
44
47
47
47
48
49
50
50
51
51
52
53
53
Namedexecutive
officercompensation
vi
TableofContents
4
5
6
7
Proposal3:RatifyDeloitte&ToucheLLPasIndependentAuditorfor
FiscalYear2017
AuditCommitteereport
FeesbilledbyDeloitte&Touche
Auditfees
Auditrelatedfees
Taxfees
Allotherfees
PolicyonAuditCommitteepreapprovalofauditandpermissiblenon
auditservicesofindependentauditor
Proposal4:ApproveAmendmenttoArticlesofIncorporation
58
ARTICLEVIIISPECIALSHAREHOLDERMEETINGS
58
Proposal5:ApproveFrenchSubPlanunderthe2001StockPlan
Materialtaxconsequences
Descriptionofthe2001StockPlan
59
59
60
AuditCommittee
matters
Othermanagement
proposals
54
54
56
56
56
57
57
57
Federalincometaxconsequencesrelatingtothe2001StockPlan,
asamendedandrestated
62
Proposal6:ShareholderproposalNo.1
65
Proposal7:ShareholderproposalNo.2
68
Shareholder
proposals

Proxymaterialsareavailableontheinternet
Proofofownershiprequiredforattendingmeetinginperson
Participatinginelectronicmeeting
Solicitingproxies
Informationabout
themeeting

70
70
70
71
10/111
10/28/2016
themeeting
PRE14A
Solicitingproxies
Householding
Electionofdirectors
Votingprocedures
Tabulationofvotes
Majorityvotestandardforelectionofdirectors
Voterequiredeffectofabstentionsandbrokernonvotes
Voteconfidentiality
Wheretofindmoreproxyvotinginformation
Wheretofindourcorporategovernancedocuments
ProposalsbyShareholdersfor2017Annualmeeting
Otherbusiness
71
71
71
71
71
71
72
72
73
73
73
74
AnnexAreconciliationofnonGAAPandGAAPfinancialmeasures
75
AnnexBFrenchSubPlan
76
DowntownBellevuedrivingdirectionsandparking
79
2016PROXYSTATEMENTvii
TableofContents
Proxysummary
ThissummaryhighlightsinformationcontainedelsewhereinthisProxyStatement.Thissummarydoesnotcontain
alloftheinformationyoushouldconsider.PleasereadtheentireProxyStatementcarefullybeforevoting.
Annual
Shareholders
Meeting
DateNovember30,2016
Time8:00a.m.PacificTime
PlaceMeydenbauerCenter
11100NE6thStreet
Bellevue,Washington
98004
Recorddate
September30,2016

Voting
Shareholdersasoftherecord
dateareentitledtovote.Each
shareofcommonstockof
MicrosoftCorporation(the
Company)isentitledtoone
voteforeachdirectornominee
andonevoteforeachofthe
proposalstobevotedon.
Meetingagenda
Elect11directors
Advisoryvoteonexecutivecompensation
RatifyDeloitte&ToucheLLPasourindependent
auditorforfiscalyear2017
ApproveanamendmenttoourAmendedand
RestatedArticlesofIncorporation
ApproveFrenchSubPlanunderthe2001Stock
Plan
Considerandvoteontwoshareholderproposals
describedintheaccompanyingProxyStatement,if
properlypresentedattheAnnualMeeting
Transactotherbusinessthatmayproperlycome
beforethemeeting
Votingmattersandvoterecommendation
11/111
10/28/2016
PRE14A
Item
Board
recommends
1. Electionof11directors
3. Ratificationoftheselection
ofDeloitte&ToucheLLP
asourindependentauditor
forfiscalyear2017
4. Amendmenttoour
AmendedandRestated
ArticlesofIncorporation
FOR
Ourexecutivecompensationprogramsdemonstratethecontinuing
evolutionofourpayforperformancephilosophy,andreflecttheinputof
shareholdersfromourextensiveoutreachefforts.
FOR
BasedontheAuditCommitteesassessmentofDeloitte&Touches
qualificationsandperformance,itbelievestheirretentionforfiscalyear
2017isinthebestinterestsoftheCompany.
FOR
6. Requestingcertainproxy
accessbylawamendments
TheBoardandGovernanceandNominatingCommitteebelievesthe11 PageXX
Boardcandidatespossesstheskills,experience,anddiversityto
effectivelymonitorperformance,provideoversight,andadvise
managementontheCompanyslongtermstrategy.
5. FrenchSubPlanunderthe
2001StockPlan
FOR
2. Advisoryvoteon
executivecompensation
sayonpay
FOR
7. Restrictingactionsthat
impairtheeffectivenessof
shareholdervotes
More
infor
mation
Reasonsfor
recommendation
PageXX
PageXX
Reducingsharesneededtocallaspecialshareholdersmeetingfrom
PageXX
25%to15%ofoutstandingsharesadvancesshareholderrightsandputs
theCompanyinthemainstreamofbestpractice.
ProvidingtaxadvantagedequitycompensationtoourFrenchemployees PageXX
isrequiredtooffermarketcompetitivecompensation.
Wehavearobustandworkableproxyaccessbylawthatreflects
PageXX
extensivefeedbackfromourinvestors,andhastermsthatarewidely
AGAINST
embracedbycompaniesadoptingproxyaccessandwidelyacceptedby
institutionalshareholdersvotingpolicies.
AGAINST
Weprovideourshareholdersmanyrightsprotectingtheirvote.The
proposalistoovagueanddoesnotaskustotakeanyspecificaction.
PageXX
2016PROXYSTATEMENT1
12/111
10/28/2016
PRE14A
TableofContents
Votein
advanceof
themeeting
Votein
personat
themeeting
Voteyoursharesat
www.proxyvote.com.
HaveyourNoticeof
InternetAvailabilityor
proxycardinhandfor
the12digitcontrol
numberneededtovote.
SeePart7Information
aboutthemeeting
fordetailsonadmission
requirementstoattend
theAnnualMeeting.
Calltollfreenumber
18006906903
Sign,date,andreturn
theenclosedproxy
cardorvoting
instructionform.
Ourdirectornominees
SeePart2BoardofDirectorsformoreinformation.
Thefollowingtableprovidessummaryinformationabouteachdirectornominee.Eachdirectoriselectedannuallybyamajorityofvotes
cast.
Name
Occupation

Director
Age since Independent
WilliamH.GatesIII
CoChairandTrustee,
Bill&MelindaGatesFoundation
60
TeriL.ListStoll
FormerExecutiveVicePresidentand
CFO,DICKSSportingGoods,Inc.
53
G.MasonMorfit
President,ValueActCapital
1981
2014
41
No
Yes
2014
SatyaNadella
49
2014
Otherpublic Committeememberships
boards
AC CC GN RPP
No
Yes
0
0
13/111
10/28/2016
SatyaNadella
CEO,Microsoft
PRE14A
CharlesH.Noski
FormerViceChairman,
BankofAmericaCorporation
49
64
2014
2003
No
Yes
HelmutPanke
FormerChairmanofthe
BoardofManagement,BMW
BayerischeMotorenWerkeAG
70
SandraE.Peterson
GroupWorldwideChairman,
Johnson&Johnson
JohnW.Stanton
Chairman,TrilogyPartnerships
JohnW.Thompson
IndependentChairman,Microsoft
FormerCEO,VirtualInstruments,Inc.
51
61
67
2015
2014
2014
2012
Yes
Yes
Yes
Yes
0
1
2
55
U.S.CEOandglobalChiefDevelopmentOfficer,NextEV
AC:AuditCommittee
CC:CompensationCommittee
GN:GovernanceandNominatingCommittee
RPP:RegulatoryandPublicPolicyCommittee
57
PadmasreeWarrior
Yes
CharlesW.Scharf
CEO,Visa,Inc.
2003
2015
Yes
Chair
Member
Financialexpert
14/111
10/28/2016
PRE14A
TableofContents
Corporategovernancehighlights
SeePart1CorporategovernanceatMicrosoftformoreinformation.
Ourdirectors
Independent
BoardandBoard
committees

IndependentChairmanoftheBoardChairmanandCEO
positionsseparatesince2000
Progressive
shareholder
rights

Directorsareelectedbymajorityvoteinuncontested
elections
9of11directornomineesareindependent
Alldirectorselectedannually
Allcommitteemembersareindependent
Ourbylawsprovideforproxyaccessbyshareholders
Independentdirectorsmeetinexecutivesessionatleast
quarterly
Wehaveaconfidentialvotingpolicy
OurBoardandcommitteesconductannualevaluations
Wehaverobustdirectororientationandcontinuing
educationprogramsfordirectors
IfProposal4isapproved,15%ofoutstandingsharescan
callaspecialmeeting
Vigorous
WearecommittedtoBoardrefreshment.Forbalance
shareholder
15/111
10/28/2016
PRE14A
WearecommittedtoBoardrefreshment.Forbalance
betweendirectorswithdeepknowledgeoftheCompany
andthosewithafreshperspective,ouraveragedirector
tenureis6.6years
AllAuditCommitteemembersarefinanciallyliterateand3
areauditcommitteefinancialexperts
OurCompensationCommitteeusesanindependent
compensationconsultant
shareholder
engagement

Duringfiscalyear2016,independentmembersofourBoard
andmembersofseniormanagementconductedoutreachtoa
crosssectionofshareholdersowning40%ofourshares.
2016PROXYSTATEMENT3
TableofContents
Executivecompensationmatters
SeePart3Namedexecutiveofficercompensationformoreinformation.
Ourbusinessperformance
Executingonourthreeambitions
Wecontinuedtoadvanceourmissiontoempowereverypersonandeveryorganizationontheplanettoachievemore.Wecontinuedto
cultivateaMicrosoftcultureinwhichpeopleconnecttheirindividualenergiesandpassionsfortechnologytothismission.Weachieved
productdevelopmentmilestones,implementedorganizationalchanges,andmadestrategicandtacticalmovestosupportthethree
ambitionsthatsupportourstrategy.
Ourambitionsandachievements
CommercialcloudannualizedrevenuerunrateiscalculatedbymultiplyingrevenueforthelastmonthofthequarterbytwelveforOffice365commercial,Azure,Dynamics
Online,andothercloudproperties.
InJune2016,weagreedtoacquireLinkedInfor$26.2billion.Ourgoalforthistransactionistocreatenewexperiencesandnewvalue
forourcustomersbyconnectingtheworldsleadingprofessionalcloudandprofessionalnetwork.
Financialresults
Webalancedinvestmentsingrowthopportunitiesandinnovationwithongoingfinancialdiscipline,withthefollowingfinancialresults.
GAAP
$85.3billion(down9%)
nonGAAP*
Revenue
Operatingincome
$20.2billion(up11%)
$16.8billion(up38%)
$22.3billion(up3%)
Netincome
Dilutedearningspershare
$2.10(up42%)
Totalcashreturnedtoshareholders
$2.79(up6%)
Increased12%to$26.1billion
Oneyeartotalshareholderreturn
19.1%
16/111
10/28/2016
Oneyeartotalshareholderreturn
PRE14A
19.1%
SeeAnnexAforareconciliationofnonGAAPandGAAPfinancialmeasures.Percentagesareyearoveryear.
Revenuedecreased$8.3billionprimarilyduetotheimpactofthe$6.6billionnetrevenuedeferralfromWindows10andanunfavorable
foreigncurrencyimpactofapproximately$3.8billion.Operatingincomeincreased$2.0billion,mainlyduetoadecreaseinimpairment,
integration,andrestructuringexpensesrelatedtoourphonebusinessandlowersalesandmarketingexpenses,offsetinpartbylower
grossmargin.
TableofContents
Stronglongtermperformance
Ourtotalshareholderreturn(TSR),cashreturnedtoshareholders,andannualrevenueforthepastthreeyearshavebeenstrong,
notwithstandingtheimpactofourbusinessrealignmentonourfiscalyear2016profitability.
Noteabout
forwardlooking
statements
ThisProxyStatementincludesestimates,projectionsandstatementsrelatingtoourbusinessplans,objectivesandexpected
operatingresultsthatareforwardlookingstatementswithinthemeaningofthePrivateSecuritiesLitigationReformActof1995,
Section27AoftheSecuritiesActof1933,andSection21EoftheSecuritiesExchangeActof1934.Forwardlookingstatementsmay
appearthroughoutthisreport,includingthisProxySummaryandPart3Namedexecutiveofficercompensation.Theseforward
lookingstatementsgenerallyareidentifiedbythewordsbelieve,project,expect,anticipate,estimate,intend,strategy,
future,opportunity,plan,may,should,will,would,willbe,willcontinue,willlikelyresult,andsimilarexpressions.
Forwardlookingstatementsarebasedoncurrentexpectationsandassumptionsthataresubjecttorisksanduncertaintiesthatmay
causeactualresultstodiffermaterially.Wedescriberisksanduncertaintiesthatcouldcauseactualresultsandeventstodiffer
materiallyinRiskFactors,QuantitativeandQualitativeDisclosuresaboutMarketRisk,andManagementsDiscussionand
AnalysissectionsofourForms10Kand10Q.Weundertakenoobligationtoupdateorrevisepubliclyanyforwardlooking
statements,whetherbecauseofnewinformation,futureevents,orotherwise.
2016PROXYSTATEMENT5
17/111
10/28/2016
PRE14A
TableofContents
Executivecompensationadvisoryvote
OurBoardofDirectorsrecommendsthatshareholdersvotetoapprove,onanadvisorybasis,thecompensationpaidtothe
CompanysnamedexecutiveofficersasdescribedinthisProxyStatement(thesayonpayvote),forthefollowingreasons.
Payfor
performance
Theevolutionofexecutivecompensationforfiscalyear2016
andbeyond.
Executingonourcommitmenttotransformourexecutivepay
programtoincludesignificantperformanceattributes,we
increasedtheportionoftotalpaythatisperformancebasedand
theportionofincentivepaythatisquantitativelydetermined
usingpreestablishedmetrics.Ourfiscalyear2016Executive
OfficerIncentivePlanawardsforMr.Nadellaandhissenior
leadershipteamincludestronger,explicittiestospecificlong
termperformanceobjectivesthatdirectlyconnectwithachieving
ourthreestrategicambitions.Weintroducedastructured
frameworkforMr.Nadellascashincentiveaward.Wereduced
themaximumawardlevelsfortheannualcashincentiveandin
2017forperformancestockawards.In2017,wewillapplypre
establishedfinancialmetricstoformulaicallydetermine50%of
theannualcashincentiveforallexecutiveofficers.These
compensationchangesrespondtofeedbackwereceived
throughthesayonpayvoteandextensiveshareholder
engagementweconductedoverthelastyear.
Fiscalyear2016executivecompensation.
Atleast70%oftargetcompensationforourChief
ExecutiveOfficer(CEO)andothernamedexecutive
officers(collectively,theNamedExecutives)was
equitybased,providingdirectalignmentwithreturnsto
shareholdersandincentivestodrivelongterm
businesssuccess.Theannualcashincentiveawards
forourNamedExecutivesrangedfrom100%to140%
oftargetconsistentwithourbusinessperformanceand
returnstoshareholders.Mr.Nadellascashincentive
wasdeterminedbasedonhisperformanceinfour
weightedcategoriesasdescribedingreaterdetailin
Part3Namedexecutiveofficercompensation.
Therewerenospecialawards.
Soundprogram
design
Wedesignedourexecutiveofficercompensationprogramsto
attract,motivate,andretainthekeyexecutiveswhodriveour
successandindustryleadershipwhileconsidering
individualandCompanyperformanceandalignmentwith
theinterestsoflongtermshareholders.Weachieveour
objectivesthroughcompensationthat:
Bestpracticesin
executive
compensation

Ourleadingpracticesinclude:
aclawbackpolicy,
anexecutivestockownershippolicy,
apolicyprohibitingpledgingandhedgingownershipof
Microsoftstock,
providesacompetitivetotalpayopportunity,
consistsprimarilyofstockbasedcompensation,
executiveonlyperquisitesorbenefitslimitedtocharitable
givingmatch,
amajorityofpayisperformancebased
noemploymentcontractsorchangeincontrolprotections,
and
enhancesretentionthroughmultiyearvestingofstock
awards,and
nosupplementalexecutiveretirementprograms.
doesnotencourageunnecessaryandexcessiverisk
taking.
18/111
10/28/2016
PRE14A
TableofContents
1.CorporategovernanceatMicrosoft
Corporategovernanceprinciplesandpractices
Ourcorporategovernancecyclepromoteseffectiveshareholderengagement
Microsoftbelievesthateffectivecorporategovernanceshouldincluderegular,constructiveconversationswithourshareholders.Weactively
engagewithourshareholdersaspartofourannualcorporategovernancecycledescribedbelow.
WearetransparentCommunicatinggovernancepoliciesandpracticestoallshareholdersandotherstakeholdersisanimportantpartof
ourcommitmenttotransparency.Withover3.5millionMicrosoftshareholders,usingbothdirectdialogueandonetomanycommunications
arenecessarytoreachallshareholders.Tothisend,duringthepastfiscalyearMicrosofttookthefollowingstepstoengagethese
communities.
WeproactivelyengagewithourshareholdersDuringfiscalyear2016,independentmembersofourBoardandmembersofsenior
managementconductedoutreachtoacrosssectionofshareholdersowningapproximately40%ofourshares.OurCEO,SatyaNadella,
remainscommittedtoinvestingtimewithourshareholderstoincreasetransparencyandbetterunderstandtheirperspectives,includingby
participatinginourquarterlyearningscallsandotherforumsforcommunication.
OurdirectorvideoseriesprovidesallstakeholdersinsightaboutourBoardWerecentlyreleasedtwonewinstallmentsofourdirector
videoseriesfeaturinginterviewswithmembersofourBoard.ThevideosprovideaninformalopportunityforMicrosoftsdirectorstodiscuss
theirapproachtoservingasadirectoratMicrosoft.ThecompleteseriescanbeviewedonMicrosoftsInvestorRelationssiteat
www.microsoft.com/investor/CorporateGovernance/BoardOfDirectors/default.aspx.
MicrosoftontheIssuesblogsaddressourviewsonemerginggovernancetopicsWemakeregularpolicyblogpostsonMicrosofton
theIssues.Blogsincludedasynopsisofourcommitmenttoshareholderengagement,includingthelatestintheseriesofdirectorinterviews
andothertopicsofimportanceincludingcorporatesocialresponsibility,privacy,cybersecurity,onlinesafety,jobs,andeducation.We
19/111
10/28/2016
PRE14A
andothertopicsofimportanceincludingcorporatesocialresponsibility,privacy,cybersecurity,onlinesafety,jobs,andeducation.We
disseminatedinformationpostedontheMicrosoftontheIssuesblogviasocialmediahandles,including@MSFTIssuesand@MSFTNews.
2016PROXYSTATEMENT7
20/111
10/28/2016
PRE14A
TableofContents
InvestorRelationswebsitedeliversextensivecontentaboutgovernanceandcorporatesocialresponsibilityOurInvestorRelations
websiteprovidesindepthinformationaboutourcorporategovernanceandcorporatesocialresponsibilityinitiativestoourshareholdersand
otherstakeholders.
Ourprogressivecorporategovernanceframework
CorporategovernanceatMicrosoftisdesignedtopromotethelongterminterestsofourshareholders,maintaininternalchecksand
balances,strengthenmanagementaccountability,engenderpublictrust,andfosterresponsibledecisionmakingandaccountability.
OurcorporategovernanceframeworkisdesignedtoensureourBoardhasthenecessaryauthorityandpracticesinplacetoreviewand
evaluateourbusinessoperationsandtomakedecisionsindependentofmanagement.Ourgoalistoaligntheinterestsofdirectors,
management,andshareholders,andcomplywithorexceedtherequirementsoftheNASDAQStockMarket(NASDAQ)andapplicablelaw.
ThisframeworkestablishesthepracticesourBoardfollowswithrespectto:
Boardcomposition,directorselection,
Boardrefreshmentandsuccessionplanning,
independentBoardleadership,
Boardmeetingsandinvolvementofseniormanagement,
CEOperformanceevaluation,
CEOandseniorexecutivedevelopmentandsuccessionplanning,
Boardcommittees,
Boardandcommitteeevaluations,
shareholderengagement,
riskoversight,and
directorcompensation.
Ourcorporategovernancedocuments
AmendedandRestatedArticlesofIncorporation
Bylaws
CorporateGovernanceGuidelines
DirectorIndependenceGuidelines
MicrosoftFinanceCodeofProfessionalConduct
MicrosoftStandardsofBusinessConduct
AuditCommitteeCharterandResponsibilitiesCalendar
CompensationCommitteeCharter
GovernanceandNominatingCommitteeCharter
RegulatoryandPublicPolicyCommitteeCharter
StockOwnershipandHoldingRequirementsforMicrosoft
CorporationExecutives
ExecutiveCompensationRecoveryPolicy
CompensationConsultantIndependenceStandards
Thesedocumentsareallavailableathttp://aka.ms/policiesandguidelines.
WehaveanindependentChairmanoftheBoard
JohnThompsonservesasindependentChairmanoftheBoard.Therolesofchairmanandchiefexecutiveofficerhavebeenseparatesince
2000.TheindependentdirectorsannuallyappointourChairman.AsChairman,Mr.ThompsonleadstheactivitiesoftheBoard,including:
callingmeetingsoftheBoardandindependentdirectors,
settingtheagendaforBoardmeetingsinconsultationwiththeCEOandcorporatesecretary,
chairingexecutivesessionsoftheindependentdirectors,
engagingwithshareholders,
actingasanadvisortoMr.NadellaonstrategicaspectsoftheCEOrolewithregularconsultationsonmajordevelopmentsanddecisions
likelytointeresttheBoard,and
TableofContents
21/111
10/28/2016
PRE14A
performingtheotherdutiesspecifiedintheCorporateGovernanceGuidelinesorassignedbytheBoard.
OurBoardbelievesitsleadershipstructureeffectivelyallocatesauthority,responsibility,andoversightbetweenmanagementandthe
independentmembersofourBoard.ItgivesprimaryresponsibilityfortheoperationalleadershipandstrategicdirectionoftheCompanyto
ourCEO,whiletheChairmanfacilitatesourBoardsindependentoversightofmanagement,promotescommunicationbetweenmanagement
andourBoard,engageswithshareholders,andleadsourBoardsconsiderationofkeygovernancematters.TheBoardbelievesitsprograms
foroverseeingriskwouldbeeffectiveunderavarietyofleadershipframeworksandthereforedonotmateriallyaffecthowitstructuresits
leadership.
OurBoardisindependent
NineofelevendirectorsareindependentWearecommittedtomaintainingasubstantialmajorityofdirectorswhoareindependentofthe
Companyandmanagement.ExceptforSatyaNadella,ourCEO,andBillGates,alldirectorsareindependent.
QuarterlyexecutivesessionsofindependentdirectorsAteachquarterlyBoardmeeting,timeissetasidefortheindependentdirectorsto
meetinexecutivesessionwithoutCompanymanagementpresent.Additionalexecutivesessionsareheldasneeded.
IndependentcompensationconsultantThecompensationconsultantretainedbytheCompensationCommitteeisindependentofthe
CompanyandmanagementasdescribedinourCompensationConsultantIndependenceStandards.
WehaveindependentBoardcommitteeswithappropriateexpertise
CommitteesareindependentOnlyindependentdirectorsaremembersoftheBoardscommittees.
RegularcommitteeexecutivesessionsofindependentdirectorsAteachregularlyscheduledmeeting,membersoftheAuditCommittee,
CompensationCommittee,andRegulatoryandPublicPolicyCommitteemeetinexecutivesession.Additionalexecutivesessionsofall
Boardcommitteesareheldasneeded.
AuditCommitteefinancialsophisticationandexpertiseAllmembersoftheAuditCommitteemeettheNASDAQlistingstandardof
financialsophistication.Ms.ListStoll,Mr.Noski,andDr.PankeareauditcommitteefinancialexpertsunderSecuritiesandExchange
Commission(SEC)rules.
Shareholderrights
MajorityvotingInanuncontestedelection,directorsareelectedbythemajorityofvotescast.
AnnualelectionsAlldirectorsareelectedannually.Microsoftdoesnothaveaclassifiedboard.
ProxyaccessWehaveaProxyAccessforDirectorNominationsbylaw,thatpermitseligibleshareholderstonominatecandidatesfor
electiontotheMicrosoftBoard.ProxyaccesscandidateswillbeincludedintheCompanysproxystatementandballot.Theproxyaccess
bylawprovidesthatholders
ofatleast3percentofMicrosofts
outstandingsharesheldbyupto20
shareholders
holdingthesharescontinuouslyforatleast3
years
cannominatetwocandidatesor20%of
theBoard,whicheverisgreater,for
electionatanannualshareholders
meeting
ConfidentialvotingWehaveaconfidentialvotingpolicytoprotectthevotingprivacyofourindividualshareholders.
SpecialmeetingsIfProposal4isapproved,holdersof15%ofoutstandingsharescancallaspecialmeeting.
2016PROXYSTATEMENT9
TableofContents
22/111
10/28/2016
PRE14A
Ourapproachtoriskoversight
BoardTheBoarddirectlyoverseesstrategicriskstotheCompanyandotherriskareasnotdelegatedtooneofitscommittees.
Committees
AuditCommittee
ReviewsandassessestheCompanys
processestomanagefinancialreporting
riskandtomanageinvestment,tax,and
otherfinancialrisks.Italsoreviewsthe
Companyspoliciesforriskassessment
andstepsmanagementhastakento
controlsignificantrisks,exceptthose
delegatedbytheBoardtoother
committees.
Overseescompensationprogramsand
policiesandtheireffectonrisktakingby
management.
Overseesrisksrelatedtocompetitionand
antitrust,dataprivacyandcybersecurity,
andworkforceandimmigrationlawsand
regulations.
ManagementperiodicallyreportstotheBoardorrelevantcommittee,whichprovidesguidanceonriskassessmentandmitigation.Each
committeechargedwithriskoversightreportstotheBoardonthosematters.
Compensationaccountability
StockownershiprequirementsWehavestockownershippoliciesfordirectors,executiveofficers,andotherseniorexecutivestopromote
alongtermperspectiveinmanagingtheenterpriseandtohelpaligntheinterestsofourshareholders,executives,anddirectors.
CompensationclawbackWehaveastrongnofaultexecutivecompensationrecoverypolicythatappliestoexecutiveofficersandour
principalaccountingofficer.
HedgingandpledgingprohibitedWeprohibitourdirectorsandexecutiveofficersfromhedgingtheirownershipofMicrosoftstock,
includingtradinginoptions,puts,calls,orotherderivativeinstrumentsrelatedtoCompanystockordebt.Directorsandexecutiveofficers
areprohibitedfrompurchasingMicrosoftstockonmargin,borrowingagainstMicrosoftstockheldinamarginaccount,orpledging
Microsoftstockascollateralforaloan.
Directororientationandcontinuingeducation
BoardorientationOurorientationprogramsfamiliarizenewdirectorswithMicrosoftsbusinesses,strategies,andpolicies,andassistnew
directorsindevelopingtheskillsandknowledgerequiredfortheirserviceontheBoardofDirectors.
ContinuingeducationContinuingeducationprogramsassistdirectorsinmaintainingskillsandknowledgenecessaryorappropriatefor
theperformanceoftheirresponsibilities.Theseprogramsmayincludeinternallydevelopedmaterialsandpresentations,programs
presentedbythirdparties,andfinancialandadministrativesupporttoattendqualifyingacademicorotherindependentprograms.
AnnualBoardandcommitteeevaluations
Eachyear,ourBoardanditscommitteesconductevaluationstoassesstheireffectivenessandadherencetotheCorporateGovernance
Guidelinesandcommitteecharters,andtoidentifyopportunitiestoimproveBoardandcommitteeperformance.
BoardevaluationTheGovernanceandNominatingCommitteeconductsanannualevaluationoftheperformanceoftheBoardandeach
ofitsmembers.TheresultsarereportedtotheBoard.ThereportincludesanassessmentoftheBoardscompliancewiththeprinciplesin
theCorporateGovernanceGuidelines,andidentificationofareasinwhichtheBoardcouldimproveitsperformance.
CommitteeevaluationsEachcommitteeconductsanannualperformanceevaluationandreportstheresultstotheBoard.Each
committeesreportincludesanassessmentofthecommitteescompliancewiththeprinciplesintheCorporateGovernanceGuidelinesand
thecommitteescharter,aswellasidentificationofareasinwhichthecommitteecouldimproveitsperformance.
AkeypartofhowMicrosoftfulfillsourmissiontoempowereverypersonandeveryorganizationontheplanettoachievemoreisthroughthe
productsandservicesweprovide.Achievingourmissionalsorequiresastrongcommitmenttocorporatesocialresponsibility:toconductour
businessinwaysthatareprincipled,transparent,andaccountabletokeystakeholders.Webelievedoingsogenerateslongtermvaluefor
ourbusiness,ourshareholders,andcommunitiesaroundtheworld.
10
TableofContents
Microsoftscorporatesocialresponsibilitycommitmentsincludetheareasofaccessibility,corporategovernance,environmentalsustainability,
23/111
10/28/2016
PRE14A
Microsoftscorporatesocialresponsibilitycommitmentsincludetheareasofaccessibility,corporategovernance,environmentalsustainability,
empoweringourpeople,ethicalbusinessconduct,humanrights,privacy,andresponsiblesourcing.Inaddition,throughMicrosoft
Philanthropies,weareinvestingMicrosoftsassetsourtechnology,investments,voice,andpeopletodrivegreaterinclusionand
empowermentofpeoplewhodonothaveaccesstotechnologyandtheopportunitiesitoffersandenables.
Atwww.microsoft.com/csrweshareabroadrangeofinformationonourpolicies,practices,andperformanceacrossalltheseareasand
others,rangingfromourcarbonfootprinttohowweverespondedtorequestsfromlawenforcementagenciesforcustomerdata.Ultimately,
ourgoalistomeetthehighstandardswehaveforourselvesandtoconsistentlyearnthetrustandconfidenceofthepublic,ourcustomers,
partners,employees,andshareholders.
Politicalcontributionstransparency
MicrosoftrecognizestheinterestofU.S.publiccompanyshareholdersinestablishinggreatertransparencyaboutcorporatepolitical
contributions.Wediscloseourpoliticalcontributionstosupportcandidatesandballotmeasuresandhowcertainofourtradeassociation
membershipduesareusedforpoliticalactivities.Aspartofourcommitmenttotransparency,wedevelopedourPrinciplesandPolicies
GuidingMicrosoftParticipationinPublicPolicyProcessintheUnitedStates,whichfocusonensuringcompliancewithapplicablefederaland
statelawsandaredesignedtogobeyondcompliancetoimplementwhatweconsiderleadingpracticesincorporateaccountability,
transparency,integrity,andresponsibility.Thepolicyisavailableatwww.microsoft.com/politicalengagement.
HowtocommunicatewithourBoard
WeinviteshareholderstocontacttheBoardaboutcorporategovernanceormattersrelatedtotheBoard.Communicationsaboutthesetopics
willbereceivedandprocessedbymanagementbeforebeingforwardedtotheBoard,acommitteeoftheBoard,oradirectorasdesignated
inyourmessage.Communicationsrelatingtoothertopics,includingthosethatareprimarilycommercialinnature,willnotbeforwarded.
AskBoard@microsoft.com
MSC123/9999
OfficeoftheCorporateSecretary
MicrosoftCorporation
OneMicrosoftWay
Redmond,WA980526399
ConcernsaboutaccountingorauditingmattersorpossibleviolationsofourStandardsofBusinessConductshouldbereportedunderthe
proceduresoutlinedintheMicrosoftStandardsofBusinessConduct,whichisavailableonourwebsiteathttp://aka.ms/buscond.
2016PROXYSTATEMENT11
TableofContents
2.BoardofDirectors
24/111
10/28/2016
PRE14A
Proposal1:
Electionof
directors
TheBoardhasnominated11directorsforelectionattheAnnualMeetingtoholdofficeuntilthe2017Annual
Meeting.TheGovernanceandNominatingCommitteehasevaluatedandrecommendedthenomineesin
accordancewithitscharterandourCorporateGovernanceGuidelines.Foradditionalinformationaboutthe
nomineesandtheirqualifications,pleaseseePart2BoardofDirectorsDirectorselectionand
qualificationsYoucanalsoviewourvideoseriesfeaturingmembersofourBoardat
www.microsoft.com/investor/board.
Eachdirectorwillbeelectedbyavoteofthemajorityofthevotescast,meaningthatthenumberofsharescast
foradirectorselectionexceedsthenumberofvotescastagainstthatdirector.
OurBoardofDirectorsrecommendsavoteFORtheelectiontotheBoardofeachofthefollowingnominees:
Name
WilliamH.GatesIII
Age Directorsince
1981
60
Occupation
CoChairandTrustee,Bill&MelindaGatesFoundation
TeriL.ListStoll
G.MasonMorfit
53
41
2014
FormerExecutiveVicePresidentandCFO,DICKSSportingGoods,Inc.
2014
President,ValueActCapital
49
64
2014
CEO,Microsoft
2003
SatyaNadella
CharlesH.Noski
HelmutPanke
70
57
51
2003
JohnW.Thompson
61
67
PadmasreeWarrior
55
SandraE.Peterson
CharlesW.Scharf
FormerViceChairman,BankofAmericaCorporation
FormerChairmanoftheBoardofManagement,BMWBayerischeMotorenWerkeAG
2015
GroupWorldwideChairman,Johnson&Johnson
2014
CEO,Visa,Inc.
2014
Chairman,TrilogyPartnerships
2012
IndependentChairman,MicrosoftFormerCEO,VirtualInstruments,Inc.
2015
U.S.CEOandglobalChiefDevelopmentOfficer,NextEV
JohnW.Stanton
Directorselectionandqualifications
HowweselectBoardmembers
ShareholderselectallBoardmembersannually.TheGovernanceandNominatingCommitteerecommendstotheBoarddirectorcandidates
fornominationandelectionattheannualshareholdersmeetingorforappointmenttofillvacancies.TheGovernanceandNominating
CommitteeannuallyreviewswiththeBoardtheskillsandcharacteristicsrequiredofBoardnominees,consideringcurrentBoardcomposition
andCompanycircumstances.InmakingitsrecommendationstoourBoard,theGovernanceandNominatingCommitteeconsidersthe
qualificationsofindividualdirectorcandidatesapplyingtheBoardmembershipcriteriadescribedbelow.TheGovernanceandNominating
Committeeretainsanysearchfirminvolvedinidentifyingpotentialcandidatesandapprovestheirfees.
12
TableofContents
Boardmembershipcriteria
TheGovernanceandNominatingCommitteeworkswithourBoardtodeterminethecharacteristics,skills,andexperiencesfortheBoardasa
wholeanditsindividualmemberswiththeobjectiveofhavingaBoardwithdiversebackgroundsandexperienceinbusiness,education,and
publicservice.Characteristicsexpectedofalldirectorsinclude
25/111
10/28/2016
PRE14A
InevaluatingthesuitabilityofindividualBoardmembers,ourBoardconsidersmanyfactors,includinggeneralunderstandingofmarketing,
finance,andotherdisciplinesrelevanttothesuccessofalarge,publiclytradedcompanyintodaysbusinessenvironmentunderstandingof
ourbusinessandtechnologyeducationalandprofessionalbackgroundpersonalaccomplishmentandgeographic,gender,age,andethnic
diversity.TheBoardiscommittedtoactivelyseekinghighlyqualifiedwomenandindividualsfromminoritygroupstoincludeinthepoolfrom
whichnewcandidatesareselected.TheBoardsobjectiveistorecommendagroupthatcanbestperpetuatethesuccessofourbusiness
andrepresentshareholderintereststhroughtheexerciseofsoundjudgmentusingitsdiversityofexperienceandperspectives.
Indeterminingwhethertorecommendadirectorforreelection,theGovernanceandNominatingCommitteeconsidersthedirectorspast
attendanceatmeetings,participationinandcontributionstotheactivitiesoftheBoard,andtheresultsofthemostrecentBoardevaluation.
TheGovernanceandNominatingCommitteeassessesitseffortstomaintainaneffectiveanddiverseBoardofDirectorsinthecourseofits
regularresponsibilities,whichincludeannually
reportingtoourBoardontheperformanceandeffectivenessoftheBoard,
presentingtoourBoardindividualsrecommendedforelectiontotheBoardattheannualmeeting,and
assessingtheGovernanceandNominatingCommitteesownperformance.
TheGovernanceandNominatingCommitteealsoworkswiththefullBoardtoregularlyevaluateBoardcompositiontoassesswhether
directorsshouldbeaddedinviewofdirectordepartures,thenumberofdirectorsneededtofulfilltheBoardsresponsibilitiesunderthe
CorporateGovernanceGuidelinesandcommitteecharters,andtheskillsandcapabilitiesthatarerelevanttotheBoardsworkandthe
Companysstrategy.
TableofContents
ShareholderspreviouslyelectedallcurrentBoardmembers.Thetablebelowsummarizeskeyqualifications,skills,andattributesmost
relevanttothedecisiontonominatecandidatestoserveontheBoardofDirectors.Amarkindicatesaspecificareaoffocusorexpertiseon
whichtheBoardreliesmost.Thelackofamarkdoesnotmeanthedirectordoesnotpossessthatqualificationorskill.Directorbiographies
belowdescribeeachdirectorsqualificationsandrelevantexperienceinmoredetail.
26/111
10/28/2016
PRE14A
Shareholderrecommendationsandnominationsofdirectorcandidates
Shareholderrecommendations
TheGovernanceandNominatingCommitteeconsidersshareholderrecommendationsforcandidatesfortheBoardofDirectorsusingthe
samecriteriadescribedabove.Thenameofanyrecommendedcandidatefordirector,togetherwithabriefbiographicalsketch,adocument
indicatingthecandidateswillingnesstoserveifelected,andevidenceofthenominatingshareholdersownershipofCompanystockmustbe
senttotheattentionofMSC123/9999,OfficeoftheCorporateSecretary,MicrosoftCorporation,OneMicrosoftWay,Redmond,WA98052
6399.
Shareholdernominations
AsdescribedinPart1CorporategovernanceatMicrosoftShareholderrights,ourBylawsprovideforproxyaccessshareholder
nominationsofdirectorcandidates.Ashareholderwhowishestoformallynominateacandidatemustfollowtheproceduresdescribedin
Article1ofourBylaws.
14
27/111
10/28/2016
PRE14A
TableofContents
Ourdirectornominees
Age:60|Directorsince:1981|MicrosoftCommittees:None
OtherPublicCompanyDirectorships:BerkshireHathawayInc.
Summary:Mr.Gates,acofounderofMicrosoft,servedasChairmanfromourincorporationin1981until
2014.HecurrentlyactsasaTechnicalAdvisortoMr.Nadellaonkeydevelopmentprojects.Mr.Gatesretired
asanemployeein2008.Mr.GatesservedasChiefSoftwareArchitectfrom2000until2006,whenhe
announcedhistwoyearplantotransitionoutofafulltimeemployeerole.Mr.GatesservedasChief
ExecutiveOfficerfrom1981until2000,whenheresignedasChiefExecutiveOfficerandassumedthe
positionofChiefSoftwareArchitect.AscochairoftheBill&MelindaGatesFoundation,Mr.Gatesshapes
andapprovesgrantmakingstrategies,advocatesforthefoundationsissues,andhelpssettheoverall
directionoftheorganization.
Qualifications:AsafounderofMicrosoft,Mr.Gatesinsightandhisvisionforpersonalcomputinghavebeen
centraltothesuccessofMicrosoftandthesoftwareindustry.Hehasunparalleledknowledgeofthe
Companyshistory,strategies,andtechnologies.AsChairmanandChiefExecutiveOfficeroftheCompany
fromitsincorporationin1981to2000,hegrewMicrosoftfromafledglingbusinessintotheworldsleading
softwarecompany,intheprocesscreatingoneoftheworldsmostprolificsourcesofinnovationandpowerful
Financial
28/111
10/28/2016
Globalbusiness
Leadership
Publiccompany
boardservice
andgovernance
PRE14A
softwarecompany,intheprocesscreatingoneoftheworldsmostprolificsourcesofinnovationandpowerful
brands.AsChiefSoftwareArchitectfrom2000to2006,andthrough2008whenheretiredasanemployeeof
Microsoft,Mr.GatessetinmotiontechnologicalandstrategicprogramsthatareacorepartoftheCompany.
Hecontinuestoprovidetechnicalandstrategicinputtowardsourmissiontoempowereverypersonand
everyorganizationontheplanettoachievemore.HisworkoverseeingtheBillandMelindaGates
FoundationprovidesglobalinsightsrelevanttotheCompanyscurrentandfuturebusinessopportunities
andakeenappreciationofstakeholderinterests.
Technology
Age:53|Directorsince:2014|MicrosoftCommittees:Audit,GovernanceandNominating
OtherPublicCompanyDirectorships:DanaherCorporation
Ethnic,gender,
national,orother
diversity
Financial
Globalbusiness
Mergersand
acquisitions
Publiccompany
boardservice
andgovernance
Summary:Ms.ListStollservedasExecutiveVicePresidentandChiefFinancialOfficerofDICKSSporting
Goods,Inc.fromAugust2015toSeptember2016,whereshewasresponsibleforfinanceandlegal
activities,includingfinancialplanningandanalysis,accounting,treasury,taxes,internalaudit,compliance,
acquisitionsanddivestitures,andinvestorrelations.FromDecember2013toMarch2015,Ms.ListStoll
servedasExecutiveVicePresidentandChiefFinancialOfficerforKraftFoodsGroup,andthenasasenior
advisorthroughMay2015.AsCFO,sheledKraftsfinance,informationservices,andbusinessprocess
excellenceorganizationsandwasresponsibleforfinancialplanning,financialaccountingandreporting,
internalaudit,treasury,tax,acquisitionsanddivestitures,andinvestorrelations.Ms.ListStolljoinedKraftin
September2013asSeniorVicePresidentleadingthebusinessunitfinanceteams.PriortoKraft,Ms.List
StollwasatProcter&Gamble(P&G)fornearly20years,whereshelastservedasSeniorVicePresident
andTreasurer.Ms.ListStollstartedwithP&Gin1994andheldfinanceleadershiprolesacrossadiverse
rangeofareasincludingbusinessunitmanagement,supplychain,sales,accounting,andfinancialplanning
andanalysis.From1991to1993,Ms.ListStollwasafellowwiththeFinancialAccountingStandardsBoard
(FASB).PriortoherfellowshipatFASB,shespentsixyearsatDeloitte&Touche,providingfinancial
counseltolargemultinationalcompanies.

Qualifications:Ms.ListStollbringstotheBoardsignificantfinancialexpertise,havingspentherprofessional
careerinabroadrangeoffinanceandaccountingroles.Shehasexceptionalfinancialandoperational
experiencefromhertwodecadesinconsumergoodsandretailindustries.AsExecutiveVicePresidentand
ChiefFinancialOfficerforDICKSSportingGoodsandinherpreviousrolesatKraftFoodsGroupandP&G,
Ms.ListStollhasaprovenrecordofaccomplishmentleadingdiverseandcomplexfinancialfunctions,
providinganunderstandingofcomplexfinancialmanagementandaccountingmatterssimilartothose
Microsoftfaces.Herexperienceinvolvingbusinessunitmanagement,supplychain,andsalesatamajor
consumerproductscompanyprovidesvaluableinsightsintotheCompanysconsumeropportunities.
Salesandmarketing
29/111
10/28/2016
PRE14A
TableofContents
Age:41|Directorsince:2014|MicrosoftCommittees:Audit,Compensation
OtherPublicCompanyDirectorships:None
FormerPublicCompanyDirectorshipsHeldinthePastFiveYears:C.R.Bard,Inc.,Valeant
PharmaceuticalsInternational,Inc.
Summary:Mr.MorfitisthePresidentofValueActCapital,asignificantMicrosoftshareholder.Hehasbeena
partnerofValueActCapitalManagement,L.P.since2004andwasanassociatewithValueActCapitalfrom
January2001toDecember2002.PriortojoiningValueActCapital,Mr.Morfitworkedinequityresearchfor
CreditSuisseFirstBostonfrom1999to2000.HehasaB.A.fromPrincetonUniversity,andisaformerCFA
charterholder.
Financial
Mergersand
acquisitions
Publiccompany
boardservice
andgovernance
Qualifications:Mr.Morfitisaseasonedinvestorinvolvedinstrategicplanningforotherpublicandprivate
companies,includingcompaniesinvolvedinsignificantperiodsoftransition.Hisexperienceontheaudit,
governance,andcompensationcommitteesofotherpubliccompaniespositionshimtobeavaluableand
versatileassetinavarietyofcontextsandcommitteeroles.Mr.Morfithassubstantialexperiencein
analyzingfinancialstatementsandcapitalallocationdecisions.
Age:49|Directorsince:2014|MicrosoftCommittees:None
FormerPublicCompanyDirectorshipsHeldinthePastFiveYears:RiverbedTechnology,Inc.
Summary:Mr.NadellawasappointedChiefExecutiveOfficerandaDirectorinFebruary2014.Heserved
30/111
10/28/2016
PRE14A
Summary:Mr.NadellawasappointedChiefExecutiveOfficerandaDirectorinFebruary2014.Heserved
asExecutiveVicePresident,CloudandEnterprisefromJuly2013toFebruary2014.From2011to2013,Mr.
NadellaservedasPresident,ServerandTools.From2009to2011,hewasSeniorVicePresident,Online
ServicesDivision.From2008to2009,hewasSeniorVicePresident,Search,PortalandAdvertising.Since
joiningMicrosoftin1992,Mr.NadellasrolesalsoincludedVicePresidentoftheBusinessDivision.
Ethnic,gender,
national,orother
diversity
Globalbusiness
Leadership
Publiccompany
boardservice
andgovernance
Qualifications:Mr.Nadellaisaprovenleaderwithmasterfulengineeringskills,businessvision,andthe
abilitytobringpeopletogether.Hisunderstandingofhowtechnologywillbeusedandexperiencedaround
theworldenableshimtoleadusthroughournextchapterofinnovationandgrowth.Mr.Nadellastwo
decadehistorywithMicrosoftgiveshimdeepinsightintoourculture,operations,andstrategicdirection.He
spearheadedmajorstrategyandtechnicalshiftsacrosstheCompanysproductsandservices,mostnotably
ourmovetothecloudandthedevelopmentofoneofthelargestcloudinfrastructuresintheworldsupporting
Bing,Xbox,Office365,Dynamics365,andotherservices.ThisexperienceisfundamentaltotheCompanys
currentstrategicdirection.Thebusinessgroupshemanageddeliveredstrong,consistentgrowth,
outperformingthemarketandtakingsharefromcompetitors,demonstratinghisabilitytotranslatevisioninto
businessresults.
Technology
16
TableofContents
Age:64|Directorsince:2003|MicrosoftCommittees:Audit(Chair),GovernanceandNominating
OtherPublicCompanyDirectorships:AvonProducts,Inc.,ThePricelineGroupInc.
FormerPublicCompanyDirectorshipsHeldinthePastFiveYears:AveryDennisonCorporation
Financial
Globalbusiness
Leadership
Mergersand
acquisitions
Publiccompany
boardservice
andgovernance
Summary:Mr.NoskiservedasViceChairmanofBankofAmericaCorporationfromJune2011until
September2012.FromMay2010throughJune2011,heservedasExecutiveVicePresidentandChief
FinancialOfficerofBankofAmericaCorporation.From2003to2005,heservedasCorporateVicePresident
andChiefFinancialOfficerofNorthropGrummanCorporationandservedasadirectorfrom2002to2005.
Mr.NoskijoinedAT&Tin1999asSeniorExecutiveVicePresidentandChiefFinancialOfficerandwas
namedViceChairmanofAT&Tsboardofdirectorsin2002.Mr.NoskiretiredfromAT&Tuponcompletionof
itsrestructuringin2002.PriortojoiningAT&T,Mr.NoskiwasPresident,ChiefOperatingOfficer,anda
memberoftheboardofdirectorsofHughesElectronicsCorporation,apubliclytradedsubsidiaryofGeneral
MotorsCorporationinthesatelliteandwirelesscommunicationsbusiness.HeisChairmanoftheBoardof
TrusteesoftheFinancialAccountingFoundation,amemberoftheAICPAandFEI,apastmemberofthe
StandingAdvisoryGroupofthePCAOB,andadirectoroftheNationalAssociationofCorporateDirectors.
Qualifications:Withhisextensivebackgroundinfinance,accounting,risk,capitalmarkets,andbusiness
operations,Mr.Noskihasauniqueportfolioofbusinessskills.Hehasservedasaseniorexecutiveofficeror
headofabusinessunitofamajorpubliccompanyinavarietyofcontexts.AlargepartofMr.Noskis
executiveexperiencehasbeeninthetechnologysector,includingmultinationaltelecommunications
companies.Hisservicewithleadingorganizationsintheaccountingandauditingfieldsreflectshisexpertise
infinanceandaccountingmatters.Mr.Noskihasservedonawiderangeofpubliccompanyboardsinthe
technology,industrial,andfinancefields.

Technology
31/111
10/28/2016
PRE14A
Age:70|Directorsince:2003|MicrosoftCommittees:Audit,RegulatoryandPublicPolicy(Chair)
OtherPublicCompanyDirectorships:SingaporeAirlinesLimited
FormerPublicCompanyDirectorshipsHeldinthePastFiveYears:UBSAG,BayerAG(supervisory
board)
Summary:Dr.PankeservedasChairmanoftheBoardofManagementofBMWBayerischeMotorenWerke
AGfrom2002through2006.From1999to2002,heservedasamemberoftheBoardofManagementfor
Finance.From1996to1999,Dr.PankewasamemberoftheBoardofManagementforHumanResources
andInformationTechnology.InhisroleasChairmanandChiefExecutiveOfficerofBMW(US)HoldingCorp.
from1993to1996,hewasresponsibleforthecompanysNorthAmericanactivities.HejoinedBMWin1982.
Ethnic,gender,
national,orother
diversity
Financial
Globalbusiness
Qualifications:Dr.PankebringsaglobalperspectivetotheBoard.Hisalmost25yearcareeratBMW
culminatedinleadingthecompanyfrom2002to2006,givinghimexperienceaschiefexecutiveofficerofa
majorinternationalpubliccorporation.Inaddition,hisextensiversumatBMWincludesleadershiprolesin
avarietyofbusinessdisciplinesincludingfinance,informationtechnology,worldwidehumanresources,and
operations.Dr.Pankeunderstandsproductmanufacturingprocesses,howtomanageacompanythrough
businesscyclesandintensecompetition,andhowtobuildandsustainagloballyrecognizedandrespected
brand.Hisserviceontheboardsofotherprominentinternationalcompaniesenhanceshisabilityto
contributeinsightsonachievingbusinesssuccessinadiverserangeofgeographies,economicconditions,
andcompetitiveenvironments.
Leadership
Publiccompany
boardservice
andgovernance
Salesandmarketing
32/111
10/28/2016
PRE14A
TableofContents
Age:57|Directorsince:2015|MicrosoftCommittees:RegulatoryandPublicPolicy
FormerPublicCompanyDirectorshipsHeldinthePastFiveYears:Dun&BradstreetCorporation
Ethnic,gender,
national,orother
diversity
Globalbusiness
Leadership
Publiccompany
boardservice
andgovernance
Summary:Ms.PetersonhasservedastheGroupWorldwideChairmanandmemberoftheExecutive
CommitteeofJohnson&Johnson,adiversifiedglobalhealthcarecompanywithleadingconsumerhealth,
pharmaceuticalandmedicaldevicebusinesses,sinceDecember2012.Ms.Petersonpreviouslyservedas
ChairmanoftheBoardofManagementofBayerCropScienceAG(asubsidiaryofBayerAG)from2010to
2012and,priortothat,asamemberofBayerCropScienceAGsBoardofManagementfromJuly2010to
September2010.Priortothat,Ms.PetersonservedasExecutiveVicePresidentandPresident,Medical
Care,BayerHealthCareLLCfrom2009to2010,andasPresident,DiabetesCareDivision,from2005to
2009.ShewasGroupPresidentofGovernmentforMedcoHealthSolutions,Inc.(formerlyMerckMedco)
from2003to2004,SeniorVicePresidentofMedcoshealthbusinessesfrom2001to2003andSeniorVice
PresidentofMarketingforMerckMedcoManagedCareLLCfrom1999to2001.

Qualifications:Ms.Petersonsskillsincludeextensiveoperatingexperiencewithglobalcompanies,product
andmarketingexperience,andexpertisewithstrategydevelopmentgainedfromherexecutivepositions
withJohnson&Johnson,BayerCropScience,BayerHealthCare,andMedcoHealthSolutions.Shehas
significantinformationtechnologyexperience,financialknowledge,andunderstandingofhowtoruna
highlyregulatedbusiness.Ms.PetersonhasoveradecadeofpubliccompanyboardexperienceatDun&
Bradstreet,includingserviceasChairmanoftheInnovationandTechnologyCommitteeandmemberofthe
CompensationandBenefitsCommittee.
Salesandmarketing
Technology
Age:51|Directorsince:2014|MicrosoftCommittees:Compensation,GovernanceandNominating
OtherPublicCompanyDirectorships:VisaInc.
Summary:Mr.ScharfhasservedasChiefExecutiveOfficerandaDirectorofVisaInc.,aglobalpayments
company,since2012.Previously,Mr.ScharfwasaManagingDirectorofOneEquityPartners,theprivate
investmentarmofJPMorganChase&Co.,aglobalfinancialservicesfirm.From2004to2011,Mr.Scharf
servedasChiefExecutiveOfficerofRetailFinancialServicesatJPMorganChase&Co.andfrom2002to
33/111
10/28/2016
PRE14A
servedasChiefExecutiveOfficerofRetailFinancialServicesatJPMorganChase&Co.andfrom2002to
2004,servedasChiefExecutiveOfficeroftheretaildivisionofBankOneCorporation,afinancialinstitution.
Mr.ScharfalsoservedasChiefFinancialOfficerofBankOneCorporationfrom2000to2002,Chief
FinancialOfficeroftheGlobalCorporateandInvestmentBankdivisionatCitigroup,Inc.,aninternational
financialconglomerate,from1999to2000,andChiefFinancialOfficerofSalomonSmithBarney,an
investmentbank,anditspredecessorcompanyfrom1995to1999.
Qualifications:Mr.Scharf,asasittingCEOofalargeglobalbusiness,addsstrategicandoperationaldepth
totheBoard,aswellasadeepunderstandingofhowcommerceischangingglobally.Mr.Scharfhasmore
Financial
Globalbusiness
Leadership
Mergersand
acquisitions
Publiccompany
boardservice
andgovernance
than25yearsofpaymentsystems,financialservices,andleadershipexperiencefromhisseniorexecutive
rolesinsomeoftheleadingfinancialservicesfirmsintheworld.ThroughouthiscareerMr.Scharfhas
positivelyimpactedlargeandcomplexinstitutions,frombuildingoneofthepremierretailbankingoperations
intheU.S.atJPMorganChase,torebuildingtheconsumerbankingbrand,improvingfinancialdiscipline,
anddevelopingseniortalentatBankOne,tooverseeingamajorbusinesstransitionandconsolidationasa
directorofVisaInc.andVisaU.S.A.Mr.Scharfsleadershipskillsandknowledgeofglobalfinanceand
commercepositionhimtocontributesignificantlytotheBoardsoversightofourevolvingbusiness,
operations,andstrategies.
Salesandmarketing
Technology
18
34/111
10/28/2016
PRE14A
TableofContents
Age:61|Directorsince:2014|MicrosoftCommittees:Compensation(Chair),RegulatoryandPublic
Policy
OtherPublicCompanyDirectorships:ColumbiaSportswearCompany,CostcoWholesaleCorporation
FormerPublicCompanyDirectorshipsHeldinthePastFiveYears:ClearwireCorp.
Financial
Globalbusiness
Leadership
Summary:Mr.StantonfoundedTrilogyInternationalPartners,Inc.,awirelessoperatorinCentralandSouth
AmericaandNewZealand,andTrilogyEquityPartners,aprivateequityfundthatinvestsinearlystage
growthopportunitiesinthewirelessecosystemin2005,andcurrentlyservesasChairmanofboth
enterprises.InAugust2016,hewasappointedChairmanofFirstAvenueEntertainmentLLLP,ownerofthe
SeattleMariners.HewasadirectorofClearwireCorp.from2008to2013andChairmanbetween2011to
2013.HealsoservedasClearwiresInterimChiefExecutiveOfficerduring2011.Mr.Stantonfoundedand
servedasChairmanandChiefExecutiveOfficerofWesternWirelessCorporation,awireless
telecommunicationscompany,from1992untilshortlyafteritsacquisitionbyALLTELCorporationin2005.
Mr.StantonwasChairmanandadirectorof
TMobileUSA,formerlyVoiceStreamWirelessCorporation,amobiletelecommunicationscompany,from
1994to2004andwasChiefExecutiveOfficerfrom1998to2003.
Mergersand
acquisitions
Publiccompany
boardservice
andgovernance
Qualifications:Mr.Stantonisarecognizedpioneerinthewirelesstelecommunicationsindustry.His
leadershipoffourofthetopwirelessoperatorsintheUnitedStatesoverthepastthreedecadespositions
himtocontributesignificantlytothedevelopmentofourmobilefirstandcloudfirststrategies.Mr.Stantons
extensivebackgroundasachiefexecutiveofficeranddirectorofpublicandprivatecompanieslends
valuableperspectiveandjudgmenttotheBoardsdeliberations.Hisrecordofaccomplishmentinmultiple
businessendeavorsdemonstrateshisacumenacrossthespectrumofstrategicplanningandfinancial
matters.
Technology
Age:67|Directorsince:2012|MicrosoftCommittees:GovernanceandNominating(Chair),Regulatory
andPublicPolicy
FormerPublicCompanyDirectorshipsHeldinthePastFiveYears:SeagateTechnologyPLC,Symantec
Corporation,UnitedParcelService
Summary:Mr.Thompson,previouslyleadindependentdirector,becameindependentChairmanofour
BoardofDirectorsinFebruary2014.HewasChiefExecutiveOfficerofVirtualInstruments,aprivatelyheld
companythatprovidesinfrastructureperformanceanalyticsforvirtualizedandprivatecloudcomputing
environmentsfrom2010untilitmergedwithLoadDynamiXinMarch2016.Since2009,Mr.Thompsonhas
beenanactiveinvestorinearlystagetechnologycompaniesinSiliconValley.Mr.Thompsonservedas
ChairmanandChiefExecutiveOfficerofSymantecCorp.beginningin1999,helpingtransformSymantec
Ethnic,gender,
intoaleaderinsecurity,storage,andsystemsmanagementsolutions.Mr.ThompsonsteppeddownasChief
national,orother
ExecutiveOfficerofSymantecin2009,andleftSymantecsboardofdirectorsin2011.Previously,Mr.
diversity
Thompsonheldleadershippositionsinsales,marketing,andsoftwaredevelopmentatIBM,including
35/111
10/28/2016
PRE14A
Thompsonheldleadershippositionsinsales,marketing,andsoftwaredevelopmentatIBM,including
generalmanagerofIBMAmericas.HewasamemberofIBMsWorldwideManagementCouncil.
Financial
Globalbusiness
Leadership
Mergersand
acquisitions
Publiccompany
boardservice
andgovernance
Qualifications:Mr.Thompsonhasawealthofleadershipexperienceinthetechnologyindustry,including
areassuchascloudcomputingandinformationsecuritythatareimportanttoMicrosoftsstrategicdirection.
AstheformerChiefExecutiveOfficerofVirtualInstruments,heunderstandsthecriticalimportanceof
performanceandreliabilityinphysical,virtual,andcloudcomputingenvironments.Duringhis10yeartenure
asChiefExecutiveOfficerofSymantec,Mr.Thompsonoversawitstransformationintoaleaderinsecurity,
storage,andsystemsmanagementsolutionsforindividualconsumersandlargeenterprises.Throughhis
seniorleadershipexperiencesatVirtualInstruments,Symantec,andIBM,hehasexpertiseinsales,
marketing,technologyandoperations,includingmanagingalargeworkforceandoverseeinginternational
businessoperations.Mr.Thompsonsexperiencealsoincludesserviceasadirectoroflargepublic
companies.
Salesandmarketing
Technology
36/111
10/28/2016
PRE14A
TableofContents
Age:55|Directorsince:2015|MicrosoftCommittees:Compensation
FormerPublicCompanyDirectorshipsHeldinthePastFiveYears:TheGap,Inc.,Box,Inc.
Ethnic,gender,
national,orother
diversity
Globalbusiness
Leadership
Mergersand
acquisitions
Publiccompany
boardservice
andgovernance
Summary:Ms.WarriorwasnamedtheU.S.ChiefExecutiveOfficerandglobalChiefDevelopmentOfficerat
NextEV,anelectriccarstartupcompany,inDecember2015.SheservedasStrategicAdvisortoCisco
Systems,Inc.,aleadingglobalnetworkingequipmentprovider,fromJunetoSeptember2015.Priortothat,
shewasChiefTechnologyandStrategyOfficerfromJuly2012toJune2015andservedasChief
TechnologyOfficer,SeniorVicePresidentEngineeringandGeneralManagerGlobalEnterprisesegment
from2010to2012.ShejoinedCiscoin2008astheChiefTechnologyOfficer.BeforejoiningCisco,Ms.
WarriorservedinvariousexecutiverolesatMotorola,Inc.,amobiledeviceandtelecommunications
company,from1999to2007,mostrecentlyasExecutiveVicePresidentandChiefTechnologyOfficerfrom
2003to2007.Ms.WarriorholdsaB.S.inChemicalEngineeringfromtheIndianInstituteofTechnologyin
NewDelhiandanM.S.inChemicalEngineeringfromCornellUniversity.

Qualifications:Ms.Warrioriswidelyrecognizedasavisionarybusinessleaderintechnology.Asasenior
executiveforCisco,Ms.Warriorwasresponsibleforworldwidebusinessandtechnologystrategy,mergers
andacquisitions,equityinvestments,andinnovation.Chargedwithaligningtechnologydevelopmentand
corporatestrategy,sheunderstandshowtomakehighstakesdecisionsinambiguousandquicklyevolving
environments.ShealsohaswiderangingexperienceasatechnicalleaderatMotorolaaddressingsilicon,
hardware,andsoftwaredevelopmentchallenges.Ms.Warriorbringssignificantexperienceindriving
technologyandoperationalinnovationacrossaglobalcompany,andinforginggrowththroughstrategic
partnershipsandnewbusinessmodels.
Technology
Determiningdirectorindependence
Havinganindependentboardisacoreelementofourgovernancephilosophy.OurCorporateGovernanceGuidelinesprovidethata
substantialmajorityofourdirectorswillbeindependent.OurBoardofDirectorshasadopteddirectorindependenceguidelinestoassistin
determiningeachdirectorsindependence.Theseguidelinesareavailableonourwebsiteat
www.microsoft.com/investor/independenceguidelines.TheguidelineseithermeetorexceedtheindependencerequirementsofNASDAQ.
TheguidelinesidentifycategoriesofrelationshipstheBoardhasdeterminedwouldnotaffectadirectorsindependence,andthereforeare
notconsideredbytheBoardindeterminingdirectorindependence.
Followingthedirectorindependenceguidelines,eachyearorbeforeanewdirectorisappointed,theBoardmustaffirmativelydeterminea
directorhasnorelationshipthatwouldinterferewiththeexerciseofindependentjudgmentincarryingouthisorherresponsibilitiesasa
director.Annually,eachdirectorcompletesadetailedquestionnairethatprovidesinformationaboutrelationshipsthatmightaffectthe
determinationofindependence.ManagementprovidestheGovernanceandNominatingCommitteeandBoardwithrelevantknownfactsand
circumstancesofanyrelationshipbearingontheindependenceofadirectorornomineethatisoutsidethecategoriespermittedunderthe
directorindependenceguidelines.TheGovernanceandNominatingCommitteethencompletesanassessmentofeachdirectorconsidering
allknownrelevantfactsandcircumstancesconcerninganyrelationshipbearingontheindependenceofadirectorornominee.Thisprocess
includesevaluatingwhetheranyidentifiedrelationshipotherwiseadverselyaffectsadirectorsindependence,andaffirmativelydetermining
thatthedirectorhasnomaterialrelationshipwithMicrosoft,anotherdirector,orasapartner,shareholder,orofficerofanorganizationthathas
arelationshipwiththeCompany.
BasedonthereviewandrecommendationbytheGovernanceandNominatingCommittee,theBoardanalyzedtheindependenceofeach
directoranddeterminedthatMmes.ListStoll,Peterson,andWarrior,Messrs.Morfit,Noski,Scharf,Stanton,andThompson,andDr.Panke
37/111
10/28/2016
PRE14A
directoranddeterminedthatMmes.ListStoll,Peterson,andWarrior,Messrs.Morfit,Noski,Scharf,Stanton,andThompson,andDr.Panke
meetthestandardsofindependenceunderourCorporateGovernanceGuidelines,thedirectorindependenceguidelines,andapplicable
NASDAQlistingstandards,includingthateachmemberisfreeofanyrelationshipthatwouldinterferewithhisorherindividualexerciseof
independentjudgment.
20
TableofContents
Directorattendance
OurBoardofDirectorsholdsregularlyscheduledquarterlymeetings.Typically,committeemeetingsoccurthedaybeforetheBoardmeeting.
Onceeachyear,thecommitteeandBoardmeetingsoccuronasingledaysotheeveningandfollowingdaycanbedevotedtotheBoards
annualstrategyretreat,whichincludespresentationsanddiscussionswithseniormanagementaboutMicrosoftslongtermstrategy.Besides
thequarterlymeetings,typicallytherearetwootherregularlyscheduledmeetingsandseveralspecialmeetingseachyear.Ateachquarterly
Boardmeeting,timeissetasidefortheindependentdirectorstomeetwithoutmanagementpresent.OurBoardmet10timesduringfiscal
year2016.
Eachdirectornomineeattendedatleast75%oftheaggregateofallfiscalyear2016meetingsoftheBoardandeachcommitteeonwhichhe
orsheserved.MariaKlawe,whoretiredfromtheBoardattheexpirationofhertermfollowingthe2015AnnualMeeting,attendedatleast
75%ofmeetingsduringherpartialtermfromJuly1toDecember2,2015.
Directorsareexpectedtoattendtheannualshareholdermeeting,ifpracticable.Allofourdirectorsattendedthe2015AnnualMeeting.
Boardcommittees
OurBoardhasfourstandingcommittees:anAuditCommittee,aCompensationCommittee,aGovernanceandNominatingCommittee,anda
RegulatoryandPublicPolicyCommittee.Eachcommitteehasacharter,whichcanbefoundonourwebsiteathttp://aka.ms/committees.The
tablebelowprovidescurrentmembershipforeachBoardcommittee.
CommitteesoftheBoardofDirectors
Director
WilliamH.GatesIII
G.MasonMorfit
Member
Member
SatyaNadella
CharlesH.Noski
TeriL.ListStoll
Governanceand
Regulatoryand
Audit Compensation Nominating
PublicPolicy
Member
Member
HelmutPanke
Chair
Member
SandraPeterson
Member
Chair
Member
CharlesW.Scharf
JohnW.Stanton
Member
Chair
Member
Member
Member
JohnW.Thompson
PadmasreeWarrior
Chair
Member
Numberofmeetingsinfiscalyear2016
12
Eachcommitteehasauthoritytoengagelegalcounselorotheradvisorsorconsultantsasitdeemsappropriatetocarryoutits
responsibilities.Belowisadescriptionofeachcommitteesresponsibilities.
AuditCommittee
TheAuditCommitteeassistsourBoardofDirectorsinoverseeingthequalityandintegrityofouraccounting,auditing,andreportingpractices.
TheAuditCommitteesroleincludes:
overseeingtheworkofouraccountingfunctionandinternalcontroloverfinancialreporting,
38/111
10/28/2016
PRE14A
overseeinginternalauditingprocesses,
inquiringaboutsignificantrisks,reviewingourpoliciesforenterpriseriskassessmentandriskmanagement,andassessingthesteps
managementhastakentocontroltheserisks,
overseeingbusinesscontinuityprograms,
reviewingwithmanagementpolicies,practices,compliance,andrisksrelatingtoourinvestmentportfolio,
39/111
10/28/2016
PRE14A
TableofContents
overseeing,withtheRegulatoryandPublicPolicyCommittee,cybersecurityandotherrisksrelevanttoourinformationtechnology
environment,and
reviewingcompliancewithsignificantapplicablelegal,ethical,andregulatoryrequirements,includingthoserelatingtoregulatorymatters
thatmayhaveamaterialimpactonourfinancialstatementsorinternalcontroloverfinancialreporting.
TheAuditCommitteeisresponsiblefortheappointment,compensation,retention,andoversightoftheindependentauditorengagedtoissue
auditreportsonourfinancialstatementsandinternalcontroloverfinancialreporting.TheAuditCommitteereliesontheexpertiseand
knowledgeofmanagement,theinternalauditor,andtheindependentauditorincarryingoutitsoversightresponsibilities.TheAudit
CommitteeResponsibilitiesCalendaraccompanyingtheAuditCommitteeCharterdescribestheCommitteesspecificresponsibilities.
TheBoardofDirectorshasdeterminedthateachCommitteememberhassufficientknowledgeinfinancialandauditingmatterstoserveon
theAuditCommittee.Inaddition,theBoardhasdeterminedthatMs.ListStoll,Mr.Noski,andDr.Pankeareauditcommitteefinancial
expertsasdefinedbySECrules.
TheprimaryresponsibilitiesoftheCompensationCommitteeareto:
assistourBoardofDirectorsinestablishingtheannualgoalsandobjectivesofthechiefexecutiveofficer,
establishtheprocessforannuallyreviewingthechiefexecutiveofficersperformance,
recommendapprovalofourchiefexecutiveofficerscompensationtotheindependentmembersofourBoard,
overseetheperformanceevaluationofthemembersofthecorporateseniorleadershipteamotherthanthechiefexecutiveofficerand
approvetheirannualcompensation,includingsalaryandincentivecompensationtargetsandawards,
overseeandadviseourBoardontheadoptionofpoliciesthatgovernexecutiveofficercompensationprogramsandothercompensation
relatedpolicesfortheexecutiveofficers,
assisttheBoardinoverseeingdevelopmentandcorporatesuccessionplansforthecorporateseniorleadershipteam,
overseeadministrationoftheCompanysequitybasedcompensationandretirementplans,
reviewandprovideguidancetoourBoardandmanagementaboutCompanypolicies,programs,andinitiativesfordiversityandinclusion,
andannuallymeetwiththeRegulatoryandPublicPolicyCommitteeonthesemattersandworkforcemanagementand
periodicallyreviewthecompensationpaidtononemployeedirectors,andmakerecommendationstoourBoardforanyadjustments.
OurseniorexecutivesforhumanresourcesandcompensationandbenefitssupporttheCompensationCommitteeinitswork.The
CompensationCommitteedelegatestoseniormanagementtheauthoritytomakeequitycompensationgrantstoemployeeswhoarenot
membersofthecorporateseniorleadershipteamandtoadministertheCompanysequitybasedcompensationplans.
TheCompensationCommitteeCharterdescribesthespecificresponsibilitiesandfunctionsoftheCommittee.
Compensationconsultant
TheCompensationCommitteeretainsSemlerBrossyConsultingGroup,LLC(SemlerBrossy)toadvisetheCommitteeonmarketplace
trendsinexecutivecompensation,managementproposalsforcompensationprograms,andexecutiveofficercompensationdecisions.
SemlerBrossyalsoevaluatescompensationforthenextlevelsofseniormanagementandequitycompensationprogramsgenerally.Thefirm
consultswiththeCompensationCommitteeaboutitsrecommendationstotheBoardofDirectorsonchiefexecutiveofficeranddirector
compensation.
Compensationconsultantisindependent
SemlerBrossyisdirectlyaccountabletotheCompensationCommittee.Tomaintaintheindependenceofthefirmsadvice,SemlerBrossy
doesnotprovideanyservicesforMicrosoftotherthanthosedescribedabove.TheCompensationCommitteehasadoptedCompensation
ConsultantIndependenceStandards,whichcanbeviewedatwww.microsoft.com/investor/compconsultant.Thispolicyrequiresthatthe
CompensationCommitteeannuallyassesstheindependenceofitscompensationconsultant.Aconsultantsatisfyingthefollowing
requirementswillbeconsideredindependent.Theconsultant(includingeachindividualemployeeoftheconsultantprovidingservices):
isretainedandterminatedby,hasitscompensationfixedby,andreportssolelytotheCompensationCommittee,
22
TableofContents
40/111
10/28/2016
PRE14A
isindependentoftheCompany,
willnotperformanyworkforCompanymanagementexceptattherequestoftheCompensationCommitteechairandinthecapacityofthe
Committeesagent,and
doesnotprovideanyunrelatedservicesorproductstotheCompany,itsaffiliates,ormanagement,exceptforsurveyspurchasedfromthe
consultantfirm.
Inassessingtheconsultantsindependence,theCompensationCommitteeconsidersthenatureandamountofworkperformedforthe
Committeeduringtheyear,thenatureofanyunrelatedservicesperformedfortheCompany,andthefeespaidforthoseservicesinrelationto
thefirmstotalrevenues.TheconsultantannuallypreparesfortheCompensationCommitteeanindependenceletterprovidingassurances
andconfirmationoftheconsultantsindependentstatusunderthepolicy.TheCompensationCommitteebelievesthatSemlerBrossyhas
beenindependentduringitsservicefortheCommittee.
GovernanceandNominatingCommittee
TheprincipalresponsibilitiesoftheGovernanceandNominatingCommitteeareto:
annuallyoverseetheprocessforreviewingthechiefexecutiveofficersperformance,
determineandrecommendtheslateofdirectornomineesforelectiontoourBoardofDirectorsattheannualmeeting,
identify,recruit,andrecommendcandidatesfortheBoard,
reviewandmakerecommendationstotheBoardaboutthecompositionofBoardcommittees,
annuallyevaluatetheperformanceandeffectivenessoftheBoard,
annuallyassesstheindependenceofeachdirector,
monitoradherenceto,review,develop,andrecommendchangestoourcorporategovernanceframework,and
reviewandprovideguidancetotheBoardandmanagementabouttheframeworkfortheBoardsoversightofandinvolvementin
shareholderengagement.
TheGovernanceandNominatingCommitteeannuallyreviewsthechartersofBoardcommitteesand,afterconsultationwiththerespective
committees,makesrecommendations,ifnecessary,aboutchangestothecharters.TheGovernanceandNominatingCommitteeCharter
describesthespecificresponsibilitiesandfunctionsoftheCommittee.
TheprincipalresponsibilitiesoftheRegulatoryandPublicPolicyCommitteeareto:
reviewandadvisetheBoardofDirectorsandmanagementaboutlegal,regulatory,andcompliancemattersconcerningcompetitionand
antitrust,dataprivacy,cybersecurity,workforceandimmigrationlawsandregulation,
withtheAuditCommittee,reviewrisksrelevanttoourinformationsystemarchitectureandcontrolsandcybersecurity,
withtheCompensationCommittee,reviewpolicies,programs,andinitiativesforworkforcemanagementanddiversityandinclusion,and
reviewourpoliciesandprogramsthatrelatetomattersofcorporatesocialresponsibility,includinghumanrights,environmental
sustainability,supplychainmanagement,andpoliticalactivitiesandexpenditures.
TheRegulatoryandPublicPolicyCommitteeCharterdescribesthespecificresponsibilitiesandfunctionsoftheCommittee.
TableofContents
41/111
10/28/2016
PRE14A
Directorcompensation
TheCompensationcommitteeperiodicallyreviewscompensationpaidtononemployeedirectorsandmakesrecommendationsfor
adjustments,asappropriate,tothefullBoardofDirectors.Ourobjectiveforcompensationtononemployeedirectorsistopayatornearthe
medianoftheDow30,toawardthemajorityofcompensationinequity,andtomakemeaningfuladjustmentseveryfewyears,ratherthan
smalleradjustmentsthataremorefrequent.WelastincreasedtheregularbaseannualretainerfordirectorsinDecember2010.Consistent
withthisapproacheffectiveDecember2,2015,theannualcashretainerincreasedfrom$100,000to$125,000andtheannualstockaward
retainerincreasedfrom$150,000to$200,000fordirectors.ThetotalretainerfortheindependentChairmanremainedthesame,howeverthe
cashretainerwasincreasedfrom$100,000to$125,000tomatchtheproportionofcashfortheotherdirectors.Asaresult,thestockaward
retainerwasdecreasedfrom$575,000to$550,000.AsourCEO,Mr.Nadelladoesnotreceiveadditionalpayforservingasadirector.In
December2014,Mr.Gateswaivedhisfuturecashandequityawards.
Compensationstructurefordirectors
Regularretainers(alldirectorsexceptMessrs.Gates,Nadella,andThompson)
Baseannualretainer(TOTAL)
Cash
$325,000
$125,000
Stockaward
Annualcommitteechairretainer
$200,000
$15,000
Annualauditcommitteechairretainer
Annualauditcommitteememberretainer
$30,000
$15,000
IndependentChairmanretainer
AnnualindependentChairmanretainer(TOTALinlieuofotherretainers)
Cash
$675,000
$125,000
Stockaward
$550,000
TheCompanyreimbursesreasonableexpensesincurredforBoardrelatedactivities.
Directorretainersarepaidquarterlyinarrears.QuarterlyperiodsaremeasuredbeginningwiththeAnnualMeeting.Attheendofeach
quarterlyperiod,wepay25%ofthetotalannualretainertoeachdirector.RetainersareproratedfordirectorswhojoinorleavetheBoardor
haveachangeinBoardroleduringaquarterlyperiod.
Directorsmayelecttodeferandconverttoequityallorpartoftheirannualcashretainer,andtodeferreceiptofallorpartoftheirannual
equityretainerundertheDeferredCompensationPlanforNonEmployeeDirectors.Amountsdeferredaremaintainedinbookkeeping
accountsthataredeemedinvestedinMicrosoftcommonstock,anddividendspaidonthedeferredequityaredeemedtobeinvestedinour
commonstock.Wecalculatethenumberofsharescreditedbydividingeachquarterlyamountdeferredbytheclosingmarketpriceofour
commonstockontheoriginallyscheduledpaymentdate.AccountsintheplanaredistributedinsharesofMicrosoftcommonstock,with
paymentseitherininstallmentsbeginningonseparationfromBoardserviceorinalumpsumamountpaidnolaterthanthefifthanniversary
afterseparationfromBoardservice.
24
TableofContents
42/111
10/28/2016
PRE14A
Fiscalyear2016directorcompensation
Thistabledescribesthecashandequityportionsoftheannualretainerpaidtoeachnonemployeedirectorinfiscalyear2016.Mr.Nadella
receivednocompensationasadirector.HeisexcludedfromthetablebecausewefullydescribehiscompensationinPart3Named
executiveofficercompensation.
Matching
Feesearnedor
charitable
paidincash1
gifts2
Stockawards
Total
($)
($)
($)
($)
0
0
0
0

50,000
75,000 15,000 140,000

Name
WilliamH.GatesIII3
MariaKlawe4
TeriL.ListStoll5
G.MasonMorfit
127,500
127,500
175,000
175,000
10,000 312,500
157,500
142,500
175,000
175,000
0 332,500
62,500
112,500
127,500
100,000
175,000
15,000 177,500
175,000
562,500
15,000 317,500
100,000
0 162,500
0 302,500
CharlesH.Noski6
HelmutPanke
0 317,500
SandraPeterson7
CharlesW.Scharf
JohnW.Stanton
JohnW.Thompson8
PadmasreeWarrior9
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
112,500
62,500
0 287,500
15,000 690,000
Thevalueoffractionalsharesisexcluded.
Amountsinthiscolumnrepresentmatchingcharitablecontributionsunderourcorporategivingprogram.
Mr.Gateswaivedhiscashandequityretainer.
Ms.KlaweretiredfromtheboardeffectiveDecember2,2015.
Ms.ListStollelectedtodeferaportionofhercompensation.Thestockawardvalueconvertedinto1,619sharesofourcommonstock.
Mr.Noskielectedtodeferthestockawardcomponentofhiscompensation.Thestockawardvalueconvertedinto3,400sharesofourcommonstock.
Ms.PetersonscompensationwasproratedbeginningwithherserviceeffectiveDecember2,2015.Sheelectedtodeferhercashandstockaward.Thestockawardvalue
convertedto3,022sharesofourcommonstock.
Mr.Thompsonelectedtodeferthestockawardcomponentofhiscompensation.Thestockawardvalueconvertedinto11,022sharesofourcommonstock.
Ms.WarriorscompensationwasproratedbeginningwithherserviceeffectiveDecember2,2015.Sheelectedtodeferaportionofhercashretainer.Thestockawardvalue
convertedto580sharesofourcommonstock.
NonexecutiveChairmancompensation
TheindependentmembersoftheBoardappointedJohnThompsonasindependentnonexecutiveChairmanoftheBoard.Mr.Thompsons
payreflectstheadditionaltimecommitmentforthisrolecomparedtoothernonemployeedirectors,whichincludes:(i)managingmeetingsof
theBoardofDirectors,leadingtheworktosettheagendaforBoardmeetings,leadingtheBoardsannualchiefexecutiveofficerperformance
review,andrepresentingtheBoardattheannualshareholdersmeeting,(ii)meetingwiththeCompanysshareholders,(iii)actingasan
advisortoMr.Nadellaonstrategicaspectsofthechiefexecutiveofficerrolewithregularconsultationsonmajordevelopmentsanddecisions
thatarelikelytobeofinteresttotheBoard,and(iv)whenrequested,interactingwithexternalaudiences.TocompensateMr.Thompsonfor
thegreaterresponsibilitiesofthenonexecutiveChairmanrole,hereceivestheannualchairmanretainerinlieuoftheregularBoard
retainers.
Directorstockownershippolicyalignsinterestswithshareholders
Toaligntheinterestsofourdirectorsandshareholders,ourBoardofDirectorsbelievesthatdirectorsshouldhaveasignificantfinancialstake
inMicrosoft.UndertheCorporateGovernanceGuidelines,eachdirectorshouldownMicrosoftsharesequalinvaluetoaminimumofthree
timesthebaseannualretainerpayabletoadirector.Eachdirectormustretain50%ofallnetshares(posttax)fromtheretaineruntilreaching
theminimumshareownershiprequirement.StockdeferredundertheDeferredCompensationPlanforNonEmployeeDirectorscounts
towardtheminimumownershiprequirement.Eachofourdirectorscompliedwithourstockownershippolicyinfiscalyear2016.
TableofContents
43/111
10/28/2016
PRE14A
Certainrelationshipsandrelatedtransactions
WeareaglobalcompanywithextensiveoperationsintheUnitedStatesandmanyforeigncountries.Everyyearwespendtensofbillionsof
dollarsforgoodsandservicespurchasedfromthirdparties.Theauthorityofouremployeestopurchasegoodsandservicesiswidely
dispersed.Becauseofthesewiderangingactivities,theremaybetransactionsandbusinessarrangementswithbusinessesandother
organizationsinwhichoneofourdirectors,executiveofficers,ornomineesfordirector,ortheirimmediatefamilies,oragreaterthan5%
ownerofourstock,mayalsobeadirector,executiveofficer,orinvestor,orhavesomeotherdirectorindirectmaterialinterest.Wewillreferto
theserelationshipsgenerallyasrelatedpartytransactions.
RelatedpartytransactionshavethepotentialtocreateactualorperceivedconflictsofinterestbetweenMicrosoftanditsdirectorsand
executiveofficersortheirimmediatefamilymembers.TheAuditCommitteehasestablishedapolicyandproceduresforreviewandapproval
ofrelatedpartytransactions.IfarelatedpartytransactionsubjecttoreviewinvolvesdirectlyorindirectlyamemberoftheAuditCommittee(or
animmediatefamilymemberordomesticpartner),theremainingCommitteememberswillconductthereview.Inevaluatingarelatedparty
transaction,theAuditCommitteeconsiders,amongotherfactors:
thegoodsorservicesprovidedbyortotherelatedparty,
thenatureofthetransactionandthecoststobeincurredbyMicrosoftorpaymentstoMicrosoft,
thebenefitsassociatedwiththetransactionandwhethercomparableoralternativegoodsorservicesareavailabletoMicrosoftfrom
unrelatedparties,
thebusinessadvantageMicrosoftwouldgainbyengaginginthetransaction,
thesignificanceofthetransactiontoMicrosoftandtotherelatedparty,and
managementsdeterminationthatthetransactionisinthebestinterestsofMicrosoft.
ToreceiveAuditCommitteeapproval,arelatedpartytransactionmusthaveaMicrosoftbusinesspurposeandbeontermsthatarefairand
reasonabletoMicrosoft,andasfavorabletoMicrosoftaswouldbeavailablefromnonrelatedentitiesincomparabletransactions.TheAudit
CommitteealsorequiresthatthetransactionmeetthesameMicrosoftstandardsthatapplytocomparabletransactionswithunaffiliated
entities.
26
TableofContents
3.Namedexecutiveofficercompensation
44/111
10/28/2016
PRE14A
Proposal2:
Advisoryvote
onnamed
executive
officer
compensation
AsrequiredbySECrules,weareaskingforyouradvisoryvoteonthefollowingresolution
(thesayonpayresolution):
Resolved,thattheshareholdersapprove,inanonbindingvote,thecompensationoftheCompanys
namedexecutiveofficers,asdisclosedinPart3Namedexecutiveofficercompensation.
Weholdoursayonpayvoteeveryyear.Shareholderswillhaveanopportunitytocastanadvisoryvote
onthefrequencyofsayonpayvotesatleasteverysixyears.Thenextadvisoryvoteonthefrequencyof
thesayonpayvotewilloccurin2017.
Statementinsupport
Payforperformance
Ourexecutivecompensationprogramcontinuestoevolvetobetteralignwithandrewardachievingourbusinessstrategiesandproducing
longtermbusinesssuccess.
Throughourongoingshareholderengagement,wereceiveconsistentfeedbackthatourinvestorsfavorincentivecompensation
arrangementstiedtospecificperformancemeasuresthatdrivelongtermperformanceandvaluecreation.Weconcurandhavebeensteadily
evolvingourprogramoverthepastthreeyearstodevelopadesignthatincorporatesperformanceelementsdirectlylinkedtoachievingour
threestrategicambitions.
Ourfiscalyear2016IncentivePlanawardsincludesignificantelementstiedtospecificperformanceobjectivesintendedtodrivelongterm
performance.Keyfeaturesofourfiscalyear2016compensationprogramwere:
55%oftheannualtargetcompensationopportunitywasperformancebased,onaverage.
From35%to38%oftheannualtargetcompensationopportunitywasdeliveredintheformofaperformancebasedstockawardtobe
earnedbasedonachievingpreestablishedfinancialandstrategicperformanceobjectivesthatreflectourthreeambitions.
Weintroducedarelativetotalshareholderreturnmultiplierfortheperformancestockawardstorewardsignificantpositiveoutperformance,
therebystrengtheningthealignmentoftheinterestsofourexecutiveofficerswiththeinterestsofourlongtermshareholders.
Wereducedthepotentialmaximumannualcashincentiveaward,placinggreateremphasisonlongtermincentivecompensation
opportunitiesforourexecutiveofficers.
WeintroducedastructuredframeworkfordeterminingMr.Nadellasannualcashincentiveawardconsistingoffourweightedperformance
categories(businessresults40%productandstrategy20%customersandstakeholders20%andcultureandorganizationalleadership
20%).
TableofContents
Beginninginfiscalyear2017,50%oftheannualcashincentivewillbetiedtofinancialobjectives,theoutcomeforthoseobjectiveswillbe
determinedformulaicallyusingpreestablishedtargetsforfinancialperformance(companywiderevenueandoperatingincome),andthis
frameworkwillapplytoallexecutiveofficers.
45/111
10/28/2016
PRE14A
Soundprogramdesign
Wedesignourcompensationprogramforourseniorleadershipteamtoattract,motivate,andretainthekeyexecutiveswhodriveoursuccess
andindustryleadership.Paythatreflectsperformanceandalignmentofthatpaywiththeinterestsoflongtermshareholdersarekey
principlesthatunderlieournewcompensationprogramdesignanddecisions.Weachieveourobjectivesthroughcompensationthat:
providesacompetitivetotaltargetpayopportunity,
enhancesretentionbysubjectingasignificantpercentageof
totaltargetcompensationtomultiyearvestingorperformance
requirements,
consistsprimarilyofequitycompensation,whichencouragesour
executivestoactasownerswithasignificantstakeinMicrosoft,
makesprudentuseofourequity,and
deliversamajorityofpaybasedonperformance,
doesnotencourageunnecessaryandexcessiverisktaking.
balanceslongtermandshorttermincentives,
Bestpracticesinexecutivecompensation
Ourcompensationprogramforourexecutiveofficersdoesnotprovideinappropriateincentivesorrewardinappropriaterisks.
Wedo
Haveastockownershippolicythatreinforcesalignmentbetween
theinterestsofourshareholdersandourexecutiveofficers
Wedonot
Awardstockoptions
Offerexecutiveonlyperquisitesorbenefitsbesidesa
charitablegiftmatch(noclubmemberships,medicalbenefits,
ortaxgrossups)
Haveaclawbackpolicytoensureaccountability
Prohibitpledging,hedging,andtradinginderivativesofMicrosoft
securities
Haveemploymentcontracts
Haveanindependentcompensationconsultantadvisingthe
Providechangeincontrolprotections
Havespecialretirementprograms
Responsiblymanagetheuseofequitycompensation
Guaranteebonuses
Paydividendsonoutstandingandunvestedstockawards
OurBoardandCompensationCommitteewillreviewthevotingresultsandthroughourregularshareholderengagementseekto
understandthefactorsthatinfluencedthevotingresults.TheBoardandtheCompensationCommitteewillconsiderfeedbackobtained
throughthisprocessinmakingfuturedecisionsaboutthedesignandoperationofourexecutivecompensationprogram.
OurBoardofDirectorsrecommendsavoteFORapproval,onanonbinding,advisorybasis,ofthecompensationpaidto
ournamedexecutivesofficersinfiscalyear2016
28
46/111
10/28/2016
PRE14A
TableofContents
Compensationdiscussionandanalysis
ThisCompensationDiscussionandAnalysisprovidesinformationaboutourfiscalyear2016compensationprogramforourfiscalyear2016
namedexecutiveofficers(theNamedExecutives).
Aspartofourongoingbusinesstransformation,wedesignedanewexecutiveincentiveprogramforfiscalyear2016thatquantitativelytiesa
greaterportionofourNamedExecutivesannualtotaltargetcompensationopportunitiestoperformancebasedpayalignedwithourkey
strategicopportunities,ourfinancialperformance,andshareholderreturns.
ThecontentofthisCompensationDiscussionandAnalysisisorganizedintofivesections.
Section1 ThecontinuingevolutionofpayatMicrosoft
29
Section2 Executivecompensationoverview
34
Section3 Fiscalyear2016compensationdecisions
36
47/111
10/28/2016
PRE14A
Section4 Compensationdesignprocessforfiscalyear2016
42
Section5 Othercompensationpoliciesandinformation
44
Section1ThecontinuingevolutionofpayatMicrosoft
Threeyearsago,ourCompensationCommitteeandBoardchartedacoursetotransformourexecutivepayprogramovertimetoinclude
significantperformanceattributes.TheyrecognizeditwouldbeprematuretomovetobusinessmetricbasedpaybeforeMr.Nadella
establishedandtheBoardconcurredwithhisvisionfortheCompanyandthestrategythatwouldembodythatvision.Onceournewstrategy
wasset,additionalperformancebasedpayelementswereadded.Withourchangesinfiscalyears2016and2017,wearesignificantly
increasingtheportionofpaythatisperformancebasedandtheportionofincentivepaythatisquantitativelydeterminedusingpre
establishedmetrics.
ThiseffortwasgroundedinacompensationphilosophyaimedatachievingstrongalignmentbetweentheCompanyslongtermstrategic
goalsandourshareholdersinterests.Weactivelyengagedwithourshareholdersseekingtheirinputaboutfeaturestheyvaluedandsought
theirfeedbackasweevolvedtheprogramdesign.
Fiscalyear2015
WeretainedourpriorpayprogramasMr.NadellaandtheBoardworkedtodeveloptheCompanysnewstrategicvision.InJune2015,we
announcedourmission,ourworldviewandstrategy,andourthreeambitionstoachieveourstrategy.
Fiscalyear2016
InSeptember2015,theBoardinitiatedthenextphaseindevelopingatotalcompensationprogramalignedwithourlongtermobjectivesfor
achievingourthreeambitions.TheBoarddesignedtheprogramtoworkbestforMicrosoftandhowwemanageour
48/111
10/28/2016
PRE14A
TableofContents
business,ratherthantakingagenericapproach.TheBoardcarefullyconsideredshareholderinputthattheprogramshouldbetiedtospecific
performancemeasuresandappropriatelybalanceobjectiveandsubjectivefactors.Thisworkresultedinsignificantchangestotheannual
cashincentiveandequitycomponentsoftheprogram.
Keyelementsofthefiscalyear2016compensationprogramchangesinclude:
WeintroducedastructuredframeworkfordeterminingMr.Nadellasannualcashincentiveawardwithfourweightedperformance
categories(businessresults40%productandstrategies20%customersandstakeholders20%andcultureandorganizational
leadership20%)andaccompanyingperformanceindicators.
WereducedthemaximumannualcashincentiveawardsforallNamedExecutivesfrom300%to200%toincreasefocusonlongterm
incentiveopportunities.
Weintroducedamultiyearperformancestockaward(PSA)withspecificpreestablishedfinancialandstrategicperformance
objectivestiedtoachievingourthreeambitions.Previously,approximately70%ofannualtotaltargetcompensationwasintheformofa
fixedstockaward,allofwhichwastimebased.In2016,halfofthetargetvaluewasconvertedtoPSAs.Thebalanceofthetargetvalue
wasdeliveredintimebasedstockawards(SA)thatwerevariablebasedonindividualperformanceandcapabilityofdeliveringfuture
contributions.PSAsareperformancebasedbecausethenumberofsharesthatvestisdeterminedbyperformanceagainstthemetrics,
andthevalueofthesharesreceiveddependsonchangesinthepriceofourstockduringthethreeyearperformanceperiodcycle.
ThethreeyearPSAswillbegrantedeachyear(i.e.,withrollingperformancetargets),allowingaflexibleapproachthatadaptstoour
evolvingbusinessenvironment.Eachperformancemetrichasathresholdlevelnoawardwillbeearnedunlessthresholdisachieved
foratleastonemetric.
WeincorporatedarelativetotalshareholderreturnmultiplierforPSAstorewardsignificantoutperformancethatcreatescloser
alignmentwiththeinterestsofourlongtermshareholders.
ThePSAsgrantedinfiscalyear2016havethesekeyattributes.
49/111
10/28/2016
ThePSAsgrantedinfiscalyear2016havethesekeyattributes.
PRE14A
AwardFeature
Design
Rationale
Performanceperiod
Threeyears
Performancemeasures
ObjectiveCompanywidepreestablishedquantitative
strategicandfinancialmeasures,withthresholds
belowwhichnoshareswillbeearned
Establishessharedtargetsthatdriveaccountability
forannualbusinessperformancewhilestrivingfor
majorstrategicobjectives
Rangingfrom0%to300%in2016(reducedto200%
in2017)ofthetargetnumberofshares,beforethe
relativeTSRmultiplier
30
Overlappingperformanceperiodslimitimpactof
shorttermbusinessperformanceorshareprice
fluctuationsonfinaloutcomesandallowforadjusted
prioritiesinarapidlychangingenvironment
Providesaccountabilityforunderperformanceand
incentiveforoutperformance.Payoutsatmaximum
areexpectedtoberareandonlypossiblewhen
Microsofthasexceptionalperformance.
RelativeTSRmultiplier
Payoutopportunity
Reinforcesimportanceoflongtermvaluecreation
becausethevalueofsharesthatvestdependsonthe
changeinoursharepriceduringtheperformance
cycle
Overlappingperformance Anewthreeyearperformanceperiodwillbegineach
periods
fiscalyear,withperformanceperiodsoverlapping
PayoutonlyifMicrosoftsrelativeTSRispositiveand
Providesanopportunitytoreceiveadditionalshares
abovethe60thpercentileoftheS&P500forthe
onlyifMicrosoftsignificantlyoutperformsthemarket
performanceperiod.Themultiplierwillincreasethe
numberofshareslinearlyuptoanadditional1/3of
earnedshareswhenMicrosoftsrelativeTSRisator
abovethe80thpercentile.
TableofContents
Thistableillustratestheperformancemeasuresandweightsforthefiscalyear2016PSAs.
Fiscalyear2017
Beginninginfiscalyear2017,thestructuredframeworkfortheannualcashincentivewillbeusedforallNamedExecutivesand50%will
50/111
10/28/2016
PRE14A
Beginninginfiscalyear2017,thestructuredframeworkfortheannualcashincentivewillbeusedforallNamedExecutivesand50%will
bedeterminedformulaicallybasedonpreestablishedtargetsforEIPRevenueandEIPOperatingIncome.
Inaddition,themaximumPSAgrantbeforeapplyingtheTSRmultiplierwillbereducedfrom300to200%,andthetotalequityopportunity
willbedividedequallybetweenPSAsandSAs.TheTSRmultiplierchangewillcauseacomparablereductionfrom400%to300%of
maximumifthefullTSRmultiplierisearned.
Forfiscalyear2017,theperformancemetricsforthePSAsfocusentirelyonstrategicmeasuresthatalignwithourthreeambitionsandare
aimedatdrivingnewgrowthareasforourcommercialandconsumerbusinesses.Thesemetricswereselectedbecausetheyaddress
areasthatsupportlongtermgrowthofourbusinessfocusingonouremergingbusinessopportunities.Becausetheseareasarenewin
dynamicallychangingmarkets,theyareinherentlyvolatileandthereforedifficulttoforecast.Thus,thetargetsforeachmetricwillbesetonan
annualbasis.Inestablishingmetrics,theBoardismindfuloftheimportanceofbalancingthebusinessneedforflexibilityandbeing
accountableoverthelongterm.Itiscommittedtosettingrigorousmetricsforwhichtheprobabilityofachievingthetargetvalueatthetimethe
valuesaresetrangesfrom40%to60%dependingonthemetric.
TableofContents
ThefinalnumberofsharesearnedwillbecalculatedbasedontheaggregateresultsoverthethreeseparateyearsapplicabletothePSA.To
avoidduplicatingmetricsacrosstheincentivepayelements,revenueandoperatingincomewillnolongerbeusedbecausetheywillbe
includedasakeycomponentinourannualcashincentive,asshownbelow.
Thistabledescribestheperformancemeasuresforthefiscalyear2017PSAs.
51/111
10/28/2016
PRE14A
Thistabledescribestheperformancemeasuresforthefiscalyear2017PSAs.
32
TableofContents
Thefollowingchartillustratesthetransitioninpaydesign,anditsimpactonthetargetcompensationmixandrangeofpotentialoutcomesfor
ourNamedExecutives.
Withthesechanges,theBoardandCompensationCommitteehavesubstantiallyaccomplishedinathoughtfulanddisciplinedwaythe
objectivestheysetin2014.Theresultingprogramprovidesacompetitivemixofpaytomotivate,reward,andretaintheexecutivetalentthatis
criticaltooursuccess,incentivizesourleaderswithquantitativeandqualitativeannualmetricsalignedtoourthree,ambitions,andprovides
longtermincentivesthatwillfocusourseniorleadershipteamonthestrategicgoalsthatwillachievethoseambitions.
52/111
10/28/2016
PRE14A
Shareholderfeedbackconsideredinevolutionofpayprogram
IthaslongbeenapriorityofourBoardtoactivelyengagewithourshareholdersonarangeoftopics,includingexecutivecompensation.We
deeplyvaluethecontinuedinterestofandfeedbackfromourshareholders,andarecommittedtomaintainingouractivedialoguewith
shareholderstoensurediverseperspectivesarethoughtfullyconsidered.TheCompensationCommitteecarefullyconsidersboththelevelof
votingsupportfromourshareholdersonoursayonpayvoteaswellasdirectfeedbackreceivedfromshareholderswhenevaluatingour
executivecompensationplan.
Atthe2015AnnualMeeting,72.7%ofthevotescastsupportedouradvisoryresolutiononthecompensationofourNamedExecutives(the
sayonpayvote).Whilethesayonpayvotereceivedmajoritysupport,theCompensationCommitteesoughttounderstandthe
perspectivesofshareholderswhovotedagainsttheproposal.SinceJuly2015,independentmembersofourBoardofDirectorsand
membersofseniormanagementspokeaboutourexecutivecompensationwithacrosssectionofourshareholdersowning40%ofour
shares.Duringthesediscussions,wereviewedthehistoricalevolutionofourcompensationstructure,andsoughtshareholderviewsonour
planstointroducemoreperformancebasedpayinfiscalyears2016and2017.Thefeedbackgainedfromtheseinteractionswasan
importantinputindesigningthechangesdescribedabove.
TableofContents
Whatweheard
Howweresponded
Themaximumpaymentsforthecashincentiveandperformance
basedstockarehighrelativetoothers
Loweredtheannualcashincentivemaximumpayoutfrom300%
to200%infiscalyear2016andthePSAmaximumpayoutfrom
400%to300%infiscalyear2017
Thediscretionunderthecashincentiveistoobroad
Adoptedastructuredframeworkforthecashincentiveforthe
CEOinfiscalyear2016andallNamedExecutivesin2017that
balancesformulabasedperformancepayandusingqualitative
judgmenttodeterminepayoutcomes
Thereshouldbemoredisclosureaboutthefactorsusedto
determinethecashincentiveawards
Addedmorerobustdisclosureaboutthespecificfactorsusedto
assessannualperformance
Annualrevenueandoperatingincomeareshortterm
measuresbettersuitedtothecashincentive
MovedthepreestablishedRevenueandOperatingIncome
metricstothecashincentiveonaformulaicbasisfortheCEOin
fiscalyear2016andallNamedExecutivesin2017
ShareholdersgenerallyviewedtheevolutionofourcompensationplanasconsistentwithwhattheCompanypreviouslycommunicatedinits
outreachoverthepasttwoyears.Basedontheinputfromourshareholders,theCompensationCommitteedeterminedthattheplanned
changestointroducemoreperformancebasedpaysubstantiallyaddressedtheviewsaboutourpayplan.
Section2Executivecompensationoverview
Executivecompensationbestpractices
Ourexecutivecompensationprogramobjectives
Thesetenetsinformthedesignofourexecutivecompensation
program.
Wepaycompetitivelytoprovideatargetcompensation
opportunitythatwillattract,motivate,andretaintheexecutives
whodriveoursuccessandindustryleadership
Atleast70%oftheannualtargetcompensationopportunityfor
ourexecutivesisdeliveredinequitytoincentivizealongterm
perspectiveandstrongalignmentwithourshareholders
Weexplicitlytiepaytoperformancebydeliveringalarge
majorityofourexecutivestargetcompensationopportunity
throughperformancebasedincentives
Ourleadingpracticesinclude:
Astockownershippolicythatreinforcesthealignmentof
executiveofficerandshareholderinterests
Anexecutivecompensationrecovery(clawback)policyto
ensureaccountability
Apolicyprohibitingpledging,hedging,andtradingin
derivativesofMicrosoftsecurities
Anindependentcompensationconsultantthatadvisesthe
Responsiblemanagementofequitycompensation
Nostockoptionawards
Wefocusonthelongtermbysubjectingalargemajorityoftotal
53/111
10/28/2016
Wefocusonthelongtermbysubjectingalargemajorityoftotal
compensationtomultiyearvestingorperformance
requirementsand
Weavoidencouragingunnecessaryandexcessiverisktaking
throughourvestingandstockholdingrequirementsand
compensationrecovery(clawback)provisions.
PRE14A
Nostockoptionawards
Noexecutiveperquisitesorotherpersonalbenefitsbesides
charitablegivingmatch(noclubmemberships,premium
medicalbenefits,ortaxgrossups)
Noemploymentagreements
Nochangeincontrolprotection
Nospecialretirementprograms
Noguaranteedbonuses
Nodividendspaidonoutstandingandunvestedstockawards
34
TableofContents
Compensationelements
Duringfiscalyear2016,nocompensationwasawardedtoourNamedExecutivesoutsidetheannualperformancereviewprocess.
Thefiscalyear2016annualcompensationforourNamedExecutivesconsistedoffourelements:
Basesalary.
AcashincentiveawardundertheIncentivePlanpayableinSeptember2016.TargetcashawardsforourNamedExecutivesrangedfrom
200%to300%oftheirbasesalaryearnedforthefiscalyear,dependingontheexecutiveofficer.
APSAundertheIncentivePlangrantedinSeptember2015forsharesofMicrosoftcommonstockthatvestsinthreeyearsfollowing
conclusionoftheperformanceperiod.
AnSAundertheIncentivePlangrantedinSeptember2015forsharesofMicrosoftcommonstockthatvestsinfourequalannual
installments.
TargetAnnualCompensationMix
Atleast70%oftheannualtargetcompensationopportunityforeachNamedExecutiveisequitybasedtoincentivizealongtermfocusand
aligntheirinterestswiththoseofourshareholders.
TheCompensationCommitteestructuresthepaymixforourannualtargettotalcompensationopportunitiestoplaceahigherproportionin
equityawardsthanthecompaniesinourcompensationpeergroup,providinggreateralignmentwiththeinterestsofourshareholders.
Theforegoingchartprovidesinformationaboutthefiscalyear2016targetcompensationlevelsforourNamedExecutivescomparedtothe
averageoftheseamountsforthenamedexecutiveofficersofthecompaniesinourcompensationpeergroup(identifiedinSection4below),
usingdataavailableinmid2015whentheCompensationCommitteeconductedourfiscalyear2016compensationplanning.
54/111
10/28/2016
PRE14A
SettingTargets
TheEIPRevenueandEIPOperatingIncometargetsforthefiscalyear2016PSAswerebasedonachievingtheCompanys2016operating
budgetapprovedbytheBoardandreflectedappropriatelyambitiousperformancegoals.TheCommercialCloudARR,CommercialCloud
Subscribers,andWindows10MADmetricsincorporatedpubliclyannouncedthreeyeartargetsforourIntelligentCloudandMorePersonal
Computingbusinesses.
TableofContents
Section3Fiscalyear2016compensationdecisions
Fiscalyear2016inreview
SeeOurbusinessperformancediscussionbeginningonpage4intheProxySummary.
Summaryofdecisions
TheBoardandCompensationCommitteereachedthesedecisionsaboutcompensationforfiscalyear2016.Moredetailabouttheprocesses
usedandtheindividualassessmentsforeachNamedExecutivefollows.
NamedExecutive
SatyaNadella
Shorttermincentive
Cashincentive
Percentage
award
oftarget
AmyE.Hood
$4,464,000
$2,304,000
MargaretL.Johnson
$1,409,000
BradfordL.Smith
$1,972,000
$2,384,000
B.KevinTurner(1)
(1)
NamedExecutive
SatyaNadella
AmyE.Hood
MargaretL.Johnson
BradfordL.Smith
B.KevinTurner
(1)
(2)
(3)
100%
Mr.TurnerlefttheCompanyinJuly2016.
140%
100%
124%
140%
Performance
stockawards
(numberof
shares)(1)
151,655
83,870
Longtermincentive
Timebased
stockawards
(numberof
shares)(2)
181,986
74,679
120,635
Aggregate
awarded
value(3)
$14,520,000
57,445
117,418
$8,760,000
57,445
$5,000,000
89,614
$7,150,000
144,762
$11,550,000

Performancebasedstockawardsvestinfullfollowingtheendofthethreeyearperformanceperiod,withthenumberofsharesdeterminedbasedonperformanceagainstgoals
setfortheperiod.
Thetimebasedstockawardsvest25%afteroneyearfromthedateofgrant,andthereafter12.5%eachsixmonthsuntilfullyvestedattheendoffouryears.
Awardedvalue(indollars)wasconvertedtosharesusingtheclosingsharepriceonAugust31,2015,roundeduptoawholenumber.
AssessingourCEOsperformance
Todetermineincentiveawardsandcompensationchanges,theindependentmembersofourBoardofDirectorsannuallyevaluateourCEOs
performance,considering:
AcomprehensivereviewoftheCompanysandMr.NadellasperformanceacrossaseriesoffactorslistedbelowunderPerformance
reviewprocessforotherNamedExecutives
InputfromMicrosoftsseniorexecutivesaboutMr.Nadellasleadership
55/111
10/28/2016
PRE14A
InputfromMicrosoftsseniorexecutivesaboutMr.Nadellasleadership
Mr.NadellasevaluationofMicrosoftsandhisindividualperformanceoverthepastfiscalyear
TheCompanysperformancerelativetoothertechnologycompanies
InputfromtheCompensationCommitteescompensationconsultantand
TheBoardsassessmentofMr.Nadellasperformanceduringtheyear.
Basedonthisassessment,theCompensationCommitteerecommendsMr.NadellascashincentiveandstockawardsundertheIncentive
PlanawardtotheindependentmembersofourBoardofDirectors.TheCommitteealsorecommends,andtheindependentmembersofthe
Boardapprove,anyadjustmenttoMr.Nadellasbasesalary.TheCompensationCommitteeappliedtheformuladescribedbelowto
determinethecashincentiveamount.TheCompensationCommitteeexerciseditsbusinessjudgmentinmakingitsrecommendationsforMr.
NadellasStockAwardandPerformanceStockAwardtarget.
AssessingtheperformanceoftheotherNamedExecutives
TheCompensationCommitteereviewedeachNamedExecutivesperformancefollowingtheendofthefiscalyear.Mr.NadellaandKathleen
Hogan,ourExecutiveVicePresident,HumanResources,alsoparticipatedintheperformancediscussions.
36
56/111
10/28/2016
PRE14A
TableofContents
TheCompensationCommitteeplacedsignificantweightonMr.NadellasrecommendationsforthecompensationofourNamedExecutives
andhisevaluationofeachNamedExecutivesperformanceforthepastfiscalyearbecauseofhisfirsthandknowledgeofeachoftheir
contributions.Indevelopinghisrecommendations,Mr.NadellaandtheCommitteeconsideredperformanceagainstquantitativeand
qualitativefinancial,operational,andstrategicfactorsinfourperformancecategories.ThefactorsvariedbasedontheNamedExecutives
responsibilitiesandthefunctionorgroupheorsheleads.Thesefactorsmayinclude(inalphabeticalorder):
Aftercompletingthisreviewprocess,theCompensationCommittee,exercisingitsbusinessjudgment,determinedeachNamedExecutives
IncentivePlancashawardforthejustcompletedfiscalyear.
Fiscalyear2016salaries
NamedExecutivebasesalarieswereunchangedinfiscalyear2015,exceptforMs.Hood.Followingacomprehensivereviewofpayatpeer
companies,inrecognitionofthescopeandcomplexityoftheirrolesandprevailingmarketforcestheCompensationCommitteeincreased
fiscalyear2016basesalariesfortheNamedExecutivesotherthanMr.Nadellaby10%webelievetheselevelsgenerallycontinuetobeat
orbelowmarketmedian.
Fiscalyear2016cashincentiveawards
Microsoftdesignscompetitivetotaltargetpayopportunitiesthatattract,motivate,andretaintheexecutiveswhodriveoursuccessand
industryleadership.TheCompensationCommitteeestablishesIndividualtargetcashawardopportunitiesbasedonanexecutiveofficers
rolefollowinganinformedreviewofpaylevelsandpaypracticesofthecompaniesinourcompensationpeergroup.Forfiscalyear2016,the
targetcashincentiveopportunitiesforourNamedExecutivescontinuedtorangefrom200%to300%ofbasesalaryearnedforthefiscalyear,
dependingontheindividualexecutiveofficer,andeachexecutiveofficercontinuedtobeeligibletoreceivefromzeroto200%ofthetarget
cashincentivebaseduponMicrosoftsandindividualperformance.Thismaximumlimitof200%ofthetargetcashawardrepresenteda
decreasefrom300%forfiscalyear2015.
SatyaNadella
IndeterminingMr.Nadellascashaward,theindependentmembersofourBoardofDirectorssoughttobothrecognizeMr.Nadellas
performanceandacknowledgethestrategicclarityhecreatedforMicrosoft.Hiseffortsresultedinthelaunchofnewproductinnovations,
increasesincustomerusageandengagementacrossourbusinesses,expansionofstrategicbusinesstransactionsandpartnerships,and
theongoingtransformationoftheCompanysculture.TheindependentmembersoftheBoardapprovedanannualcashincentiveawardof
$4,464,000,representing124%ofMr.Nadellastargetopportunity.
TheCompensationCommitteeandBoardusedaweightedsetoffourperformancecategoriestodeterminethisaward.They
consideredspecificperformanceindicatorsrelevanttoMr.Nadellathatencompassbothquantitativefactorsandfactorsthatrequirea
qualitativeassessment.Theperformanceindicatorsweredrawnfromtheseniorleadershipteamscorecardusedtomanageperformance
againstMicrosoftsannualbusinessplan.Withineachcategory,Mr.Nadellacouldreceiveanassessmentfromzeroto200%basedonfiscal
yearperformance,consistentwithourpayforperformancephilosophy.Thefiscalyear2016performancecategories,performanceindicators,
andcategoryweightswererecommendedbytheCompensationCommittee,andapprovedbytheindependentmembersofourBoardof
Directors.
57/111
10/28/2016
Directors.
PRE14A
TableofContents
ThisdiagramillustrateshowtheannualcashawardwasdeterminedforMr.Nadella.
ThistablesummarizesMr.Nadellasperformanceindicatorsonwhichhewasevaluatedandtheresultingassessmentofhisperformanceby
theindependentmembersofourBoardofDirectors.
WeightedperformancecategoriesandperformanceindicatorsSatyaNadella
TotalWeightedPerformanceResult

124%

(1)BusinessResults

Outcomes
Weight Assessment
EIPRevenue*
$91.5billion,slightlybelowtarget
EIPOperatingIncome*
$27.3billion,abovetarget
EIPGrossMargin*
$58.7billion,abovetarget
40%
ThreeYearAnnualizedTotalShareholderReturn(TSR)
asofJune30,2016andPercentileofPeerGroup
17.2%and77.7percentilerank
130%
* SeetheexplanationforcalculatingEIPRevenue,EIPOperatingIncome,andEIPGrossMargininAppendixAandwhytheseresultsdifferfromthosedisclosedinour
fourthquarter2016earningsrelease.
BusinessresulttargetswereformulatedasaggressivestretchgoalsalignedtoMicrosoftsfinancialplanandkeygrowthambitions.Though
revenuewasslightlybelowtargetduetoourchangeinphonestrategy,stronggrossmarginperformanceandoperatingexpensecontrolsoffset
theshortfallinrevenueandresultedinEIPOperatingIncomeof6.1%abovetargetand8.6%growthovertheprioryear.GrossMarginimproved
by3.2%yearoveryear.TheGrossMarginimprovementcombinedwithloweroperatingexpensesthroughcostreductionsandefficienciesin
areaslikemobiledevicesallowedtheCompanytofundmorestrategicpriorities.Mr.Nadellasdecisiontostreamlinethephonehardware
businesscreatedtheopportunitytoreprioritizeassetstogrowthareas.
38
58/111
10/28/2016
PRE14A
TableofContents
WeightedperformancecategoriesandperformanceindicatorsSatyaNadellacontinued

(2)Product&Strategy

Outcomes
Weight Assessment
ReinventProductivityandBusinessProcesses
60%growthinCommercial
Subscribers,includingO365&

Dynamics

SegmentRevenueup6%

CommercialCloudAnnualRevenue
BuildtheIntelligentCloud
RunRate(ARR)>$12.1billion,on

trackfor$20billionFY18goal
20%
100%
113%Azurerevenuegrowth

SegmentRevenueup10%

Windows10MonthlyActiveDevices
(MAD)>350million,offtrackfor

FY18goal

CreateMorePersonalComputing
Changeinmobiledevicestrategy
leadto4%declineinsegment

revenue

TheCompanycontinuedtoinvestinanddeliverinnovativeproductsandservicesforitscommercialandconsumercustomers,building
momentuminfuturegrowthareas.CommercialOffice365seatgrowthwas45%acrossbusinessesofallsizes.CommercialCloudARR
experiencedmorethan50%growthinfiscalyear2016andcontinuedonapathtoachieve$20billionduringfiscalyear2018withsuccess
acrosseachofitscomponents(Azure,Dynamics365,EnterpriseManagementSuite,andOffice365).Windows10MADfellshortof
expectationsfortheyear,inpartbecauseofthechangeinphonestrategy,pushingthegoaltoachieve1billionWindows10MADbeyondfiscal
year2018.InMorePersonalComputing,XboxLiveusersgrew33%,andtheCortanaSearchboxexceeded100millionmonthlyusers,while
mobiledevicesfellshortofplanandexecutionagainstcompetitorscouldhavebeen,stronger.

(3)Customers&Stakeholders

Outcomes
Weight Assessment
Customers,Partners,andBrand
Developedandexpandedstrategic
partnershipsandbusiness
transactionsacrossarangeof
customersincludingBoeing,Docker,
Facebook,GE,RedHat,andtheU.S.
DepartmentofDefense.
20%
120%
Positiveexternaltrendsinbrand,
includinginnovationandsecurity.

GovernmentRelationsandCorporateCitizenship
EstablishedMicrosoftPhilanthropies
ExternallyrecognizedforESG
performance

Therewassignificantprogresswithkeycustomersegmentsincludingmorethan80percentoftheworldslargestbanksbecomingAzure
customers.Theseresultsreflectedleadershipaddressingregulatoryrequirementsandsuccessdeployingadvancedsecuritywithastrong
commitmenttoprivacy.TheMicrosoftBrandcontinuedtotrendpositivelywithimprovementsinthekeyareasofinnovationandsecurity.The
companyexpandeditscommitmenttocorporatephilanthropybyformingMicrosoftPhilanthropiestohelpdeliverthebenefitsoftechnologyto
peoplewiththegreatestneed.Microsoftsustainedits#1rankinginCorporateResponsibilityMagazines100BestCorporateCitizenslistfor
standoutperformanceinenvironmental,economic,andsocialvalues.Mr.Nadellacontinuedtoinvestinbuildingstrongrelationshipswith
shareholders.

(4)Culture&OrganizationalLeadership

Outcomes
Weight Determination
EmployeeSentimentonCompanyDirection,
Sustainedhighemployeeperceptions
Leadership,andCulture

DiversityandInclusion
RepresentationofAfrican
American/BlackandHispanic/Latinoin
theU.S.increasedslightly.The
companyspercentageoffemales
declinedoverall,largelydueto
20%
140%
workforcereductionsinthephone
business,whileitincreasedslightlyfor
femalesintechnicalfields.

TalentManagement
Greatestnumberofnewhiresin
Companyhistorywithsignificant
progressvisviscompetitorsfor
talent

Mr.NadellamadeverysignificantprogressdevelopingandassertingtheaspiretoculturefortheCompany,anddrivingthatculturechange
leadingtoanewsenseofpurposeattheCompany.Regularemployeesentimentpollsdemonstrateincreasedawarenessofandbeliefinkey
culturalpillars(increased12to14pointsyearoveryear).Employeesentimentoncompanydirectionandconfidenceintheleadershipteam
remainedveryhigh.Mr.Nadellamadedecisionsonpeopleandprocessesthatcontributedsignificantlytobuildingastrongleadershipteamand
robustresultsinrecruiting.Heplayedaleadingroleintransitioningtomoreperformancebasedpayfortheseniorleadershipteam.
Mr.Nadellaimplementedamultiyearstrategytoimprovediversityandinclusion.Whilemoreprogressisstillneeded,manyfoundational
elementsoftheplanwereimplemented.TheCompanyscommitmenttotransparencyandequalpayforequalworkwasevidencedbythepay
equitydisclosureinApril2016.Microsoftreceived100%CorporateEqualityIndexScoreforthe10thconsecutiveyearfromtheHumanRights
Campaignandranked#4onWomenEngineerMagazinesTop50employerslist.
59/111
10/28/2016
PRE14A
TableofContents
60/111
10/28/2016
PRE14A
OtherNamedExecutives
AfterevaluatingourotherNamedExecutivesperformanceforfiscalyear2016againstperformanceindicatorsrelevanttotheindividualsrole
andresponsibilitiesassummarizedbelow,theCompensationCommitteeexercisingitsjudgmentapprovedthecashincentiveawardslisted
intheShortTermPaytableabove.
AmyE.Hood
AsourExecutiveVicePresidentandChiefFinancialOfficer,Ms.HoodledMicrosoftsworldwidefinancialorganization,includingacquisitions
anddivestitures,treasury,taxplanning,accountingandreporting,internalaudit,investorrelations,globalprocurement,andfacilities.
Duringfiscalyear2016,Ms.Hood:
ProvidedstrongoverallfinancialmanagementcontributingtoMicrosoftssharepriceappreciationandthreeyearannualizedTSRof
17.2%,
LedeffectiveandefficientexecutionofouroperatingbudgetresultinginEIPOperatingIncomeincreasing8.6%to$27.3billion,
Maintainedcompanywideoperatingexpensedisciplinethatrepositionedfundingtostrategicbusinessinitiatives,
DrovestrongexecutionoftheCompanyscapitalallocationstrategyandreturned$26.1billionincashtoshareholdersthroughstock
buybacksanddividends,anincreaseof12%yearoveryear,
Providedstrategicdirectionandguidanceonawiderangeofbusinessmatters,and
Providedeffective,transparentcommunicationoftheCompanysstrategiesandresultstoinvestors.
MargaretL.Johnson
AsourExecutiveVicePresident,BusinessDevelopment,Ms.JohnsonledMicrosoftsstrategicpartnershipsandbusinesstransactions
acrossvariousindustrieswithkeycustomers,strategicinnovationpartners,originalequipmentmanufacturers,keyaccounts,thirdparty
publishers,andindustryinfluencers.ShemanagedtheCompanysrelationshipwiththeventurecapitalcommunityandoversawstrategic
investmentsthroughourcorporateventurefund,MicrosoftVentures.
Duringfiscalyear2016,Ms.Johnson:
ContributedtotheexecutionofsignificantbusinessdealssupportingourIntelligentCloudandProductivityandBusinessProcess
initiatives,suchasRedHatandSAP,
EstablishedMicrosoftVenturesandcompletedstrategicinvestmentsthatcomplementandleveragethetransitiontothecloud,and
ProvidedmeaningfulprogressonstrategicpartnershipsforindustrialIOT,ConnectedCar,androbotics,andproductacquisitionslike
Swiftkey.
BradfordL.Smith
Mr.SmithwasappointedPresidentandChiefLegalOfficerinSeptember2015leadingourCorporate,External,andLegalAffairs
group.Previously,hewasExecutiveVicePresident,LegalandCorporateAffairsandGeneralCounsel.Besideshispriorresponsibilities
overseeingMicrosoftslegalwork,intellectualpropertyportfolioandpatentlicensingbusiness,anditsgovernmentaffairs,publicpolicy,and
corporatesocialresponsibilityandphilanthropicwork,heassumedakeyleadershiprole,includingrepresentingtheCompanyexternallyon
criticalissuessuchasprivacy,security,accessibility,environmentalsustainability,anddigitalinclusion.HealsoservesasMicrosoftsChief
ComplianceOfficer.
Duringfiscalyear2016,Mr.Smith:
Providedsignificantcontributionstowardourcloudstrategy.Wearethemostgloballydistributedproviderofcloudservicesandmorethan
80%oftheworldslargestbanksareAzurecustomers,reflectingourregulatorycompliance,advancedsecurity,andcommitmenttoprivacy,
ContinuedtoadvancethedevelopmentanduseoftheCompanyspatents,
Providedstrongleadershiponaccessibilityandenvironmentalsustainability,
FormedMicrosoftPhilanthropiesandsustainedMicrosoftsstrongreputationforcorporatesocialresponsibility,and
Continuedtostrengthenworkexternallyandinternallyrelatingtodiversityandinclusion.
40
TableofContents
61/111
10/28/2016
PRE14A
B.KevinTurner
AsourChiefOperatingOfficer,Mr.TurnerhandledtheoperationalleadershipofMicrosoftsworldwidesales,fieldmarketing,andservices
organization.Mr.Turneralsomanagedsupportandpartnerchannels,Microsoftstores,andcorporatesupportfunctionsforInformation
Technology,WorldwideLicensing&Pricing,andOperations.
Duringfiscalyear2016,Mr.Turner:
LedstrategicinvestmentsinoursalesforcethatcontributedtogrowingCommercialCloudARRtomorethan$12.1billion,
Produced$1.7billionofadditionalsearchadvertisingrevenue,anincreaseof46%,and
ExceededexpectationsforWindows10deploymentinmanagedaccounts.
Fiscalyear2016stockawards
AspartofeachNamedExecutivesannualcompensation,atthebeginningofthefiscalyearinSeptember2015theCompensation
Committee(and,forMr.Nadella,theindependentmembersofourBoardofDirectors)grantedPSAsandSAsundertheIncentivePlanto
eachoftheNamedExecutives.OnehalfofthetargetvaluewasgrantedasPSAs.TheportionofthetargetvalueassignedtoSAscouldvary
basedontheparticipantsroleandresponsibilities,individualperformance,andbuildingcapabilityfordeliveringsignificantfuture
contributionstooursuccess.Asexplainedabove,goingforwardequityawardswillhaveafixedbalanceof50%PSAsand50%SAs.For
fiscalyear2016,theCompensationCommitteeandtheindependentmembersofourBoardofDirectorsbelievedthisawardcombination
appropriatelybalancedperformancebasedincentivesthatsupportourlongtermbusinessgoalsandlongtermretentionincentivesforour
NamedExecutives.Overall,atleast70%oftheannualtargetcompensationopportunityforeachNamedExecutiveisequitybasedto
aligntheirinterestswiththoseofourshareholders.
SatyaNadella
IndeterminingMr.NadellasSAgrant,theindependentmembersofourBoardofDirectorssoughttobothrecognizeMr.Nadellas
performanceandacknowledgethestrategicclarityhehascreatedforMicrosoftthatwillallowustocontinuetogrowandcompete.The
independentdirectorsalsonotedthatMr.Nadellahadsuccessfullyexecutedagainstaconsistentvisiononourmobilefirstandcloudfirst
strategyenablingMicrosofttobuildmomentumtowardourthreeambitions.Inthejudgmentoftheindependentdirectors,Mr.Nadella
successfullyactivatedtheseniorleadershipteamandMicrosoftsworkforcearoundthisstrategicvisionandcarriedforwardourbusiness
transformationtoaccelerategrowthincriticalareastodeliverincreasedvaluetoourcustomersandpartnersacrossourcorebusinesses,
resultinginanawardof181,986shares.
OtherNamedExecutives
FortheotherNamedExecutives,theCompensationCommitteegrantedSAsinSeptember2016listedinSummaryofdecisionsonpage
36.Theawardswerebasedontheparticipantsroleandresponsibilitiesandinrecognitionoftheirfiscalyear2016performanceand
capabilityofdeliveringfuturecontributions.
AmyE.Hood
Droveimprovementstofinancialprocessesthatenablesmoreagilityandtoreallocateresourcesfastertoemergingbusinessneeds,and
Strengthenedshareholderrelationsandsuccessfullycommunicatedthebusinessinitiativestoimplementourlongtermbusinessstrategy.
MargaretL.Johnson
Deepenedrelationshipswithexistingstrategicpartners,and
DevelopedkeypartnershipsresultinginnewbusinessopportunitiesfortheCompany.
BradfordL.Smith
Workedtobuildbroadertrustintechnologyespeciallyintheareasofprivacyandsecuritythrougheffectiveactions,increased
transparency,andleadingpublicpolicyadvocacyforreformofoutdatedlawsaroundtheworld,and
Greatlyexpandedourcorporatesocialresponsibilityandphilanthropyactivitiesaroundtheworldwithaparticularfocusonensuringthe
broadcommunityofnonprofitscanharnessthepotentialofcloudcomputingtobetterachievetheirmissionalongwithtransitioningto
morecloudbasedsupportfornonprofits.
B.KevinTurner
Ledthetransformationofthesalesteamstoenablenewgrowth,and
Drovesignificantprogressinkeygrowthareasofthebusiness,includingAzurerevenueandOffice365commercialseats.
62/111
10/28/2016
PRE14A
TableofContents
Thefollowingresultsforthefiscalyear2016PSAsrepresentonethirdoftheaggregateweightforthethreeyearEIPRevenueandEIP
OperatingIncomemetrics(onesixthofthePSAtargetshares).Theultimatepayoutwillbedeterminedattheendofthethreeyear
performanceperiodwhenthefullperformanceperiodisconcluded.
FY16financialmetrics1
Threshold
Target
Maximum
ActualFY16
Payoutas%of
63/111
10/28/2016
FY16financialmetrics1
($inbillions)
FY16EIPRevenue
FY16EIPOperatingIncome
Combined
Threshold
(%oftarget)
$89.69
97.00%
$23.14
90.00%
PRE14A
Target
(%oftarget)
$92.47
100.00%
$25.71
100.00%
Maximum
(%oftarget)
$95.00
102.74%
$28.28
110.00%
ActualFY16 Payoutas%of
(%oftarget)
targetaward
$91.53
83.09%
98.98%
$27.26
220.62%
106.03%
151.86%
(1) CalculatedusingMicrosoftnonGAAPaccountingmeasures,whichassumeconstantdollarforeignexchangeratesandexcludeWindows10revenue
deferralsaswellasintegration,impairment,andrestructuringcharges.Theresultsabovearedifferentthanthosedisclosedinourfourthquarter2016
earningsreleasebecauseourinternalplanisbasedonconstantdollarsandnonGAAPearningsarereportedusingconstantcurrency.SeeAnnexAfor
moreinformationonthecalculationofthesenonGAAPperformancemeasures.
Section4Compensationdesignprocessforfiscalyear2016
Executivecompensationprogramdesign
Payingcompetitively
WecompetewithglobalinformationtechnologyandlargemarketcapitalizationU.S.companiesandsmaller,highgrowthtechnology
businessesforseniorexecutivetalent.Wecontinuallymonitorthemarketplaceandthecompensationlevelsandpaypracticesofother
companiestorespondtomarketplacechanges.
ToensurethattheindependentmembersofourBoardofDirectorsandtheCompensationCommitteehavecurrentinformationtoset
appropriatecompensationlevels,weconductanexecutivecompensationmarketanalysiseachyearthatdrawsfromthirdparty
compensationsurveysandpubliclyavailableexecutivecompensationdataforagroupofpeercompanies.Wesupplementthisanalysiswith
additionalmarketinformationspecifictoeachexecutiveofficersrole.Becauseothercompaniesactivelyrecruitourexecutiveofficerstofill
CEOandotherseniorleadershippositions,wealsosupplementthismarketinformationwithdataonexternalopportunitiespotentially
availabletoourexecutiveofficers.
WhilethismarketanalysisandsupplementaldatainformthedecisionsoftheindependentmembersofourBoardofDirectorsandthe
CompensationCommitteeontherangeofcompensationopportunities,wedonottieexecutiveofficercompensationtospecificmarket
percentiles.
Inconjunctionwithdesigningthefiscal2016incentiveprogram,inMarch2016wereplacedthetwocompensationpeergroupswehad
developedandusedinprioryearswithasinglecompensationpeergroupcomprisingtechnologyandgeneralindustrycompaniesthatwould
appropriatelyrepresentourpeerswhilesimplifyingrelatedanalyticalwork.SemlerBrossyledthepeergroupdevelopmentprocessonbehalf
oftheCompensationCommittee.Weselectedacombinationofthelargesttechnologyandgeneralindustrycompaniesintermsofmarket
capitalization,revenue,andearningsbeforeinterest,taxes,depreciationandamortization(EBITDA)thatwerecomparabletoMicrosoft
becausewebelievethesecompaniesareledbyexecutiveswithsimilarlycomplexrolesandresponsibilities.Wealsoscreenedthese
companiestoensuretheyhadasignificantpresenceoutsidetheUnitedStates,andexcludedcompaniesinthefinancialservicessector
becauseofthedifferentregulatoryenvironmentinwhichtheyoperate.Forfiscalyear2016,thiscompensationpeergroupcomprisedthese
companies.
Peergroupusedforfiscalyear2016payanalysis
Technology
Alphabet
Amazon
Apple
CiscoSystems
Facebook
HewlettPackard(1)
IBM
Intel
Oracle
Qualcomm
Generalindustry
AT&T
Chevron
CocaCola
Comcast
ExxonMobil
GeneralElectric
Johnson&Johnson
Merck
PepsiCo
Pfizer
Procter&Gamble
Verizon
WalMart
WaltDisney
(1)FollowingtheHewlettPackardspinoffresultinginHPIncandHewlettPackardEnterpriseCompany,HewlettPackardEnterpriseCompanywasretained
forthefiscalyear2017peergroup.
42
TableofContents
InMarch2015,whenweselectedthecompensationpeergroupforfiscalyear2016,Microsoftwassignificantlylargerthanthemedianof
thesecompaniesbasedonthethreeprimaryscreeningcriteria.
64/111
10/28/2016
PRE14A
Technologylabormarket
Ourbusinessesoperateinverydynamicenvironments.Thetechnologylabormarketishypercompetitivewithdemandgrowingfasterthan
thesupplyoftechnicaltalent,resultinginsignificantincreasesincompensationatallemployeelevelsatthecompanieswithwhomwe
competefortalent.Thesameconditionsexistinthemarketforexecutiveleveltalentthatcanprovideinnovativeleadershipwhilemanaging
ataglobalscaleacrossseveralcomplexbusinesses.Weexpectthesetrendstocontinueandweexpecttocontinuetoadjustourapproach
toexecutivecompensationtorespondtomarketconditions.
Scopeofexecutiveroles
Ourexecutiveofficersmustperformdemandingrolesleadinglargeglobalorganizations,overseeingcomplexandinterdependentstrategic
initiatives.Often,ourrolesinvolvegreaterscopeandcomplexitythansimilarpositionsatthecompaniesinthecompensationpeergroup.
Establishingcompensationopportunities
InSeptember2015,Mr.NadellarecommendedtotheCompensationCommitteefiscalyear2016totaltargetannualcompensation
opportunitiescomprisingbasesalaryandIncentivePlanstockawardsandtargetcashincentiveawardsforeachoftheotherexecutive
officers.Inmakingtheserecommendations,heconsideredanarrayofinformationthat,dependingontheexecutiveofficer,included:
roleandresponsibilities
marketdatafromourcompensationpeergroupandothercompetitivemarketinformationreflectingthescaleandscopeofhisorherrole.
Forthispurpose,thecompensationpeergroupwastailoredtocomprisecompaniesthatrepresentthefunctiontheexecutiveofficer
oversees
therelationshipofannualtargetcompensationamonginternalpeersand
informationaboutthemarketforexecutivetalentgainedthroughourmonitoringofexternalmarketpaypractices,ourexperiencerecruiting
forexecutivepositionsatMicrosoft,andeffortsbyotherstorecruitourexecutiveofficers.
Indeterminingtargetpay,theCompensationCommitteeconsiderstherangeofcompensationforexecutivesperformingsimilarrolesat
companiesinourcompensationpeergroup.Basesalariesandincentiveopportunitiesmaybesetbeloworabovemedianamountsbecause
offactorslikeexpertise,performance,andpotentialforfuturecontributions.Applyingitsindependentjudgment,theCompensationCommittee
formulatedatotalannualtargetcompensationamountforeachpaycomponentforeachexecutiveofficerbasedonMr.Nadellas
recommendation,thefactorsMr.Nadellaconsideredwhenformulatinghisrecommendations,andinputfromtheCompensationCommittees
compensationconsultant,SemlerBrossy.
Independentcompensationconsultant
TheCompensationCommitteeretainsSemlerBrossy,anexecutivecompensationconsultingfirmthatisindependentofmanagement,to
assistandadvisetheCompensationCommitteeinitsreviewandoversightofourexecutivecompensationprogram.SeePart2Boardof
DirectorsCompensationCommitteeCompensationconsultantformoreinformationonSemlerBrossysroleandindependenceasan
advisortotheCompensationCommittee.
TableofContents
Section5Othercompensationpoliciesandinformation
Nosignificantexecutivebenefitsandperquisites
OurNamedexecutivesareeligibleforthesamebenefitsavailabletoourotherU.S.basedfulltimeemployees,includingourSection401(k)
plan,employeestockpurchaseplan,healthcareplan,lifeinsuranceplans,andotherwelfarebenefitprograms.Besidesthestandard
benefitsofferedtoallemployees,wemaintainanonqualifieddeferredcompensationplanforourexecutiveofficersandseniormanagers.
Thisdeferredcompensationplanisunfunded,andparticipationisvoluntary.ThedeferredcompensationplanallowsourNamedExecutives
todefertheirbasesalary,thecashportionoftheirIncentivePlanawards,andcertainonhirebonuses.Wedonotcontributetothedeferred
compensationplan.InMarch2016,NamedExecutivesbecameeligibleformatchinggiftsforcharitabledonationsabovethemaximumforour
otherU.S.basedfulltimeemployees.
Duringfiscalyear2016,weprovidednoexecutiveonlyperquisitesorotherpersonalbenefitstoourNamedExecutivesotherthanmodest
65/111
10/28/2016
PRE14A
Duringfiscalyear2016,weprovidednoexecutiveonlyperquisitesorotherpersonalbenefitstoourNamedExecutivesotherthanmodest
matchinggiftsmadetocharitableorganizations.
Limitedpostemploymentcompensation
OurNamedexecutivesdonothaveemploymentagreements,andtheyarenotentitledtoanypaymentsorbenefitsfollowingachangein
controlofMicrosoft.
OurNamedexecutivesmaybeeligibleforadditionalvestingoftheiroutstandingstockawardsuponterminationofemploymentonthesame
termsasourotheremployees.AllemployeeswhoretirefromMicrosoftintheUnitedStatesafter(a)age65or(b)age55with15yearsof
serviceareeligibleforthecontinuationofvestingofoutstandingstockawardsgrantedathireoratthetimeofperformancereview,ifthe
awardwasgrantedoveroneyearbeforethedateofretirement.AsofJune30,2016,onlyMr.Smithwasretirementeligible,andthevalueof
hisretirementbasedstockawardvestingonthatdatewas$9,631,269.AllemployeeswhoseemploymentwithMicrosoftterminatesdueto
deathortotalandpermanentdisabilitywillfullyvestintheiroutstandingstockawards.Mr.Nadellaslongtermperformancestockaward
(LTPSA)wouldvestforthetargetnumberofshares.ThevalueofourNamedExecutivesstockawardsvestingataJune30,2016
terminationofemploymentduetodeathortotalandpermanentdisabilitywas:Mr.Nadella$146,590,230Ms.Hood$22,825,351Ms.
Johnson$11,195,075Mr.Smith$30,110,372andMr.Turner$40,390,579.
Inaddition,ourNamedExecutivesandourotherexecutiveofficersareeligibletoparticipateintheMicrosoftSeniorExecutiveSeverance
BenefitPlan(theSeverancePlan).TheSeverancePlanwasadoptedtohelpensurecontinuityofkeyleadersbyprovidingdesignated
executivesseverancepaymentsandbenefitsiftheiremploymentisterminatedwithoutcause.ForpurposesoftheSeverancePlan,cause
means(i)aconvictionorpleaofguiltyornocontesttoafelonyorcertainmisdemeanors(ii)engagingingrossmisconduct(iii)repeated
failuretosubstantiallyperformthedutiesoftheexecutivesrole(iv)violationofanysecuritieslawsor(v)violationofMicrosoftspolicies
designedtopreventviolationsoflaw.
TheSeverancePlanpaymentsandbenefitshavefourcomponentscash,stockvesting,continuedhealthcare,andoutplacement
assistance.Cashpaymentsconsistofaseverancepaymentequalto12Monthsbasesalaryplustargetannualcashincentiveaward,anda
proratapaymentoftheexecutiveofficerstargetannualcashincentiveawardforthepartialyearofwork.StockvestingappliestoSAsand
PSAs.SAsthatotherwisewouldvestinthe12monthperiodafteremploymentterminatescontinuetovest.IfthefirstyearofthePSA
performanceperiodiscompleted,aprorataportionofanyPSAshareswillalsovest,andthenumberofsharessubjecttoprorationisthe
lesserofthetargetawardsharesthatareotherwisepayableaftertheendoftheperformanceperiod.ContinuedhealthcarethroughCOBRA
andoutplacementassistancewillbeprovidedonthesametermsasareavailabletootheremployeeswhoseemploymentisterminated
withoutcause.ThereisnochangeincontrolprovisionintheSeverancePlan.ToreceivetheSeverancePlanpaymentsandbenefits,the
executiveofficermustexecuteaseparationagreementthatincludesareleaseofclaimsinfavorofMicrosoft,confidentialityandnon
disparagementprovisions,and12monthnoncompete/nonsolicitationrestrictions.
Mr.NadellaparticipatesintheSeverancePlanonthesametermsasourotherexecutiveofficers,exceptthatunderhisLTPSAawardif
Microsoftterminateshisemploymentwithoutcause(asdefinedintheSeverancePlan)duringaperformanceperiod,hewillvestinaprorata
fractionofthethreshold150,000sharesofMicrosoftcommonstocksubjecttotheawardforhisactualperiodofemploymentduringthe
performanceperiod.
44
TableofContents
ThistableshowstheamountsthatwouldhavebeenpayabletoourNamedExecutivesuponaterminationofemploymentwithoutcauseon
June30,2016,thelastdayofourlastcompetedfiscalyear.
NamedExecutive
Amountpayable
Mr.Nadella
$36,085,5691
Ms.Hood
$13,816,990
Ms.Johnson
$8,206,898
Mr.Smith
$10,641,925
$28,426,3702
Mr.Turner
(1)
(2)
IncludesamountspayableundertheSeverancePlan,plusstockvestingunderMr.NadellasLTPSAaward($6,524,175).
Mr.TurnerreceivednoneofthisamountwhenhelefttheCompanyvoluntarilyinJuly2016theamountincludesthevalueofthe160,000sharesofMicrosoftcommonstock
($8,187,200)thatwouldhavevesteduponhisretirementfromMicrosoftatage60orolder,oruponhisterminationofemploymentbyMicrosoftotherthanforcause,asprovided
inhisemploymentofferletter.
66/111
10/28/2016
PRE14A
Strongclawbackpolicy
AccountabilityisafundamentalvalueofMicrosoft.Toreinforcethisvaluethroughourexecutivecompensationprogram,ourexecutiveofficers
andcertainotherseniorexecutivesaresubjecttoanaggressive,nofaultexecutivecompensationrecoveryclawbackpolicy.Underthis
policy,theCompensationCommitteemayrecoverincentivecompensationwhetherornottheexecutivesactionsinvolvemisconduct.When
anexecutivehasengagedinintentionalmisconductthatcontributedtothepaymentoftheincentivecompensation,theCompensation
Committeemaytakeotherremedialaction,includingseekingtorecovertheentirepayment.Underthispolicy,theCompensationCommittee
mayseektorecoverpaymentsofincentivecompensationiftheperformanceresultsleadingtoapaymentarelatersubjecttoadownward
adjustmentorrestatementoffinancialornonfinancialperformance.TheCompensationCommitteemayuseitsjudgmentindeterminingthe
amounttoberecoveredwheretheincentivecompensationwasawardedsubjectively.Ourexecutivecompensationrecoverypolicyis
availableonourwebsiteatwww.microsoft.com/investor/recoverypolicy.
Rigorousstockownershippolicy
OurexecutiveofficersandcertainotherseniorexecutivesarerequiredtomaintainaminimumequitystakeinMicrosoft.Thispolicyembodies
theCompensationCommitteesbeliefthatourmostseniorexecutivesshouldmaintainasignificantpersonalfinancialstakeinMicrosoftto
promotealongtermperspectiveinmanagingourbusiness.Inaddition,thepolicyhelpsensurethealignmentofexecutiveandshareholder
interests,whichreducesincentiveforexcessiveshorttermrisktaking.Eachcoveredexecutiveisrequiredtoacquireandmaintainownership
ofsharesofMicrosoftcommonstockequaltoaspecifiedmultipleofhisorherbasesalary,whichrangesfromthreeto10timesbase
salary.Eachcoveredexecutivemustretain50%ofallnetshares(posttax)thatvestuntilachievinghisorherminimumshareownership
requirement.TheownershiprequirementsforourNamedExecutivesareasfollows.
NamedExecutive
Shareownershiprequirement
SatyaNadella
10xbasesalary
AmyE.Hood
3xbasesalary
MargaretL.Johnson
3xbasesalary
BradfordL.Smith
3xbasesalary
5xbasesalary
B.KevinTurner1
(1)
Mr.TurnerlefttheCompanyinJuly2016.Thiswashisrequirementatthetimeofhisdeparture.
Infiscalyear2016,eachofourNamedExecutivescompliedwithourstockownershippolicy.Ourstockownershippolicyisavailableonour
websiteatwww.microsoft.com/investor/execstockpolicy.
Derivativestrading,hedging,andpledgingprohibited
Ourexecutiveofficersareprohibitedfromtradinginoptions,puts,calls,orotherderivativeinstrumentsrelatedtoMicrosoftequityordebt
securities.TheyalsoareprohibitedfrompurchasingMicrosoftcommonstockonmargin,borrowingagainstMicrosoftcommonstockheldina
marginaccount,orpledgingMicrosoftcommonstockascollateralforaloan.
TableofContents
Deductibilityofexecutivecompensation
Instructuringcompensationforourexecutiveofficers,theCompensationCommitteeconsiderswhethercompensationwillbedeductiblefor
federalincometaxpurposesorotherwisesubjecttothe$1millionannualdeductionlimitofSection162(m)oftheInternalRevenueCode.
Otherfactorsmaybeofgreaterimportancethanpreservingdeductibilityforaparticularformofcompensation,however,andthe
CompensationCommitteeretainsthediscretiontoawardincentivecompensationthatisnondeductible.Underfederalincometaxrules,
certainqualifiedperformancebasedcompensationapprovedbyourshareholdersisnotsubjecttotheannualdeductionlimit.Annual
awardsundertheIncentivePlanpotentiallysubjecttotheannualdeductionlimitofSection162(m)areexpectedtoqualifyasperformance
basedcompensation.AllIncentivePlancompensationforourNamedExecutivesinfiscalyear2016wasintendedtobedeductible.
Annualcompensationriskassessment
WeperformedanannualassessmentfortheCompensationandAuditCommitteesofourBoardofDirectorstodeterminewhethertherisks
arisingfromourfiscalyear2016compensationpoliciesandpracticesarereasonablylikelytohaveamaterialadverseeffectonMicrosoft.
Ourassessmentreviewedthematerialelementsofexecutiveandnonexecutiveemployeecompensation.Weconcludedthesepoliciesand
practicesdonotcreateriskthatisreasonablylikelytohaveamaterialadverseeffectonMicrosoft.
Thestructureofourcompensationprogramforexecutiveofficersdoesnotincentivizeunnecessaryorexcessiverisktaking.Thebasesalary
componentofcompensationdoesnotencouragerisktakingbecauseitisafixedamount.TheIncentivePlanawardshavetheserisklimiting
characteristics:
AnnualawardstoeachexecutiveofficerarelimitedtothelesserofafixedmaximumspecifiedintheIncentivePlanorafixedpercentageof
67/111
10/28/2016
PRE14A
AnnualawardstoeachexecutiveofficerarelimitedtothelesserofafixedmaximumspecifiedintheIncentivePlanorafixedpercentageof
anincentivepool.CashawardsundertheIncentivePlanarelimitedto200%ofatargetcashaward.
Cashincentiveawardsarebasedonareviewofavarietyperformancemeasures,diversifyingtheriskassociatedwithanysingleaspectof
performance,whileamountsreceivedunderstockawardsdonotvarydirectlybasedonanindividualexecutiveofficersperformance.
Theintroductionoftheperformancestockawardsfurtherdiversifiestheelementsoftheprogram,tominimizetheincentivetoproducea
particularoutcome.
Rollingthreeyearperformanceperiodsfortheperformancestockawardsemphasizelongterm,sustainedperformance.
Usingmultipleperformancemeasuresandpreestablishedtargetsreducesincentivestomanageresultstoasingleoutcome.
TheperformancestockawardsuseCompanywidemeasuresthatarenotspecifictoanyoneexecutiveofficerssphereofresponsibility
andwhichapplyequallytoallparticipants,toencourageaunifiedandresponsibleapproachtoachievingfinancialandstrategicgoals.
TheCompensationCommitteecanadjustperformanceresults,upordown,toaccountforextraordinaryorunanticipatedevents,toensure
payreflectsperformanceoutcomesthatdrivelongtermbusinesssuccess.
Equityawardsarenotmadeintheformofstockoptions,whichmayprovideanasymmetricalincentivetotakeunnecessaryorexcessive
riskstoincreasethemarketpriceofMicrosoftcommonstock.
MembersoftheCompensationCommittee,orforMr.Nadella,theindependentmembersofourBoardofDirectors,approvethefinal
IncentivePlancashawards,afterreviewingexecutiveandcorporateperformance.
Inaddition,awardsaresubjecttoourExecutiveCompensationRecoveryPolicy,describedinthisSection3Othercompensationpolicies
andinformationStrongclawbackpolicy.
ThemajorityoftheawardvalueisdeliveredinsharesofMicrosoftcommonstockwithamultiyearvestingschedule,whichalignsthe
interestsofourexecutiveofficerstolongtermshareholderinterests.
Executiveofficersaresubjecttoourexecutivestockownershiprequirements,describedinthisSection3Othercompensationpoliciesand
informationRigorousstockownershippolicy.
46
TableofContents
CompensationCommitteereport
TheCompensationCommitteehasreviewedanddiscussedwithmanagementtheCompensationDiscussionandAnalysisprovidedabove.
Basedonitsreviewanddiscussions,theCompensationCommitteerecommendedtotheBoardofDirectorsthattheCompensation
DiscussionandAnalysisbeincludedinthisProxyStatement.
JohnW.StantonChair
G.MasonMorfit
CharlesW.Scharf
PadmasreeWarrior
Fiscalyear2016compensationtables
Summarycompensationtable
ThistablecontainsinformationaboutcompensationawardedtoourNamedExecutivesforthefiscalyearsendedJune30,2016,2015,and
2014.NoneofourNamedExecutivesreceivedstockoptionsduringthoseyears.
68/111
10/28/2016
PRE14A
2014.NoneofourNamedExecutivesreceivedstockoptionsduringthoseyears.
Nameand
principalposition
SatyaNadella
ChiefExecutiveOfficerandDirector
AmyE.Hood
ExecutiveVicePresidentand
ChiefFinancialOfficer
MargaretL.Johnson
ExecutiveVicePresident,Business
Development
BradfordL.Smith
PresidentandChiefLegalOfficer
B.KevinTurner
ChiefOperatingOfficer
(1)
(2)
Year
2016
2015
2014
2016
2015
2014
2016
2015

2016
2015
2014
2016
2015
2014
Salary
($)
1,200,000
1,200,000
918,917
731,250
675,985
603,333
704,167
539,204
704,167
650,000
641,667
866,667
800,000
796,667
Bonus1
($)
4,464,000
4,320,000
3,600,000
2,304,000
1,978,000
1,583,750
1,909,000
3,795,000
1,972,000
1,300,000
1,925,000
2,384,000
2,200,000
2,848,083
Stock
awards2
($)
12,013,927
12,761,263
79,777,1092
7,326,650
6,090,606
8,264,576
4,083,212
10,180,6262
5,915,948
4,833,835
14,383,054
9,556,560
9,184,243
19,063,869
Allother
compensation
($)
14,104
13,007
12,729
12,730
10,372
11,399
20,111
18,765
18,497
16,847
15,082
149,523
11,171
10,657
Total
($)
17,692,031
18,294,270
84,308,755
10,374,630
8,754,963
10,463,058
6,716,490
14,533,595
8,610,612
6,800,682
16,964,803
12,956,750
12,195,414
22,719,276
ThiscolumnreportsIncentivePlancashawardsforthefiscalyear.Inaddition,Ms.Johnson,receiveda$3,000,000signingbonuspayableovertwoyears$2,500,000infiscal
year2015andanadditional$500,000infiscalyear2016.
ValuesforSAsinthiscolumnarecalculatedusingthegrantdatefairvalueunderAccountingStandardsCodificationTopic718(ASC718)basedonthemarketpriceasofthe
dateofgrantofcommonstockawarded,reducedbythepresentvalueofestimatedfuturedividendsbecausetheawardsarenotentitledtoreceivedividendspriorto
vesting.ValuesforPSAsinthiscolumnarecalculatedusingaMonteCarlosimulationvaluationperformedasofthedateofgrantbyanindependentthirdparty.Thevaluesof
PSAsinthiscolumnatthegrantdate,assumingthatthehighestlevelofperformanceconditionswillbeachievedare:forMr.Nadella,$13,825,602forMs.Hood,$7,645,994
forMs.Johnson,$5,236,964forMr.Smith,$6,808,098andforMr.Turner,$10,997,669.Includes,forfiscalyear2014,theLTPSAMr.Nadellareceivedwhenhewaspromoted
toCEO,withagrantdatefairvalueof$59,184,000hewillnotbeeligibletoreceiveanypartofthisLTPSAcompensationuntil2019,ifhecontinuestoserveasCEO.
TableofContents
(3)
Detailsabouttheamountsinthiscolumnaresetforthinthetablebelow.
Allothercompensation
NoneofourNamedExecutivesreceivedreimbursementsforrelocationexpensesortaxgrossuppaymentsinthelastthreefiscalyears.
NamedExecutive
SatyaNadella
AmyE.Hood
MargaretL.Johnson
BradfordL.Smith
B.KevinTurner
Year
2016
2015
2014
2016
2015
2014
2016
2015
2016
2015
2014
2016
2015
2014
401(k)Plan
Company
match
($)
9,000
7,950
7,800
9,000
7,950
9,086
9,000
14,376
9,000
7,950
7,800
9,000
7,950
7,800
Broadbased
planbenefitsA
($)
5,104
5,057
4,929
3,730
2,422
2,313
7,111
4,389
9,497
8,897
7,282
3,894
3,221
2,857
Matching
charitable
giftsB
Other
($)
($)
4,000
1,250 135,379C
Total
($)
14,104
13,007
12,729
12,730
10,372
11,399
20,111
18,765
18,497
16,847
15,082
149,523
11,171
10,657
(A)
Theseamountsinclude(i)imputedincomefromlifeanddisabilityinsuranceand(ii)athleticclubmembershipandpaymentsinlieuofathleticclubmembership.These
benefitsareavailabletosubstantiallyallourU.S.basedemployees.
(B) IncludesmatchingcharitablecontributionsabovematchlevelavailabletoallU.S.employeesunderourcorporategivingprogram.
(C) ThisamountisthelumpsumpaymenttoMr.Turnerinlieuof8weekspaidtimeoffearnedundertheCompanyssabbaticalprogram.
69/111
10/28/2016
PRE14A
Grantsofplanbasedawards
ThistableprovidesinformationongrantsofawardsunderanyplantotheNamedExecutivesrelatedtothefiscalyearendedJune30,2016.
NamedExecutive
SatyaNadella
AmyE.Hood
MargaretL.Johnson
BradfordL.Smith
B.KevinTurner
(1)
Grantdate
9/15/2015
9/15/2015
9/15/2015
9/15/2015
9/15/2015
9/15/2015
9/15/2015
9/15/2015
9/15/2015
9/15/2015
Estimatedfuturepayoutsunder
equityincentiveplanawards1
Threshold
Target
Maximum
(#)
(#)
(#)
6,325 101,124 404,496
3,498 55,925 223,700
2,396 38,304 153,216
3,115 49,796 199,184
5,031 80,439 321,756
Allother
stockawards
(#)
181,986
117,418
57,445
89,614
144,762
Grantdate
fairvalueof
stockawards2
($)
7,405,393
4,608,534
4,777,985
2,548,665
2,337,558
1,745,655
3,646,582
2,269,366
5,890,670
3,665,890
TheEstimatedfuturepayoutsunderequityincentiveplanawardscolumnsrepresentthethreshold,target,andmaximumsharesforthePSAsgrantedinfiscalyear2016.
BecauseunderASC718thereportedtargetsharesexcludesfutureperiodsforwhichaperformancetargethasnotbeenset,thereportedtargetnumberofsharesiscalculated
asthetargetsharesofthestrategicmetrics(50%ofthePSAs)andonethirdofthetwofinancialmetricsforfiscalyear2016(16.68%ofthePSAs).Thethresholdiscalculated
asifthethresholdofonlyoneofthefinancialmetricsforoneyear(50%of8.34%ofthePSAs)ismet.Themaximumiscalculatedassumingallmaximumtargetsweremetand
therelativeTSRmultiplierwasfullyearned.
ValuesforSAsinthiscolumnarecalculatedusingthegrantdatefairvalueunderASC718basedonthemarketpriceasofthedateofgrantofcommonstockawarded,reduced
bythepresentvalueofestimatedfuturedividendsbecausetheawardsarenotentitledtoreceivedividendspriortovesting.ValuesforPSAsinthiscolumnarecalculatedusinga
MonteCarlosimulationvaluationperformedasofthedateofgrantbyanindependentthirdparty.
(2)
48
TableofContents
OutstandingequityawardsatJune30,2016
ThistableprovidesinformationaboutunvestedstockawardsheldbytheNamedExecutivesonJune30,2016.Mr.TurnerlefttheCompanyin
July2016heisnoteligibletovestintheawardsreportedinthistable.
NamedExecutive
SatyaNadella
AmyE.Hood
MargaretL.Johnson
BradfordL.Smith
B.KevinTurner
(1)
Stockawards
Numberofshares
orunitsofstock
thathavenot
vested1
(#)
913,114
362,199
161,337
513,759
668,706
Marketvalueof
sharesorunitsof
stockthathave
notvested2
($)
46,724,043
18,533,723
8,255,614
26,289,048
34,217,686
Equityincentiveplan
awards:numberof
unearnedshares,
unitsorotherrights
thathavenotvested1
(#)
551,124
55,925
38,304
49,796
80,439
Equityincentiveplan
awards:marketor
payoutvalueof
unearnedshares,
unitsorotherrights
thathavenot
vested2
($)
28,200,992
2,861,657
1,960,032
2,548,059
4,116,085
Thefollowingtableshowsthedatesonwhichtheawardsintheoutstandingequityawardstablevestandthecorrespondingnumberofshares,subjecttocontinuedemployment
throughthevestdateoreligibleretirement.Performancestockawardsarereportedattargetawardlevels.Mr.NadellasLTPSAisreportedattheminimumawardlevel.
Numberofsharesvesting
Satya
AmyE.
MargaretL.
BradfordL.
Nadella
Hood
Johnson
Smith
Vestingdate
117,962
78,641
8/15/2016
27,515
64,940
8/29/2016
128,777 63,112
92,544
50,037
14,361
53,228
8/31/2016
3,722
0
9/28/2016
B.Kevin
Turner
0
123,386
101,083
70/111
10/28/2016
9/28/2016
2/28/2017
6/25/2017
8/15/2017
8/29/2017
8/31/2017
2/28/2018
6/25/2018
8/15/2018
8/29/2018
8/31/2018
2/3/2019
2/28/2019
8/31/2019
2/3/2020
2/3/2021
Retirementatage60orolder
Total
0
22,748
0
117,962
128,777
22,749
22,748
0
117,962
72,640
123,872
150,000(A)
22,748
22,749
150,000(A)
150,000(A)
0
1,464,238
PRE14A
3,722
14,677
29,741
0
63,113
14,678
14,677
29,741
0
34,669
70,602
0
14,677
14,678
0
418,124
0
28,527
0
0
27,515
7,181
7,181
0
0
27,515
45,484
0
7,181
7,181
0
0
0
199,641
0
11,202
0
78,641
64,941
11,202
11,201
0
78,642
27,515
60,998
0
11,202
11,202
0
0
0
563,555(B)
(A)
(B)
(2)
Themarketvalueisthenumberofsharesshowninthetablemultipliedby$51.17,theclosingmarketpriceofMicrosoftcommonstockonJune30,2016.
0
18,095
0
123,386
18,096
18,095
0
52,279
98,534
0
18,095
18,096
0
160,000
749,145
RepresentsvestofMr.NadellasLTPSAattheminimumawardlevel.
188,221ofthesesharesareeligibleforcontinuedvestingfollowingMr.Smithsretirement.
TableofContents
Stockvested
Thistableprovidesinformation,onanaggregatebasis,aboutstockawardsthatvestedduringthefiscalyearendedJune30,2016foreachof
theNamedExecutives.
Microsofthasnotgrantedstockoptions,otherthanoptionssubstitutedinacquisitions,since2003.NoNamedExecutivesheldanyMicrosoft
stockoptionsduringthefiscalyear.
NamedExecutive
SatyaNadella
Stockawards
Valuerealized
Numberofshares
onvesting1
acquiredonvesting
($)
(#)
338,481
15,231,611
AmyE.Hood
MargaretL.Johnson
BradfordL.Smith
164,858
61,059
7,639,708
2,929,541
211,394
371,006
9,527,966
16,991,385
B.KevinTurner
(1)
Thevaluerealizedonvestingiscalculatedbymultiplyingthenumberofsharesshowninthetablebythemarketvalueofthesharesonthevestingdate.
Nonqualifieddeferredcompensation
ThistableprovidesinformationaboutNamedExecutivescontributions,earnings,andbalancesunderournonqualifiedDeferred
CompensationPlaninfiscalyear2016.MicrosoftdoesnotcontributetotheDeferredCompensationPlan,andinfiscalyear2016therewere
nowithdrawalsbyordistributionstoNamedExecutives.
NamedExecutive
SatyaNadella
Executive
contributionsin
fiscalyear
2016
($)
AmyE.Hood
Aggregate
earningsinfiscal
year2016
($)
1,844
Aggregate
balanceat
June30,20161
($)
160,571
0
71/111
10/28/2016
AmyE.Hood
MargaretL.Johnson
BradfordL.Smith
PRE14A
0
0
0
0
0
0
0
0
B.KevinTurner
(1)
TheamountinthiscolumnhasnotbeenincludedintheSummaryCompensationTableforpreviousyears.
MicrosoftsDeferredCompensationPlanisunfundedandunsecured.Itallowsparticipantstodeferaspecifiedpercentageoftheirbase
salary(upto75%),and/oreligibleincentivecashpayments(upto100%).ParticipationintheDeferredCompensationPlanislimitedtosenior
managers,includingourNamedExecutives.MicrosoftdoesnotcontributetotheDeferredCompensationPlanorguaranteeanyreturnson
participantcontributions.
WhenanemployeeelectstoparticipateintheDeferredCompensationPlan,theemployeemustspecifythepercentageofbasesalaryand/or
cashincentiveawardtobedeferred,andthetimingofdistributions.Nowithdrawalsarepermittedpriortothepreviouslyelecteddistribution
date,otherthanhardshipwithdrawalsaspermittedbyapplicablelaw.AmountsdeferredundertheDeferredCompensationPlanare
creditedwithhypotheticalinvestmentearningsbasedonparticipantinvestmentelectionsmadefromamonginvestmentoptionsavailable
undertheplan.
50
TableofContents
Equitycompensationplaninformation
ThistableprovidesinformationaboutsharesofMicrosoftstockthatmaybeissuedunderourequitycompensationplansapprovedby
shareholdersandplansnotapprovedbyshareholders.Underthe2001StockPlan,nooptionorstockappreciationrightsmayberepriced,
replaced,regrantedthroughcancellation,repurchasedforcashorotherconsideration,ormodifiedwithoutshareholderapproval(exceptin
connectionwithachangeinourcapitalization),iftheeffectwouldbetoreducetheexercisepricefortheshareunderlyingtheaward.
Plancategory
Equitycompensationplansapprovedby
securityholders
Numberofsecurities
tobeissuedupon
exerciseofoutstanding
options,warrants,
andrights1
Weightedaverage
exerciseprice
ofoutstanding
options,warrants,
andrights2
Numberofsecurities
remainingavailable
forfutureissuance
underequity
compensationplans3
196,275,045
Equitycompensationplansnotapprovedby
securityholders
Total
(1)
(2)
(3)
196,275,045
$6.55
356,665,006
N/A
$6.55
356,665,006
Representssharesissuableuponvestingofoutstandingstockawardsgrantedunderthe2001StockPlanincludesPSAandMr.NadellasLTPSAsharesthatwillvestiftarget
performancelevelsareachieved.
Theweightedaverageexercisepricedoesnottakeintoaccountthesharesissuableuponvestingofoutstandingstockawards,whichhavenoexerciseprice.
Includes142millionsharesremainingavailableforissuanceasofJune30,2016undertheEmployeeStockPurchasePlan.
CompensationCommitteeinterlocksandinsiderparticipation
Ms.Warrior,Messrs.Morfit,Scharf,andStanton,andDrs.KlaweandPankeweremembersoftheCompensationCommitteeduringfiscal
year2016.Dr.KlawelefttheCommitteeonDecember2,2015followingherretirementfromtheBoard.Dr.PankesteppedofftheCommittee,
andMs.WarriorandMr.ScharfjoinedtheCommitteeonJanuary1,2016.AllmembersoftheCompensationCommitteewereindependent
directors,andnomemberwasanemployeeorformeremployeeofMicrosoft.Duringfiscalyear2016,noneofourexecutiveofficersserved
onthecompensationcommittee(oritsequivalent)orboardofdirectorsofanotherentitywhoseexecutiveofficerservedonourCompensation
Committee.
72/111
10/28/2016
PRE14A
TableofContents
Stockownershipinformation
Thistabledescribes,asofSeptember30,2016,thenumberofsharesofourcommonstockbeneficiallyownedbyourdirectorsandall
executiveofficers,togetherwithadditionalunderlyingsharesorstockunitsasdescribedinNotes2through4tothetable.
Incomputingthenumberandpercentageofsharesbeneficiallyownedbyeachperson,wehaveincludedanysharesofourcommonstock
thatcouldbeacquiredwithin60daysofSeptember30,2016bytheexerciseofoptions,thevestingofstockawardsorthereceiptofshares
creditedundertheDeferredCompensationPlanforNonEmployeeDirectors.Theseshares,however,arenotcountedincomputingthe
percentageownershipofanyotherperson.
Beneficialownership
Percentof
common
stock
2.45%

Additional
underlyingshares
orstockunits3,4
37,769
2,504,357
326,254
162,970
Name
WilliamH.GatesIII
TeriL.ListStoll
G.MasonMorfit
CharlesH.Noski
HelmutPanke
SandraE.Peterson
CharlesW.Scharf
JohnW.Stanton
JohnW.Thompson
PadmasreeWarrior
SatyaNadella
AmyE.Hood
MargaretL.Johnson
BradfordL.Smith
B.KevinTurner
Executiveofficersanddirectorsasagroup
(18People)
*
(1)
(2)
Common
stock1,2
190,992,9345
9,108
38,626,4976
98,2357
49,211
4,491
33,187
74,4408
31,7229
4,202
467,659
192,645
105,10910
502,805
274,387(11)
*
*
388,304
0
891,109
274,387
232,269,00212
2.98%
N/A
N/A
Total
190,992,934
9,108
38,626,497
98,235
49,211
4,491
33,184
74,440
69,491
4,202
2,972,016
518,899
268,079
Lessthan1%
Beneficialownershiprepresentssolevotingandinvestmentpower.
Fordirectors,includessharescreditedundertheDeferredCompensationPlanforNonEmployeeDirectorsthatmaybedistributablewithin60daysofSeptember30,2016:Ms.
73/111
10/28/2016
PRE14A
(2)
Fordirectors,includessharescreditedundertheDeferredCompensationPlanforNonEmployeeDirectorsthatmaybedistributablewithin60daysofSeptember30,2016:Ms.
ListStoll,5,710Mr.Noski,86,055Ms.Peterson,4,491Mr.Thompson,3,377andMs.Warrior,863.
(3) Fordirectors,includessharescreditedundertheDeferredCompensationPlanforNonEmployeeDirectorsthatarenotpayablewithin60daysfollowingterminationofBoard
service:Mr.Thompson,37,759.
(4) ForNamedExecutives,includes(i)unvestedstockawardsthatdonotvestwithin60daysofSeptember30,2016,subjecttocontinuedemploymentatthetimeofeachvest:
Ms.Hood,326,254Mr.Nadella,704,357Ms.Johnson,162,970andMr.Smith,228,637(ii),1,800,000sharespayabletoMr.NadellaunderhisLTPSAattargetperformance,
and(iii)159,667sharesthatwouldvestifMr.SmithretiresfromMicrosoft.
(5) Excludes424,816sharesheldbyMr.Gatesspouse,astowhichhedisclaimsbeneficialownership.
(6) Includes34,846,148sharesthataredirectlybeneficiallyownedbyValueActCapitalMasterFund,L.P.andmaybedeemedtobeindirectlybeneficiallyownedby(i)VAPartnersI,
LLCasGeneralPartnerofValueActCapitalMasterFund,L.P.,(ii)ValueActCapitalManagement,L.P.asthemanagerofValueActCapitalMasterFund,L.P.,(iii)ValueAct
CapitalManagement,LLCasGeneralPartnerofValueActCapitalManagement,L.P.,(iv)ValueActHoldings,L.P.asthesoleownerofthelimitedpartnershipinterestsof
ValueActCapitalManagement,L.P.andthemembershipinterestsofValueActCapitalManagement,LLCandasthemajorityownerofthemembershipinterestsofVAPartnersI,
LLCand(v)ValueActHoldingsGP,LLCasGeneralPartnerofValueActHoldings,L.P.Alsoincludes3,780,349sharesdirectlybeneficiallyownedbyValueActCapitalMaster
Fund,L.P.andmaybedeemedtobeindirectlybeneficiallyownedby(i)VAPartnersI,LLCasGeneralPartnerofValueActCapitalMasterFund,L.P.,(ii)ValueActCapital
Management,L.P.asthemanagerofValueActCapitalMasterFund,L.P.,(iii)ValueActCapitalManagement,LLCasGeneralPartnerofValueActCapitalManagement,L.P.,(iv)
ValueActHoldings,L.P.asthesoleownerofthelimitedpartnershipinterestsofValueActCapitalManagement,L.P.andthemembershipinterestsofValueActCapital
Management,LLCandasthemajorityownerofthemembershipinterestsofVAPartnersI,LLCand(v)ValueActHoldingsGP,LLCasGeneralPartnerofValueActHoldings,L.P.
Mr.MorfitisamemberofthemanagementboardofValueActHoldingsGP,LLC.Eachreportingpersonlistedabovedisclaimsbeneficialownershipofthereportedsecurities
excepttotheextentofitspecuniaryinteresttherein.
(7) Includes12,180sharesheldbyafamilytrust.
(11) RepresentssharesownedasofJune30,2016.Mr.TurnerlefttheCompanyinJuly2016.
(12) Includes100,496sharescreditedundertheDeferredCompensationPlanforNonEmployeeDirectorsthatmaybeissuedwithin60daysofSeptember30,2016.
52
74/111
10/28/2016
PRE14A
TableofContents
Principalshareholders
Thistablelistsallentitiesthatarethebeneficialownerofmorethan5%ofMicrosoftcommonstock.
Name
Votingcommonstockand
natureofbeneficial
ownershipasof9/30/2016
Percentof
classtobevoted
atthemeeting
TheVanguardGroup,Inc.
100VanguardBlvd.,Malvern,PA19355
485,335,8221
450,562,5322
6.07%
BlackRock,Inc.
55East52ndStreet,NewYork,NY10055
(1)
(2)
5.6%
AllinformationaboutTheVanguardGroup,Inc.isbasedonaSchedule13GfiledwiththeSEConFebruary10,2016.TheVanguardGroup,Inc.reportedthatithassolevoting
powerwithrespectto14,751,047sharesofcommonstock,soledispositivepowerwithrespectto469,723,610sharesofcommonstock,sharedvotingpowerof762,900shares
ofcommonstock,andshareddispositivepowerof15,612,212sharesofcommonstock.
AllinformationaboutBlackRock,Inc.isbasedonaSchedule13G/AfiledwiththeSEConJanuary26,2016.BlackRock,Inc.reportedthatithassolevotingpowerwithrespect
to382,928,585sharesofcommonstock,soledispositivepowerwithrespectto450,518,657sharesofcommonstock,andsharedvotingandshareddispositivepowerof43,875
sharesofcommonstock.
Section16(a)beneficialownershipreportingcompliance
Section16(a)oftheSecuritiesExchangeActof1934requiresourdirectors,executiveofficers,andpersonswhoownmorethan10%ofour
commonstocktofilereportsoftheirownershipandchangesinownershipofourcommonstockwiththeSEC.Ouremployeespreparethese
reportsforourdirectorsandexecutiveofficersusinginformationobtainedfromthemandfromMicrosoftsrecords.Webelieveourexecutive
officersmetallapplicableSection16(a)requirementsduringfiscalyear2016.Duetoadministrativeerror,FrankH.Brod,ourChief
AccountingOfficer,wasonedaylateinfilingaForm4toreportanopenmarketsaleof7,000sharesofMicrosoftcommonstock.
75/111
10/28/2016
PRE14A
TableofContents
4.AuditCommitteematters
Proposal3:
RatifyDeloitte&
ToucheLLPas
independent
auditorforfiscal
year2017
Theaffirmativevoteofholdersofamajorityofthesharesofcommonstockcastinpersonorbyproxyatthe
meetingisrequiredtoapprovetheratificationoftheselectionofDeloitte&ToucheasMicrosofts
independentauditorforthecurrentfiscalyear.Ifamajorityofshareholdersdoesnotratifytheselectionof
Deloitte&Touche,theAuditCommitteewillconsidertheresultarecommendationtoconsidertheselection
ofadifferentfirm.
TheAuditCommitteehasselectedDeloitte&ToucheasMicrosoftsindependentauditorforfiscalyear
2017,andtheBoardasksshareholderstoratifythatselection.Althoughcurrentlaw,rules,andregulations,
aswellasthecharteroftheAuditCommittee,requiretheAuditCommitteetoengage,retain,and
superviseMicrosoftsindependentauditor,theBoardconsiderstheselectionoftheindependentauditorto
beanimportantmatterofshareholderconcernandissubmittingtheselectionofDeloitte&Touchefor
ratificationbyshareholdersasamatterofgoodcorporatepractice.TheBoardconsiderstheselectionof
Deloitte&ToucheasMicrosoftsindependentauditorforfiscalyear2017tobeinthebestinterestsof
Microsoftanditsshareholders.
TheBoardofDirectorsrecommendsavoteFORtheratificationoftheindependentauditor.
AuditCommitteereport
TheAuditCommitteeoperatesunderawrittencharteradoptedbytheBoardofDirectors.ItisavailableonMicrosoftswebsiteat
www.microsoft.com/investor/auditcommittee.Thecharter,whichwaslastamendedeffectiveJuly1,2016,includesacalendarthatoutlinesthe
AuditCommitteesdutiesandresponsibilities.TheAuditCommitteereviewsthecharterandcalendarannuallyandworkswiththeBoardof
DirectorstoamendthemasappropriatetoreflecttheevolvingroleoftheCommittee.
TheBoardofDirectorshastheultimateauthorityforeffectivecorporategovernance,includingoversightofthemanagementofMicrosoft.The
AuditCommitteeassiststheBoardinfulfillingitsresponsibilitiesbyoverseeingtheaccountingandfinancialreportingprocessesofMicrosoft,
theauditsofMicrosoftsconsolidatedfinancialstatementsandinternalcontroloverfinancialreporting,thequalificationsandperformanceof
theindependentregisteredpublicaccountingfirmengagedasMicrosoftsindependentauditor,andtheperformanceofMicrosoftsinternal
auditor.
TheAuditCommitteereliesontheexpertiseandknowledgeofmanagement,theinternalauditor,andtheindependentauditorincarryingout
itsoversightresponsibilities.Managementisresponsibleforthepreparation,presentation,andintegrityofMicrosoftsconsolidatedfinancial
statements,accountingandfinancialreportingprinciples,internalcontroloverfinancialreporting,anddisclosurecontrolsandprocedures
designedtoensurecompliancewithaccountingstandards,applicablelaws,andregulations.Managementisalsoresponsibleforobjectively
reviewingandevaluatingtheadequacy,effectiveness,andqualityofMicrosoftssystemofinternalcontrol.Microsoftsindependentauditor,
Deloitte&Touche,isresponsibleforperforminganindependentauditoftheconsolidatedfinancialstatementsandexpressinganopinionon
theconformityofthosefinancialstatementswithaccountingprinciplesgenerallyacceptedintheUnitedStates.Theindependentauditoris
alsoresponsibleforexpressinganopinionontheeffectivenessoftheCompanysinternalcontroloverfinancialreporting.
Duringfiscalyear2016,theAuditCommitteefulfilleditsdutiesandresponsibilitiesasoutlinedinthecharterandtheaccompanyingcalendar.
TheAuditCommitteemeetstwiceeachquarteronceinconnectionwithquarterlyBoardmeetingsandoncetoreviewthequarterlyForms10
QandannualForm10K.Inaddition,theCommitteemeetsasneededtoaddressemergingaccounting,compliance,orothermattersorfor
76/111
10/28/2016
PRE14A
QandannualForm10K.Inaddition,theCommitteemeetsasneededtoaddressemergingaccounting,compliance,orothermattersorfor
educationaltraining.Specifically,theAuditCommittee:
reviewedanddiscussedwithmanagementandtheindependentauditorMicrosoftsquarterlyearningspressreleases,consolidated
financialstatements,andrelatedperiodicreportsfiledwiththeSEC,
54
TableofContents
reviewedanddiscussedwithmanagement,theinternalauditor,andtheindependentauditormanagementsassessmentofthe
effectivenessoftheCompanysinternalcontroloverfinancialreportingandtheindependentauditorsopinionabouttheeffectivenessof
Microsoftsinternalcontroloverfinancialreporting,
reviewedanddiscussedwithmanagement,theinternalauditor,andtheindependentauditor,asappropriate,theauditscopesandplansof
boththeinternalauditorandtheindependentauditor,
inquiredaboutsignificantbusinessandfinancialreportingrisks,reviewedMicrosoftspoliciesforriskassessmentandriskmanagement,
andassessedthestepsmanagementistakingtocontroltheserisks,
metinperiodicexecutivesessionswitheachofmanagement,theinternalauditor,andtheindependentauditor,todiscusstheresultsof
theirexaminations,theirevaluationsofinternalcontrols,andtheoverallqualityoftheCompanysfinancialreporting,
metwiththechiefexecutiveofficerandchieffinancialofficertodiscusstheprocessestheyhaveundertakentoevaluatetheaccuracyand
fairpresentationoftheCompanysconsolidatedfinancialstatementsandtheeffectivenessoftheCompanyssystemsofdisclosure
controlsandproceduresandinternalcontroloverfinancialreporting,
reviewedtheCompanysrelatedpartytransactionsandPolicyforRelatedPartyTransactions,
receivedreportsaboutthereceipt,retention,andtreatmentoffinancialreportingandothercomplianceconcerns,
reviewedandassessedthequalitativeaspectsoftheCompanysethicsandcomplianceprograms,and
reviewedwiththechiefcomplianceofficerlegalandregulatorymattersthatmayhaveamaterialimpactontheconsolidatedfinancial
statementsorinternalcontroloverfinancialreporting.
TheAuditCommitteehasreviewedanddiscussedwithmanagementandtheindependentauditorMicrosoftsauditedconsolidatedfinancial
statementsandrelatedfootnotesforthefiscalyearendedJune30,2016,andtheindependentauditorsreportonthosefinancialstatements.
ManagementrepresentedtotheAuditCommitteethatMicrosoftsconsolidatedfinancialstatementswerepreparedinaccordancewith
accountingprinciplesgenerallyacceptedintheUnitedStates.Deloitte&Touchepresentedthemattersrequiredtobediscussedwiththe
AuditCommitteebyPublicCompanyAccountingOversightBoardstandardsandRule207ofSECRegulationSX.Thisreviewincludeda
discussionwithmanagementandtheindependentauditorofthequality(notmerelytheacceptability)ofMicrosoftsaccountingprinciples,the
reasonablenessofsignificantestimatesandjudgments,andthedisclosuresinMicrosoftsconsolidatedfinancialstatements,includingthe
disclosuresrelatingtocriticalaccountingpolicies.
Basedonthereviewsanddiscussionsdescribedabove,theAuditCommitteerecommendedtotheBoardofDirectorsthattheaudited
consolidatedfinancialstatementsbeincludedinMicrosoftsAnnualReportonForm10KforthefiscalyearendedJune30,2016forfiling
withtheSEC.
TheAuditCommitteerecognizestheimportanceofmaintainingtheindependenceofMicrosoftsindependentauditor,bothinfactand
appearance,andtakesanumberofmeasurestoensureindependence.TheAuditCommitteeleadstheselectionoftheleadaudit
engagementpartner,workingwithDeloitte&Touchewithinputfrommanagement.Aspartofitsauditorengagementprocess,theAudit
Committeeconsiderswhethertorotatetheindependentauditfirm.TheAuditCommitteehasestablishedapolicypursuanttowhichall
services,auditandnonaudit,providedbytheindependentauditormustbepreapprovedbytheAuditCommitteeoritsdelegate.Thispolicy
prohibitstheindependentauditorfromprovidingnonauditservicessuchasbookkeepingorfinancialsystemsdesignandimplementation.
TheCompanyspreapprovalpolicyismorefullydescribedbelowinthisPart4underthecaptionPolicyonAuditCommitteePreapprovalof
AuditandPermissibleNonauditServicesofIndependentAuditor.Giventheamountandthenatureofthenonauditservicesprovided,the
AuditCommitteehasconcludedthatprovisionofthoseserviceswascompatiblewithmaintainingtheindependenceofDeloitte&Touche.In
addition,Deloitte&TouchehasprovidedtheAuditCommitteewiththewritten
disclosuresandletterrequiredbyapplicablerequirementsofthePublicCompanyAccountingOversightBoardregardingtheindependent
accountantscommunicationswiththeauditcommitteeconcerningindependence.TheAuditCommitteehasreviewedthesematerialsand
discussedthefirmsindependencewithDeloitte&Touche.
Asprovidedinitscharter,inadditiontoevaluatingDeloitte&Touchesindependence,theAuditCommitteeassessedDeloitte&Touches
performanceasindependentauditorduringfiscalyear2016,consistentwiththeapproachdescribedinAuditCommitteeAnnualEvaluation
oftheExternalAuditorpublishedbytheCenterforAuditQuality.TheAuditCommitteeassessedtheperformanceoftheDeloitte&Touche
leadauditengagementpartnerandtheauditteam.TheAuditCommitteereviewedavarietyofindicatorsofauditqualityincluding:
ThequalityandcandorofDeloitte&TouchescommunicationswiththeAuditCommitteeandmanagement.
HoweffectivelyDeloitte&Touchemaintaineditsindependenceandemployeditsindependentjudgment,objectivity,andprofessional
skepticism.
77/111
10/28/2016
PRE14A
TableofContents
ThelevelofengagementandvalueprovidedbytheDeloitte&Touchenationaloffice.
ThedepthandexpertiseoftheglobalDeloitte&Toucheauditteam.
ThequalityofinsightdemonstratedinDeloitte&TouchesreviewoftheCompanysassessmentofinternalcontroloverfinancialreporting
andremediationofcontroldeficiencies.
AvailableexternaldataaboutqualityandperformanceincludingreportsofthePublicCompanyAccountingOversightBoardonDeloitte&
ToucheanditspeerfirmsandDeloitte&Touchesresponsetothosereports.
TheappropriatenessofDeloitte&Touchesfees,takingintoaccountthesizeandcomplexityoftheCompanyandtheresourcesnecessary
toperformtheaudit.
Deloitte&Touchestenureasourindependentauditorandtheirknowledgeofourglobaloperations,accountingpoliciesandpractices,
andinternalcontroloverfinancialreporting.
Asaresultofitsevaluation,theAuditCommitteeconcludedthattheselectionofDeloitte&Toucheastheindependentregisteredpublic
accountingfirmforfiscalyear2017isinthebestinterestoftheCompanyanditsshareholders.TheBoardrecommendsthatshareholders
ratifythisselectionattheAnnualMeeting.
AuditCommittee
CharlesH.Noski(Chair)
TeriL.ListStoll
G.MasonMorfit
HelmutPanke
FeesbilledbyDeloitte&Touche
ThistablepresentsfeesforprofessionalauditservicesrenderedbyDeloitte&TouchefortheauditofMicrosoftsannualfinancialstatements
forthefiscalyearsendedJune30,2016and2015,andfeesbilledforotherservicesrenderedbyDeloitte&Toucheduringthoseperiods.
YearendedJune30
Auditfees
Auditrelatedfees
2016
2015
$34,258,000 $35,622,000
16,735,000 19,193,000
Taxfees
Allotherfees
Total
$51,781,000 $55,812,000
621,000
167,000
828,000
169,000
Auditfees
TheseamountsrepresentfeesofDeloitte&Touchefortheauditofourannualconsolidatedfinancialstatements,thereviewofconsolidated
financialstatementsincludedinourquarterlyForm10Qreports,theauditofinternalcontroloverfinancialreporting,andtheservicesthatan
independentauditorwouldcustomarilyprovideinconnectionwithsubsidiaryaudits,statutoryrequirements,regulatoryfilings,andsimilar
engagementsforthefiscalyear,suchascomfortletters,attestservices,consents,andassistancewithreviewofdocumentsfiledwiththe
SEC.Auditfeesalsoincludeadviceaboutaccountingmattersthataroseinconnectionwithorasaresultoftheauditorthereviewofperiodic
financialstatementsandstatutoryauditsthatnonU.S.jurisdictionsrequire.Auditfeesdecreasedinfiscalyear2016mainlyduetoa
reductioninauditproceduresassociatedwithourphonebusiness.Thechangeinstrategyforthephonebusinessresultedinasignificant
declineinphonebusinessactivityinfiscalyear2016,andthemajorityofphoneintegrationactivitieswerecompletedandauditedinfiscal
year2015,bothofwhichcontributedtoareductioninthevolumeofrequiredauditproceduresandassociatedfeesinfiscalyear2016.
Auditrelatedfees
Auditrelatedfeesconsistofassuranceandrelatedservicesthatarereasonablyrelatedtotheperformanceoftheauditorreviewof
Microsoftsconsolidatedfinancialstatementsorinternalcontroloverfinancialreporting.Thiscategorymayincludefeesrelatedtothe
performanceofauditsandattestservicesnotrequiredbystatuteorregulations,auditsofouremployeebenefitplans,duediligencerelatedto
mergers,acquisitions,andinvestments,additionalrevenueandlicensecomplianceproceduresrelatedtoperformanceoftherevieworaudit
ofMicrosoftsconsolidatedfinancialstatements,thirdpartyassuranceauditsforcloudservices,andaccounting
78/111
10/28/2016
56
PRE14A
TableofContents
79/111
10/28/2016
PRE14A
consultationsabouttheapplicationofgenerallyacceptedaccountingprinciplestoproposedtransactions.Revenueassuranceandlicense
complianceincludesproceduresundercontractswehaveenteredthatprovideforreviewbyanindependentaccountant,andadviceabout
controlsassociatedwiththecompletenessandaccuracyofoursoftwarelicensingrevenue.Theseservicessupporttheevaluationofthe
effectivenessofinternalcontroloverrevenuerecognition,andenhancetheindependentauditorsunderstandingofourlicensingprograms
andcontrols.Auditrelatedfeesdecreasedinfiscalyear2016mainlyduetoatimingshiftincertainlicensecomplianceaudits,whicharenow
expectedtobecompletedinfiscalyear2017.
Taxfees
Taxfeesconsistgenerallyofthetwocategoriesoftaxcomplianceandreturnpreparation,andoftaxplanningandadvice.Thetaxcompliance
andreturnpreparationservicesconsistedofpreparingoriginalandamendedtaxreturnsandclaimsforrefunds.Duringfiscalyears2016and
2015,feesincurredfortaxcomplianceandreturnpreparationwereapproximately$26,000and$13,000,respectively.Taxplanningand
adviceconsistedofsupportduringincometaxauditsorinquiries.Forfiscalyear2016and2015,feesincurredfortaxplanningandadvice
wereapproximately$595,000and$815,000,respectively.
Allotherfees
Allotherfeesconsistofpermittedservicesotherthanthosethatmeetthecriteriaaboveandincludetrainingactivitiesandeconomic,industry,
andaccountingsubscriptionsandsurveys.
TheAuditCommitteeconcludedthattheprovisionofthenonauditserviceslistedaboveiscompatiblewithmaintainingtheindependenceof
Deloitte&Touche.
PolicyonAuditCommitteepreapprovalofauditandpermissiblenonauditservices
ofindependentauditor
TheAuditCommitteehasapolicyforpreapprovalofallauditandpermissiblenonauditservicesprovidedbytheindependentauditor.Each
year,theAuditCommitteeapprovesthetermsonwhichtheindependentauditorisengagedfortheensuingfiscalyear.Atleastquarterly,the
AuditCommitteereviewsand,ifappropriate,preapprovesservicestobeperformedbytheindependentauditor,reviewsareport
summarizingfiscalyeartodateservicesprovidedbytheindependentauditor,andreviewsanupdatedprojectionofthefiscalyears
estimatedfees.TheAuditCommittee,aspermittedbyitspreapprovalpolicy,fromtimetotimedelegatestheapprovalofcertainpermitted
servicesorclassesofservicestoamemberoftheAuditCommittee.TheAuditCommitteethenreviewsthedelegatesapprovaldecisions
eachquarter.MicrosoftusesacentralizedinternalsystemtocollectrequestsfromCompanypersonnelforservicesbytheindependent
auditortofacilitatecompliancewiththispreapprovalpolicy.
TableofContents
80/111
10/28/2016
PRE14A
5.Othermanagementproposals
Proposal4:
WeaskourshareholderstoapproveanamendmenttoourAmendedandRestatedArticlesofIncorporationto
Approve
reducethesharesneededtocallspecialshareholdermeetingsfrom25%to15%.TheBoardbelievesthis
amendmentto changeadvancesshareholderrightsandputstheCompanyinthemainstreamofbestpractice.
TheaffirmativevoteofamajorityofsharesentitledtovoteisrequiredtoapprovetheamendmenttotheArticles
Articlesof
Incorporation ofIncorporation.
TheBoardofDirectorsrecommendsavoteFORtheamendmenttotheArticlesofIncorporation.
In2009weamendedourAmendedandRestatedArticlesofIncorporation(theArticles)toprovidethatshareholdersrepresenting25%of
sharesoutstandingmaycallspecialshareholdermeetings.Wedidthisbecausetherighttocallspecialmeetingswasbecomingrecognized
asanimportantelementofgoodcorporategovernanceatU.S.publiccompanies.WeroutinelyevaluateMicrosoftsgovernancepracticesto
maintainstrongBoardaccountabilityandshareholderrightsandtransparentpoliciesthatenhanceinvestorandpublictrust.Asaresult,the
BoardofDirectorsisproposingtoamendourArticlestoreducethepercentageofoutstandingsharesrequiredforshareholderstocalla
specialshareholdermeetingto15%.Basedondiscussionswithshareholdersandareviewofvotingresultsonproposalsrelatingto
shareholderinitiatedspecialmeetings,theBoardbelievesthischangeisbroadlysupportedamongsignificantinstitutionalinvestors,proxy
advisors,andothergovernanceadvocates.TheBoardbelievesreducingthepercentageisinthebestinterestsofourshareholders,and
illustratesourcommitmenttogovernancebestpractices.
TheBoardofDirectors,upontherecommendationoftheGovernanceandNominatingCommittee,hasunanimouslyadoptedresolutions
approvingthisamendmentandrecommendingapprovalofthisamendmenttoourshareholders.Ifthisproposalisapprovedbythemajority
voteofshareholdersentitledtovote,theamendmentwillbeeffectivewhenfiledwiththeStateofWashington.
ThetextoftheproposedamendmenttoArticleVIIIoftheAmendedandRestatedArticlesofIncorporationisasfollows(additionsare
underlinedanddeletionsarestruckthrough):
ArticleVIII
Specialshareholdermeetings
SpecialmeetingsoftheshareholdersoftheCorporationforanypurposeorpurposesmaybecalledatanytimeby
(a) theBoardofDirectors,
(b) acommitteeoftheBoardofDirectorsthathasbeendulydesignatedbytheBoardofDirectorsandwhosepowersandauthority,as
providedinaresolutionoftheBoardofDirectorsorinthebylawsoftheCorporation,includethepowertocallsuchmeetings,orby
(c) shareholdersholdingfifteentwentyfivepercent(1525%)ofthethenoutstandingsharesoftheCorporationentitledtovote,providedthe
requestisinproperformasprescribedinthebylawsoftheCorporationorasotherwiserequiredbyapplicablelaw.
Suchspecialmeetingsmaynotbecalledbyanyotherpersonorpersons.
58
TableofContents
81/111
10/28/2016
PRE14A
Proposal5:
Approve
French
SubPlan
underthe
2001Stock
Plan
ProvidingtaxadvantagedequitycompensationtoourFrenchemployeesisnecessarysothatwecanoffer
marketcompetitivecompensationwithoutincreasingtheawardedshares.Weareaskingourshareholdersto
approvetheRulesoftheMicrosoftCorporation2001StockPlanforStockAwardsGrantedtoEmployeesin
France(theFrenchSubPlan),whichoperatesundertheMicrosoftCorporation2001StockPlan.
Theaffirmativevoteofholdersofamajorityofthesharesofcommonstockcastinpersonorbyproxyatthe
meetingisrequiredtoapprovetheFrenchSubPlan.
TheBoardofDirectorsrecommendsavoteFORapprovaloftheFrenchSubPlanunderthe2001StockPlan.
AsrequiredunderanewFrenchlaw(LoiMacron)adoptedinAugust2015,weareaskingourshareholderstoapprovetheRulesofthe
MicrosoftCorporation2001StockPlanforStockAwardsGrantedtoEmployeesinFrance(theFrenchSubPlan),whichoperatesunderthe
MicrosoftCorporation2001StockPlan(the2001StockPlan)forthepurposeofqualifyingundertheLoiMacroninFrance,sothatStock
AwardsandPerformanceStockAwards(collectively,StockAwards)thataregrantedundertheFrenchSubPlantoindividualswhoare
subjecttotaxationunderFrenchlawmayqualifyforthespecifictaxtreatmentdescribedundertheLoiMacron.Anysuchgrantswillbe
satisfiedfromtheexistingsharereserveofthe2001StockPlanandwillhavetermsconsistentwiththeexistingtermsofthe2001StockPlan.
GrantsundertheLoiMacroncurrentlymaybesubjecttolowertaxationonthedateofsaleofthesharessubjecttotheStockAwardsbythe
individualandalsosubjecttoloweremployersocialinsurancecontributions.
ThisProposalwouldnotmakeanychangestothe2001StockPlanitself,nortoincreasethenumberofsharescurrentlyauthorizedfor
issuanceunderthe2001StockPlan.AcopyoftheFrenchSubPlanisattachedasAnnexB.
ApprovaloftheFrenchSubPlan
TheLoiMacronintroducedchangestotherequirementsandincometaxandsocialtaxtreatmentofFrenchtaxqualifiedrestrictedstockunits
(FrenchqualifiedRSUs).Pursuanttothenewlaw,foreigncompaniesarepermittedbutnotrequiredtograntFrenchqualifiedRSUs,which
mayprovidemorefavorabletaxandsocialtaxtreatmenttothelocalemployersubsidiaryanditsemployees,comparedtothegrantofnon
qualifiedrestrictedstockunits.Amongotherrequirements,underthenewlawFrenchqualifiedRSUsmustprovideforaminimumvesting
periodofoneyearfromthegrantdate,andrestrictthesaleofsharesforaminimumoftwoyearsfromthegrantdate.Thelatterrestrictioncan
beachievedbyplacingatwoyearvestingperiodfromthegrantdate,orbyimposingaholdingrestrictiononsharesobtainedatvesting.
The2001StockPlanalreadyprovidesthattheCompensationCommitteehasthefullauthority,initssolediscretion,toadoptsuchplansor
subplansasmaybedeemednecessaryorappropriatetocomplywiththelawofothercountries,andtoallowfortaxpreferredtreatmentof
awards.TheCompensationCommitteewillretainthatdiscretionaryauthoritywhetherornottheFrenchSubPlanisapproved.However,the
newFrenchlawprovidesthatgrantsofFrenchqualifiedRSUsmustbeauthorizedbyashareholdermeetingafterAugust7,2015.Wewantto
ensurethatifweelecttograntFrenchqualifiedStockAwardsundertheFrenchSubPlan,theawardsmaybenefitfromthespecifictaxand
socialtreatmentundertheLoiMacron,provideditsotherrequirementsalsoaresatisfied.
Wearenotproposinganyrevisionstothe2001StockPlaninordertograntFrenchqualifiedStockAwardsunderthenewlaw.Weareasking
shareholderstoapprovetheFrenchSubPlansolelytocomplywithapostAugust7,2015shareholderauthorizationrequirementunder
Frenchtaxlaw.Inaddition,wearenotrequiredtogranttaxqualifiedawardsinFranceandmaychoose,atourdiscretion,tograntnon
qualifiedStockAwardstoemployeesofourFrenchsubsidiaries.
Materialtaxconsequences
IftheFrenchSubPlanisapprovedbyshareholdersandStockAwardsotherwisesatisfytherequirementsofFrenchqualifiedRSUsunderthe
LoiMacron,suchgrantstoFrenchresidentemployeessubjecttotheFrenchsocialsecurityregimeshouldbesubjectto15.5%socialtaxes
(ofwhich5.1%aretaxdeductible)onthevalueofthesharessubjecttosuchawardsatthetimeofvesting,incontrasttocurrentlybeing
subjecttoacombined18%socialtaxrate.Thevestinggain(i.e.,thevalueofthesharesissueduponvesting)continuestobesubjectto
progressiveincometaxratesthatemployeespayuponultimatesaleofsharesreceivedundersuchStockAwardgrants,butundertheLoi
Macron,suchtaxratescanbereducedby50%ormoreifthesharesareheldforaspecifiednumberofyearsafterthedateofissuance.In
addition,undertheLoiMacron,theemployingcompanywillbesubjecttoa20%socialinsurancecontribution
82/111
10/28/2016
PRE14A
TableofContents
uponvestingofqualifiedStockAwards,incontrasttothecurrent30%socialinsurancecontributionthatisimposedupongrantofqualified
StockAwardsundertheold(preMacron)regime(andwhichcurrentlyisnotrefundediftheStockAwardsareforfeitedbeforevesting).The
taxconsequencesofparticipatingintheFrenchSubPlanmayvarywithrespecttoindividualsituationsincometaxlaws,regulationsand
interpretationsthereofchangefrequently.Awardeesshouldrelyupontheirowntaxadvisorsforadviceconcerningthespecifictax
consequencesapplicabletothem,includingtheapplicabilityandeffectofstate,localandforeigntaxlaws.
TheBoardofDirectorsbelievesthatitisinthebestinterestsoftheCompanyanditsshareholderstogivetheCompanythediscretiontogrant
StockAwardsundertheFrenchSubPlanthatwouldqualifyfortheincomeandsocialtaxtreatmentauthorizedundertheLoiMacron.If
83/111
10/28/2016
PRE14A
StockAwardsundertheFrenchSubPlanthatwouldqualifyfortheincomeandsocialtaxtreatmentauthorizedundertheLoiMacron.If
shareholdersdonotapprovetheFrenchSubPlan,theCompanyexpectstocontinuetorelyonitsexistingqualifiedFrenchSubplan,andit
maygrantpreLoiMacronqualifiedStockAwards(ornonqualifiedStockAwards)toFrenchemployees,ormaymakealternativeincentive
arrangements.Inaddition,nothinginthisproposalalterstheCompanysdiscretioninawardingcompensation,includingmakingany
paymentorgrantingequityawardsthatdonotqualifyforsuchtaxtreatment.ThesubmissionofthisproposaltotheCompanysshareholders
isnotaguaranteethatallgrantstoindividualssubjecttotaxationunderFrenchlawwillqualifyastaxqualifiedStockAwardsundertheLoi
Macron.
Descriptionofthe2001StockPlan
Asnotedabove,theProposaldoesnotmakeanychangestothe2001StockPlanitselfandislimitedtoLoiMacronqualificationforFrench
lawpurposes.However,tocomplywithapplicablelaw,thematerialtermsofthe2001StockPlanaredescribedbelow.
GeneralThepurposesofthe2001StockPlanaretoattractandretainthebestavailableindividualsforpositionsofsubstantial
responsibility,toprovideadditionalincentivetosuchindividuals,andtopromotethesuccessofMicrosoftsbusinessbyaligningthefinancial
interestsofemployeesandconsultantsprovidingpersonalservicestotheCompanyoritsaffiliateswithlongtermshareholdervalue.Stock
options,stockawards,andstockappreciationrightsmaybegrantedunderthe2001StockPlan.Optionsgrantedunderthe2001StockPlan
maybeeitherincentivestockoptions,asdefinedinSection422oftheInternalRevenueCode(Code),ornonqualifiedstockoptions.
AdministrationThe2001StockPlanisadministeredbytheBoardortheCompensationCommitteeoftheBoard(hereafter,the
Committee).TheCommitteemaydelegateitsauthoritytoadministerthe2001StockPlantotheextentprovidedinitscharterorinaBoard
resolution.
PlanBenefitsBecausebenefitsunderthe2001StockPlandependontheCommitteesactionsandthefairmarketvalueofcommonstock
atvariousfuturedates,itisnotpossibletodeterminethebenefitsthatwillbereceivedbyofficersandotheremployeesunderthe2001Stock
Plan.
EligibilityIncentivestockoptionsmaybegrantedonlytoemployeesoftheCompanyoritssubsidiaries.Nonqualifiedstockoptions,stock
awards,andstockappreciationrightsawardsmaybegrantedunderthe2001StockPlantoemployeesandconsultantsoftheCompany,its
affiliatesandsubsidiaries,aswellastopersonstowhomoffersofemploymentasemployeeshavebeenmade.TheCommittee,inits
discretion,willselecttheindividualstowhomoptions,stockawards,andstockappreciationrightswillbegranted,thetimeortimeswhen
suchawardsaregranted,andthenumberofsharessubjecttoeachgrant.
SharesSubjecttothe2001StockPlanThetotalnumberofsharesofCompanycommonstockthatmaybeawardedanddeliveredunder
the2001StockPlanare(a)thenumberofsharesthatremainedavailableforfutureawardsundertheCompanys1991PlanasofJanuary1,
2001,theeffectivedateofthe2001StockPlan,(b)plusanysharesrepresentedbyawardsunderthe1991Planthatexpire,areforfeited,are
cancelledwithoutdeliveryofshares,orotherwiseresultinthereturnofsharestotheCompany,(c)minus100,000,000shares.Inaddition,
whenanyawardunderthe2001StockPlanexpiresorforanyreasonsharesunderlyinganawardarenotdeliveredinfull,theundelivered
shareswillbecomeavailableforfutureawardsunderthe2001StockPlan.Notwithstandingtheforegoing,anyawardsrepresentedbystock
optionstransferredunderanoptiontransferprogram,suchastheprogramconductedbytheCompanyinthesecondquarteroffiscalyear
2004,willberemovedfromthe2001StockPlan,andthesharesunderlyingthetransferredstockoptionswillnotbeavailableforregrant
underthe2001StockPlan,regardlessofwhetherthetransferredstockoptionsareexercisedorexpireunexercised.Thesharesthatmaybe
awardedanddeliveredunderthe2001StockPlanmaybeauthorized,butunissued,orreacquiredcommonshares.AsofSeptember30,
2016,therecorddate,199,149,708sharesofCompanycommonstockwereissuableontheexerciseorsettlementofoutstandingequity
awardsunderthe2001StockPlan,and159,391,443sharesofCompanycommonstockremainedissuableforfuturegrant(subjectto
increaseasdescribedabove).
LimitationsThe2001StockPlanprovidesthatthemaximumaggregatenumberofCompanycommonsharesunderlyingallawardstobe
grantedtoanypersoninanysinglefiscalyearoftheCompanyis20,000,000sharesofcommonstock(5millionsharesforastockaward).
Theaggregatenumberofsharesunderlyingallnonqualifiedstockoptionsandallstockappreciationrightsthatmaybegrantedunderthe
2001StockPlanatexercisepriceswhicharelessthanfairmarketvalueatthedatesofsuchgrantsmaynotexceed50,000,000(excluding
certainreplacement(conversion)optionsgrantedtoemployees,consultantsandadvisorsofacquiredentities).Theselimitsareincreased
proportionatelyintheeventofanystocksplit,stockdividendorsimilarevent.
60
TableofContents
TermsandconditionsofawardsEachaward(otherthanareplacement(conversion)option)istobeevidencedbyanawardagreement
betweentheCompanyandtheindividualawardeeandissubjecttothefollowingadditionaltermsandconditions:
ExercisepriceTheCommitteewilldeterminetheexercisepriceforthesharesofcommonstockunderlyingeachawardatthetimethe
awardisgranted.Theexercisepriceforsharesunderanincentivestockoptionmaynotbelessthan100%ofthefairmarketvalueofthe
commonstockonthedatesuchoptionisgranted.Theexercisepriceforsharessubjecttoanonqualifiedstockoptionorstockappreciation
rightmaynotbelessthan75%ofthefairmarketvalueofthecommonstockonthedatesuchawardisgranted,exceptthatcertain
replacement(conversion)optionswithlowerexercisepricesfortheunderlyingsharesmaybegranted,inconnectionwithacquisitions,to
employees,consultantsandadvisorsofacquiredentities.ThefairmarketvaluepriceforashareofCompanycommonstockunderlyingeach
awardistheclosingpricepershareonNasdaqonthedatetheawardisgranted.Noawardmayberepriced,replaced,regrantedthrough
cancellation,ormodifiedwithoutshareholderapproval(exceptinconnectionwithachangeintheCompanyscapitalizationorsimilarevent),
84/111
10/28/2016
PRE14A
cancellation,ormodifiedwithoutshareholderapproval(exceptinconnectionwithachangeintheCompanyscapitalizationorsimilarevent),
iftheeffectwouldbetoreducetheexercisepriceforthesharesunderlyingsuchaward.
ExerciseofawardformofconsiderationTheCommitteewilldeterminewhenawardsbecomeexercisable.Eachawardisrequiredtohave
aminimumvestingperiodofnotlessthanthreeyearsfromthedateofgrant,exceptthatthefollowingarenotsubjecttothethreeyearvesting
restriction:(i)awardscoveringupto50,000,000shares(increased,proportionately,intheeventofanystocksplit,stockdividendorsimilar
event)and(ii)awardsthataregrantedorthatvestsubjecttoperformancegoalsorthatvestinlessthanthreeyearsbasedondeath,disability
orretirementandawardsassumedorsubstituteduponanacquisition.
Themeansofpayment,ifany,forsharesissueduponexerciseofanawardwillbespecifiedineachawardagreement.The2001StockPlan
permitspaymenttobemadebycash,check,brokerassistedsamedaysales,and,inthecaseofcertainexecutiveofficers,bydeliveryof
othersharesofCompanystocktheyhaveownedforsixmonthsormoreasoftheexercisedate.Fornonqualifiedstockoptions,stockawards,
andstockreceivedupontheexerciseofstockappreciationrights,theoptionholderorstockrecipientmustalsopaytheCompany,atthetime
ofpurchase,theamountoffederal,state,andlocalwithholdingtaxesrequiredtobewithheldbytheCompany.Anawardunderthe2001
StockPlanmaypermitorrequirethatsuchwithholdingtaxobligationsbepaidbyhavingtheCompanywithholdsharesofcommonstock
havingavalueequaltotheamountrequiredtobewithheld.CertainexecutivesoftheCompanymayelecttopaytheirwithholdingobligations
byhavingshareswithheld.
PerformancegoalsAwardsmay,butneednot,vestorbegrantedsubjecttothesatisfactionofoneormoreperformancegoals.Performance
goalsforawardswillbedeterminedbytheCommitteeandwillbedesignedtosupporttheCompanysbusinessstrategy,andalign
executivesinterestswithcustomerandshareholderinterests.Forawardsthatareintendedtoqualifyasperformancebasedcompensation
underSection162(m)oftheInternalRevenueCode,performancegoalswillbebasedononeormoreofthefollowingbusinesscriteria:sales
orlicensingvolume,revenues,customersatisfaction,expenses,organizationalhealth/productivity,earnings(whichincludessimilar
measurementssuchasnetprofits,operatingprofitsandnetincome,andwhichmaybecalculatedbeforeoraftertaxes,interest,depreciation,
amortizationortaxes),margins,cashflow,shareholderreturn,returnonequity,assets,orinvestments,workingcapital,productshipments,
productreleases,brandorproductrecognition/acceptance,and/orstockprice.
Achievementofthegoalsmaybemeasuredindividually,alternatively,orinanycombinationwithrespecttoMicrosoft,asubsidiary,division,
businessunit,productline,product,oranycombinationoftheforegoingonanabsolutebasis,orrelativetoatarget,toadesignated
comparisongroup,toresultsinotherperiods,ortootherexternalmeasuresandincludingorexcludingitemsthatcouldaffectthe
measurement,suchasextraordinaryorunusualandnonrecurringgainsorlosses,litigationorclaimjudgmentsorsettlements,material
changesintaxlaws,acquisitions,divestitures,thecumulativeeffectofaccountingchanges,assetwritedowns,restructuringcharges,orthe
resultsofdiscontinuedoperations.
TermofawardThetermofanawardmaybenomorethantenyearsfromthedateofgrant.Noawardmaybeexercisedaftertheexpiration
ofitsterm.
DeathordisabilityIfanawardeesemploymentorconsultingrelationshipterminatesasaresultofhisorherdeathortotalandpermanent
disability,thenhisorherstockawardsshallbecomeimmediatelyvested(unlessotherwiseprovidedintheawardagreement)andhisorher
optionsand/orSARswillvesttotheextentofanyvestingthatwouldhaveoccurredwithinthefollowing12monthshadtheemploymentor
consultingrelationshipcontinued.Followingdeath,anoptionorSARmaybeexercised,totheextentvestedandnotexpired,withinthe12
monthperiodfollowingtheawardeesdeathbyhisorherestateorbythepersonwhoacquirestheexerciserightbybequestorinheritance.
Followingtotalandpermanentdisability,anoptionorSARmaybeexercised,totheextentvestedandnotexpired,withinthe18month
periodfollowingthedateonwhichtheawardeeceasedperformingservices.Theforegoingappliestoreplacement(conversion)optionsonly
totheextentprovidedintheawardagreementsforsuchoptions.
Nontransferabilityofawards.UnlessotherwisedeterminedbytheCommittee,awardsgrantedunderthe2001StockPlanarenottransferable
otherthanbywillorthelawsofdescentanddistributionandmaybeexercisedduringtheawardeeslifetimeonlybytheawardee.
TableofContents
OtherprovisionsAnawardagreementmaycontainothertermsandprovisionsconsistentwiththe2001StockPlan,asmaybedetermined
bytheCommittee.
StockawardsStockawardsmaybegrantedalone,inadditionto,orintandemwithotherawardsunderthe2001StockPlan.Unlessthe
Committeedeterminesotherwise,theawardagreementwillprovidethatanynonvestedstockunderlyingthestockawardisforfeitedbackto
theCompanyupontheawardeesterminationofemploymentorconsultingrelationshipforanyreason.Iftheunvestedshareswere
purchasedunderastockaward,attheterminationofemploymentorconsultingrelationshiptheshareswillbeimmediatelyresoldtothe
Companyattheoriginalpurchaseprice.
StockappreciationrightsStockappreciationrights(SARs)maybegrantedalone(StandAloneSARs),inadditionto,orintandem
(TandemSARs)withastockoptionunderthe2001StockPlan.UponexerciseofaStandAloneSAR,theawardeewillbeentitledtoreceive
theexcessofthefairmarketvalueontheexercisedateoftheCompanycommonsharesunderlyingtheSARovertheaggregatebaseprice
applicabletosuchsharesprovidedthatthebasepricepersharemaynotbelessthanthefairmarketvalueofsuchsharesonthegrantdate.
AnawardeegrantedaTandemSARwillberequiredtoelectbetweenexercisingtheunderlyingoptionandsurrenderingtheoptionin
exchangeforadistributionfromtheCompanyequaltotheexcessofthefairmarketvalueonthesurrenderdateofthesharesthatwere
vestedunderthesurrenderedoptionovertheaggregateexercisepricepayableforsuchshares.Anysuchsurrendermustbefirstapproved
85/111
10/28/2016
PRE14A
vestedunderthesurrenderedoptionovertheaggregateexercisepricepayableforsuchshares.Anysuchsurrendermustbefirstapproved
bytheCommittee.Distributionstotheawardeemaybemadeincommonstock,incash,orinacombinationofstockandcash,asdetermined
bytheCommittee.
AdjustmentstosharessubjecttotheplanIfanychangeismadetotheCompanyscommonsharesbyreasonofanystocksplit,stock
dividend,recapitalization,combinationofshares,exchangeofsharesorotherchangeaffectingtheoutstandingsharesasaclasswithoutthe
Companysreceiptofconsideration,appropriateadjustmentsshallbemadeto(i)themaximumnumberand/orclassofsecuritiesissuable
underthePlan,(ii)thenumberand/orclassofsecuritiesand/orthepricepersharecoveredbyoutstandingawardsunderthePlan,(iii)the
maximumannualaward,(iv)thelimitonnonqualifiedstockoptionsandSARswithanexercisepriceoflessthanfairmarketvalueonthe
grantdate,and(v)thelimitonawardswithavestingperiodoflessthanthreeyears.Suchadjustmentsalsomaybemadeintheeventofany
distributionofassetstoshareholdersotherthananormalcashdividend.Indeterminingadjustmentstobemadeundertheseprovisions,the
Boardmaytakeintoaccountsuchfactorsasitdeemsappropriate.Anysuchadjustmentstooutstandingawardswillbeeffectedinamanner
thatprecludestheenlargementofrightsandbenefitsundersuchawards.
IntheeventofaliquidationordissolutionoftheCompany,anyunexercisedawardswillterminateimmediatelypriortotheproposedaction
unlessotherwisedeterminedbytheBoard.IntheeventofthesaleofsubstantiallyallassetsoftheCompanyoramergerwithorintoanother
corporationIntheeventofthesaleofsubstantiallyallassetsoftheCompanyoramergerwithorintoanothercorporation,eachawardshall
beassumedoranequivalentawardshallbesubstitutedbythesuccessorcorporationoraparentorsubsidiaryofthesuccessorcorporation
or,ifnotassumed,shallbefullyvested.
AmendmentandTerminationofthe2001StockPlanTheBoardmayamend,alter,suspend,orterminatethe2001StockPlan,oranypart
thereof,atanytimeandforanyreason.However,theCompanyshallobtainshareholderapprovalorratificationforanyincreaseinthe
numberofsharessubjecttothePlan(otherthaninconnectionwiththeadjustmentprovisionsofthePlan),andforanyawardrepricing,
replacement,regrantthroughcancellation,repurchaseforcashorotherconsideration,ormodification,ineachcasethatreducesthe
exercisepriceforsharesundertheaward.NosuchactionbytheBoardorshareholdersmayaffectanyawardpreviouslygrantedunderthe
2001StockPlanwithoutthewrittenagreementoftheawardeeprovidedthattheconsentofanawardeeisnotnecessaryforamodificationor
amendmentoftheaward,ortheaccelerationordeferraloftheawardsvestingorexercise,thatinthereasonablejudgmentoftheBoard
confersabenefitontheawardeeorismadeinconnectionwiththe2001StockPlansprovisionsforadjustmentofsharesintheeventof
changestothesharesunderlyingtheawardorthedistributionofassetstoshareholdersotherthanunderanormalcashdividend.The2001
StockPlanremainsineffectuntilterminatedbyactionoftheBoardoroperationoflaw.
Federalincometaxconsequencesrelatingtothe2001StockPlan,asamendedandrestated
TheU.S.federalincometaxconsequencestotheCompanyanditsemployeesofawardsunderthe2001StockPlanarecomplexandsubject
tochange.Thefollowingdiscussionisonlyasummaryofthegeneralrulesapplicabletothe2001StockPlan.
Recipientsofawardsunderthe2001StockPlanshouldconsulttheirowntaxadvisorssinceataxpayersparticularsituationmaybesuch
thatsomevariationoftherulesdescribedbelowwillapply.
Asdiscussedabove,severaldifferenttypesofinstrumentsmaybeissuedundertheStockPlan.Thetaxconsequencesrelatedtothe
issuanceofeachisdiscussedseparatelybelow.
Options.Asnotedabove,optionsgrantedunderthe2001StockPlanmaybeeitherincentivestockoptionsornonqualifiedstockoptions.
IncentivestockoptionsareoptionswhicharedesignatedassuchbytheCompanyandwhichmeetcertainrequirementsunder
62
TableofContents
Section422oftheCodeandtheregulationsthereunder.Anyoptionthatdoesnotsatisfytheserequirementswillbetreatedasanonqualified
stockoption.
IncentivestockoptionsIfanoptiongrantedunderthe2001StockPlanistreatedasanincentivestockoption,theoptioneewillnot
recognizeanyincomeuponeitherthegrantortheexerciseoftheoption,andtheCompanywillnotbeallowedadeductionforfederaltax
purposes.Uponasaleoftheshares,thetaxtreatmenttotheoptioneeandtheCompanywilldependprimarilyuponwhethertheoptionee
hasmetcertainholdingperiodrequirementsatthetimeheorshesellstheshares.Inaddition,asdiscussedbelow,theexerciseofan
incentivestockoptionmaysubjecttheoptioneetoalternativeminimumtaxliability.
Ifanoptioneeexercisesanincentivestockoptionanddoesnotdisposeofthesharesreceivedwithintwoyearsafterthedatesuchoption
wasgrantedorwithinoneyearafterthetransferofthesharestohimorher,anygainrealizeduponthedispositionwillbecharacterizedas
longtermcapitalgainand,insuchcase,theCompanywillnotbeentitledtoafederaltaxdeduction.
Iftheoptioneedisposesoftheshareseitherwithintwoyearsafterthedatetheoptionisgrantedorwithinoneyearafterthetransferofthe
sharestohimorher,suchdispositionwillbetreatedasadisqualifyingdispositionandanamountequaltothelesserof(1)thefairmarket
valueofthesharesonthedateofexerciseminustheexerciseprice,or(2)theamountrealizedonthedispositionminustheexerciseprice,
willbetaxedasordinaryincometotheoptioneeinthetaxableyearinwhichthedispositionoccurs.(However,inthecaseofgifts,salesto
relatedparties,andcertainothertransactions,thefulldifferencebetweenthefairmarketvalueofthestockandthepurchasepricewillbe
treatedascompensationincome.)Theexcess,ifany,oftheamountrealizedupondispositionoverthefairmarketvalueatthetimeofthe
exerciseoftheoptionwillbetreatedaslongtermcapitalgainiftheshareshavebeenheldformorethanoneyearfollowingtheexerciseof
86/111
10/28/2016
PRE14A
exerciseoftheoptionwillbetreatedaslongtermcapitalgainiftheshareshavebeenheldformorethanoneyearfollowingtheexerciseof
theoption.Intheeventofadisqualifyingdisposition,theCompanymaywithholdincometaxesfromtheoptioneescompensationwith
respecttotheordinaryincomerealizedbytheoptioneeasaresultofthedisqualifyingdisposition.
Theexerciseofanincentivestockoptionmaysubjectanoptioneetoalternativeminimumtaxliability.Theexcessofthefairmarketvalueof
thesharesatthetimeanincentivestockoptionisexercisedoverthepurchasepriceofthesharesisincludedinincomeforpurposesofthe
alternativeminimumtaxeventhoughitisnotincludedintaxableincomeforpurposesofdeterminingtheregulartaxliabilityofanemployee.
Consequently,anoptioneemaybeobligatedtopayalternativeminimumtaxintheyearheorsheexercisesanincentivestockoption.
Ingeneral,therewillbenofederalincometaxdeductionsallowedtotheCompanyuponthegrant,exercise,orterminationofanincentive
stockoption.However,ifanoptioneesellsorotherwisedisposesofstockreceivedontheexerciseofanincentivestockoptionina
disqualifyingdisposition,theCompanywillbeentitledtoadeductionforfederalincometaxpurposesinanamountequaltotheordinary
income,ifany,recognizedbytheoptioneeupondispositionoftheshares,providedthatthedeductionisnototherwisedisallowedunderthe
Code.
NonqualifiedstockoptionsNonqualifiedstockoptionsgrantedunderthe2001StockPlandonotqualifyasincentivestockoptionsand
willnotqualifyforanyspecialtaxbenefitstotheoptionee.Anoptioneegenerallywillnotrecognizeanytaxableincomeatthetimeheorshe
isgrantedanonqualifiedoption.However,uponitsexercise,theoptioneewillrecognizeordinaryincomeforfederaltaxpurposesmeasured
bytheexcessofthethenfairmarketvalueofthesharesovertheexerciseprice.Theincomerealizedbytheoptioneewillbesubjectto
incomeandotheremployeewithholdingtaxes.
Theoptioneesbasisfordeterminationofgainorlossuponthesubsequentdispositionofsharesacquiredupontheexerciseofa
nonqualifiedstockoptionwillbetheamountpaidforsuchsharesplusanyordinaryincomerecognizedasaresultoftheexerciseofsuch
option.Upondispositionofanysharesacquiredpursuanttotheexerciseofanonqualifiedstockoption,thedifferencebetweenthesaleprice
andtheoptioneesbasisintheshareswillbetreatedasacapitalgainorlossandgenerallywillbecharacterizedaslongtermcapitalgainor
lossiftheshareshavebeenheldformorethanoneyearattheirdisposition.
Ingeneral,therewillbenofederalincometaxdeductionallowedtotheCompanyuponthegrantorterminationofanonqualifiedstockoption
orasaleordispositionofthesharesacquiredupontheexerciseofanonqualifiedstockoption.However,upontheexerciseofanonqualified
stockoption,theCompanywillbeentitledtoadeductionforfederalincometaxpurposesequaltotheamountofordinaryincomethatan
optioneeisrequiredtorecognizeasaresultoftheexercise,providedthatthedeductionisnototherwisedisallowedundertheCode.
StockawardsGenerally,therecipientofastockawardwillrecognizeordinarycompensationincomeatthetimetheCompanyscommon
stockassociatedwiththestockawardisreceivedinanamountequaltotheexcess,ifany,ofthefairmarketvalueofthestockreceivedover
anyamountpaidbytherecipientinexchangeforthestock.If,however,thestockisnonvested(i.e.,iftheemployeeisrequiredtoworkfora
periodoftimeinordertohavetherighttosellthestock)whenitisreceivedunderthe2001StockPlanandtherecipienthadnotelected
otherwise,therecipientgenerallywillnotrecognizeincomeuntilthestockbecomesvested,atwhichtimetherecipientwillrecognizeordinary
compensationincomeequaltotheexcess,ifany,ofthefairmarketvalueofthestockonthedateit
TableofContents
becomesvestedoveranyamountpaidbytherecipientinexchangeforthestock.Theincomerealizedbytherecipientwillgenerallybe
subjecttoU.S.incomeandemploymenttaxes.
InthecaseofstockawardsthattaketheformoftheCompanysunfundedandunsecuredpromisetoissuecommonstockatafuturedate,the
grantofthistypeofstockawardisnotataxableeventtotherecipientbecauseitconstitutesanunfundedandunsecuredpromisetoissue
sharesofCompanycommonstockatafuturedate.OncethistypeofstockawardvestsandtherecipientreceivestheCompanycommon
shares,thetaxrulesdiscussedinthepreviousparagraphwillapplytoreceiptofsuchshares.
Therecipientsbasisfordeterminationofgainorlossuponthesubsequentdispositionofsharesacquiredasstockawardswillbetheamount
paidforsuchsharesplusanyordinaryincomerecognizedeitherwhenthestockisreceivedorwhenthestockbecomesvested,as
applicable.Uponthedispositionofanystockreceivedasastockawardunderthe2001StockPlan,thedifferencebetweenthesalepriceand
therecipientsbasisintheshareswillbetreatedasacapitalgainorlossandgenerallywillbecharacterizedaslongtermcapitalgainorloss
if,atthetimeofdisposition,theshareshavebeenheldformorethanoneyearsincetherecipientrecognizedcompensationincomewith
respecttosuchshares.
IfarecipientofastockawardreceivesthecashequivalentofCompanycommonstock(inlieuofactuallyreceivingCompanycommonstock),
therecipientwillrecognizeordinarycompensationincomeatthetimeofthereceiptofsuchcashintheamountofthecashreceived.
Intheyearthattherecipientofastockawardrecognizesordinarytaxableincomeinrespectofsuchaward,theCompanywillbeentitledtoa
deductionforfederalincometaxpurposesequaltotheamountofordinaryincomethattherecipientisrequiredtorecognize,providedthat
thedeductionisnototherwisedisallowedundertheCode.
StockappreciationrightsAsdiscussedabove,theCompanymaygranteitherStandAloneSARsorTandemSARsunderthe2001Stock
Plan.Generally,therecipientofaStandAloneSARwillnotrecognizeanytaxableincomeatthetimetheStandAloneSARisgranted.
87/111
10/28/2016
PRE14A
WithrespecttoStandAloneSARs,iftheemployeereceivestheappreciationinherentintheSARsincash,thecashwillbetaxableas
ordinarycompensationincometotheemployeeatthetimethatitisreceived.IftheemployeereceivestheappreciationinherentintheStand
AloneSARsinstock,theemployeewillrecognizeordinarycompensationincomeequaltotheexcessofthefairmarketvalueofthestockon
thedayitisreceivedoveranyamountspaidbytheemployeeforthestock.
WithrespecttoTandemSARs,ifaholderelectstosurrendertheunderlyingoptioninexchangeforcashorstockequaltotheappreciation
inherentintheunderlyingoption,thetaxconsequencestotheemployeewillbethesameasdiscussedaboverelatingtoStandAloneSARs.
Iftheemployeeelectstoexercisetheunderlyingoption,theholderwillbetaxedatthetimeofexerciseasifheorshehadexerciseda
nonqualifiedstockoption(discussedabove),i.e.,theemployeewillrecognizeordinaryincomeforfederaltaxpurposesmeasuredbythe
excessofthethenfairmarketvalueofthesharesovertheexerciseprice.
Ingeneral,therewillbenofederalincometaxdeductionallowedtotheCompanyuponthegrantorterminationofStandAloneSARsor
TandemSARs.However,upontheexerciseofeitheraStandAloneSARoraTandemSAR,theCompanywillbeentitledtoadeductionfor
federalincometaxpurposesequaltotheamountofordinaryincomethattheemployeeisrequiredtorecognizeasaresultoftheexercise,
providedthatthedeductionisnototherwisedisallowedundertheCode.
AdditionalmedicaretaxRecipientsofawardswillbesubjecttoa3.8%taxonthelesserof(1)theirnetinvestmentincomefortherelevant
taxableyearand(2)theexcessoftheirmodifiedadjustedgrossincomeforthetaxableyearoveracertainthreshold(between$125,000and
$250,000,dependingontheawardrecipientscircumstances).Anawardrecipientsnetinvestmentincomegenerallyincludesnetgainsfrom
thedispositionofshares.RecipientsareurgedtoconsulttheirtaxadvisorsregardingtheapplicabilityofthisMedicaretaxtotheirincomeand
gainsinrespectoftheirinvestmentinsharesofCompanystock.
Section409AIfanawardissubjecttoSection409AoftheCode,butdoesnotcomplywiththerequirementsofSection409AoftheCode,
thetaxableeventsasdescribedabovecouldapplyearlierthandescribed,andcouldresultintheimpositionofadditionaltaxesand
penalties.RecipientsofawardsareurgedtoconsultwiththeirtaxadvisorsregardingtheapplicabilityofSection409AoftheCodetotheir
awards.
64
TableofContents
6.Shareholderproposals
Proposal6:
JamesMcRitchiehasadvisedusthatheintendstosubmitthefollowingproposalforconsiderationattheAnnual
Shareholder ShareholdersMeeting.
proposalNo.1 Theaffirmativevoteofholdersofamajorityofthesharesofcommonstockcastinpersonorbyproxyatthe
meetingisrequiredtoapprovetheproposal.
TheBoardofDirectorsrecommendsavoteAGAINSTapprovalofshareholderproposalNo.1
ShareholderProxyAccessEnhancement
RESOLVED:ShareholdersofMicrosoft(theCompany)asktheboardofdirectors(theBoard)toadopt,andpresentforshareholder
approval,anenhancementpackageofitsProxyAccessforDirectorNominationsbylaw,withessentialelementsforsubstantial
implementationasfollows:
1. Thenumberofshareholdernominatedcandidateseligibletoappearinproxymaterialsshouldnotexceedonequarterofthedirectors
thenservingortwo,whicheverisgreater.Expansionofthecurrentnumberofdirectorpositionscouldsubstantiallydilutetheinfluenceof
88/111
10/28/2016
PRE14A
thenservingortwo,whicheverisgreater.Expansionofthecurrentnumberofdirectorpositionscouldsubstantiallydilutetheinfluenceof
shareholdersundertheCompanyscurrentproxyaccessprovisions.
2. Nolimitationonthenumberofshareholdersthatcanaggregatetheirsharestoachievethe3%RequiredShares,outstandingsharesof
theCompanyentitledtovoteintheelectionofdirectors.Undercurrentprovisions,evenifthe20largestpublicpensionfundswereable
toaggregatetheirshares,theywouldnotmeetthe3%criteriaatmostofthecompaniesexaminedbytheCouncilofInstitutionalInvestors.
3. Nolimitationontherenominationofshareholdernomineesbasedonthenumberorpercentageofvotesreceivedinanyelection.Such
limitationsdonotfacilitatetheshareholderstraditionalstatelawrightsandaddunnecessarycomplexity.
4. Totheextentpossible,theBoardshoulddeferdecisionsaboutthesuitabilityofshareholdernomineestothevoteofshareholders.
SUPPORTINGSTATEMENT:TheSECsuniversalproxyaccessRule14a11(https://www.sec.gov/rules/final/2010/339136.pdf)wasvacated
afteracourtdecisionregardingtheSECscostbenefitanalysis.Therefore,proxyaccessrightsmustbeestablishedonacompanyby
companybasis.
Subsequently,ProxyAccessintheUnitedStates:RevisitingtheProposedSECRule(http://www.cfapubs.org/doi/pdf/10.2469/ccb.v2014.n9.1)
acostbenefitanalysisbyCFAInstitute,foundproxyaccesswouldbenefitboththemarketsandcorporateboardrooms,withlittlecostor
disruption,raisingUSmarketcapitalizationbyupto$140.3billion.PublicVersusPrivateProvisionofGovernance:TheCaseofProxy
Access(http://ssrn.com/abstract=2635695)founda0.5percentaverageincreaseinshareholdervalueforproxyaccesstargetedfirms.Proxy
Access:BestPractices(http://www.cii.org/files/publications/misc/08_05_15_Best%20Practices%20%20Proxy%20Access.pdf)bytheCouncil
ofInstitutionalInvestors,highlightsthemosttroublesomeprovisionsinrecentlyimplementedaccessbylaworcharteramendments.
AlthoughtheCompanysboardadoptedaproxyaccessbylaw,itcontainstroublesomeprovisionsthatsignificantlyimpairtheabilityof
shareholderstouseit,renderingitlargelyunworkable.Adoptionoftherequestedenhancementinthisproposalwouldlargelyremedythat
situation.
Increaseshareholdervalue
VoteforShareholderProxyAccessEnhancementShareholderProposalNo.1
TheBoardrecommendsthatshareholdervoteAGAINSTthisproposalforthefollowingreasons:
COMPANYSTATEMENTINOPPOSITION
Microsofthaslongsupportedprogressivecorporategovernancepractices.Forexample,wewereamongtheveryfirstcompaniesto
implementmajorityvotingfordirectors.Similarly,inAugust2015weadoptedabylawestablishingadetailedproxyaccessframeworkfor
directornominationsbyshareholders.Itprovidesrobustrightstoshareholdersthroughaneffectiveandworkableproxyaccessregime.Asa
result,adoptionofthisProposalisunnecessary.
89/111
10/28/2016
PRE14A
TableofContents
Ourproxyaccessframework,theresultofextensivediscussionswithourshareholdersincludingtheProponent,strikestheright
balancebetweenpromotingshareholdernominationrightsandprotectingtheinterestsofallourshareholders.
TheframeworkweadoptediswithinthemainstreamofothersignificantU.S.publiccompanieswithproxyaccessrights.Specifically,our
Bylawspermitashareholder,oragroupofuptotwentyshareholders,owningatleastthreepercentofMicrosoftsoutstandingsharesof
commonstockcontinuouslyforatleastthreeyears,tonominateandincludeinourannualmeetingproxymaterialsdirectornominees
constitutingtwentypercentoftheBoard(butnofewerthantwonominees),subjecttotheotherproceduralrequirementsspecifiedinour
Bylaws,whichareavailableathttp://aka.ms/policiesandguidelines.
Thepotentialadoptionofproxyaccesswasaprominentpartofour2015shareholderoutreachdiscussions.Wereceivedarangeoffeedback
fromshareholdersandgovernanceexpertsandadvisorsonwhethertoadoptproxyaccess,andifsowhattermsweshould
incorporate.Someopposedproxyaccessinanyformotherssupportedthetermswewereconsideringstillothersadvocatedformore
expansiveterms.Aftercarefullyconsideringtherangeofviewpointsandtakingintoaccountfeedbackfrommanyofourshareholders,our
Boardadoptedaregimethatitbelievedstrucktheappropriatebalancebetweenprovidingaworkableprocessthatcanbeusedifever
neededandthatreinforcesourBoardsaccountability,whilemitigatingthepossibilityofproxyaccessbeingusedbyshareholderspursuing
objectivesthatarenotbroadlysupportedbyothershareholdersorotherwisemisusingproxyaccess.Thosetermswereinsomecasesmore
favorablethanprevailingpracticesamongothersignificantU.S.companiesthathadadoptedproxyaccess,forexamplebyprovidingasa
thresholdthatproxyaccesswouldbeavailableforatleasttwonominees,evenifmorethantwentypercentofthefullBoard.
TheBoardcontinuallyreviewsourcorporategovernancepoliciesandpracticesandremainsopentomakingadjustmentsinresponseto
evolvingpracticesorourownexperience.InSeptember2016,reflectingwhatwaslearnedfromongoingdevelopmentsinhowproxyaccess
hasbeenadoptedatothercompanies,werefinedourproxyaccessbylawto(1)reducefrom25%to15%thelevelofvotingsupportneeded
torenominateaproxyaccesscandidateinoneofthefollowingtwoyears(2)clarifywhengroupsoffundscountasasingleshareholderfor
purposesofmeetingthe3%ownershipthreshold(3)countloanedsharesrecallablewithinfivebusinessdays(increasedfromthreedays)
asbeingownedforpurposesofsatisfyingthe3%ownershipthreshold,andeliminatetherequirementthatloanedsharesberecalledatthe
timeanominatingshareholderprovidesnoticetotheCompanyand(4)clarifycertainindemnificationprovisions.Likewise,reflectingouron
goingshareholderengagementandevaluationofgovernancepractices,atthisannualmeetingwearesubmittingforshareholderapproval
anamendmenttoourArticlesofIncorporationtolowerthethresholdforshareholderstocallspecialmeetingsfrom25%to15%.
TheProponentsubmittedaproxyaccessshareholderproposalin2015.Afterweadoptedproxyaccess,hewithdrewhisproposalforaproxy
accessregimesimilartothisyearsProposal.Asdescribedbelow,thechangesadvocatedbytheProposalarenotnecessaryfortheproper
functioningofproxyaccess.
Wehaveprovidedaneffectiveandworkableproxyaccessframework.Therequestedchangesareunnecessaryandpotentially
disruptive.
90/111
10/28/2016
disruptive.
PRE14A
Ourbylawpermitseligibleshareholderstonominatethegreateroftwonomineesor20%ofthecurrentboardseats.Thisfullyaccomplishes
themainobjectiveofproxyaccessofprovidingmeaningfulrepresentationonaboardforqualifiedindividualsendorsedbyamajorityof
shareholders.Webelievethatraisingthepotentiallevelofrepresentationto25%oftheboardcouldhaveunintendedeffectsthatcouldbe
destructiveofshareholdervalue,includingpromotingtheuseofproxyaccesstolaythegroundworkforeffectingachangeincontrol,
encouragingthepursuitofspecialinterestsattheexpenseofaholistic,longtermstrategicview,orotherwisedisruptingtheeffective
functioningoftheBoard.
Ourbylawpermitsgroupsofuptotwentyshareholderstoaggregatetheirsharestoreachtherequired3%ownershipthreshold(withagroup
ofinvestmentfundsundercommonmanagementandinvestmentcontrolcountingasasingleshareholder).Wequestionwhetherallowinga
largernumberofshareholderstoaggregatetheirsharesisworkableforthenominatingshareholdergroup,giventhebroadsolicitationthat
wouldberequiredandthepracticaldifficultiesofcoordinatingalargernumberofshareholders.Withourcurrentownershipstructure,itis
possibletoassembleagroupof20shareholdersthatownsatleast3%ofoursharesandthatdoesnotincludeanyofourlargest50
institutionalshareholders(assumingeachholderhasowneditssharesforthreeyears).A20shareholderlimitiswidelyembracedby
companiesadoptingproxyaccess,andwidelyendorsedamonginstitutionalshareholdersvotingpolicies.
Ourbylaw,asamendedinSeptember2016,providesthatacandidatewhodoesnotreceivemorethan15%ofsharesvotedmaynotbe
nominatedasaproxyaccesscandidateforthefollowingtwoyears.Thisisdesignedsolelytopreventshareholdersfromabusingtheproxy
accessprocess,puttingtheCompanyandothershareholderstotheexpenseandeffortofrespondingtoproxyaccess,afterthatprocesshas
alreadybeenusedoncewithaparticularcandidatewhomshareholdersasawholedidnotmeaningfullysupport.
Ourbylawhasonlylimitedandnecessarycriteriaforthesuitabilityofproxyaccesscandidates.Theseincludeindependence,notbeing
anofficerordirectorofacompetitor,andnotbeingnamedorconvictedinacriminalproceeding.Asaresult,wehaveinfactimplementedthe
Proponentsrequestsothatdecisionsaboutthesuitabilityofaproxyaccessnomineearedecidedbythevoteofshareholders.
66
TableofContents
Wehaveastrongcorporategovernancestructureandrecordofaccountability.
TheCompanyscorporategovernancestructurereflectsourcommitmenttostrongandeffectivegovernancepracticesandawillingnesstobe
responsiveandaccountabletoshareholders.Weregularlyassessourcorporategovernancepoliciestotakeintoaccountevolvingbest
practicesandtoaddressshareholderfeedback.Ourgoalsaretoaligntheinterestsofshareholders,directors,andmanagementensure
accountabilityencouragerobustengagementwithourkeystakeholdersandprovideourshareholderswithameaningfulvoiceinboththe
nominationandtheelectionofdirectors.Someofourgovernancepoliciesandpracticesthatsupportthesegoalsare:
Annualelectionsofallincumbentdirectors.
Majorityvotinginuncontesteddirectorelections.
TheBoardcomprisesasubstantialmajorityofindependentdirectors,andallstandingcommitteesoftheBoardcompriseonlyindependent
directors.
Therolesofboardchairmanandchiefexecutiveofficerhavebeenseparatesince2000.
Wehaveanindependentchairmanwithsignificantresponsibilities,including
SettingtheagendaforBoardmeetingsin
consultationwiththeCEOandcorporate
secretary
Chairingexecutivesessionsofthe
independentdirectors
Engagingwithshareholders
Shareholdersrepresenting15%ormoreofoutstandingshares(ifshareholdersapproveProposal4toamendourArticlesofIncorporation)
cancallaspecialshareholdersmeeting.
Ourshareholdersareableto
Recommenddirectorcandidatestoour
GovernanceandNominatingCommittee,
whichconsiderssuchrecommendationsin
thesamemannerasrecommendations
receivedfromothersources
Directlynominatedirectorcandidatesand
solicitproxiesfortheelectionofthose
candidatesinaccordancewithourBylaws
andthefederalsecuritieslaws
Communicatedirectlywithmembersofour
Board,theChairman,anyBoard
committeeorourindependentdirectorsas
agroup
OurBoardalsohasshownanongoingcommitmenttoBoardrefreshmentandtohavinghighlyqualified,independentvoicesinthe
boardroom.Throughourrobustdirectornominationandevaluationprocess,sevenoftheCompanysindependentdirectorshavebeen
addedtotheBoardsince2012.
GiventheBoardscontinuingcommitmenttoengagingwithourshareholdersandensuringeffectivecorporategovernance,asevidencedby
91/111
10/28/2016
PRE14A
GiventheBoardscontinuingcommitmenttoengagingwithourshareholdersandensuringeffectivecorporategovernance,asevidencedby
ourearlyadoptionofaproxyaccessbylawandfurthershareholderfavorableamendmentsmadethisyear,andbytheotheractions
describedaboveandelsewhereinthisproxystatement,theBoardbelievesthatchangingourproxyaccessframeworkasoutlinedbythe
Proposalisunnecessaryandcouldbedetrimentaltoshareholdervalue.
TableofContents
Proposal7:
KennethSteinerhasadvisedusthatheintendstosubmitthefollowingproposalforconsiderationattheAnnual
Shareholder ShareholdersMeeting.
proposalNo.2 Theaffirmativevoteofholdersofamajorityofthesharesofcommonstockcastinpersonorbyproxyatthe
meetingisrequiredtoapprovetheproposal.
TheBoardofDirectorsrecommendsavoteAGAINSTapprovalofshareholderproposalNo.2
ShareholderProposalNo.2
RESOLVED:Theboardshallnottakeanyactionwhoseprimarypurposeistopreventtheeffectivenessofshareholdervotewithouta
compellingjustificationforsuchaction.
SUPPORTINGSTATEMENT:Almostthirtyyearsago,theDelawareChanceryCourtruledthatactionsthathaveanadverseimpactonthe
rightofshareholderstovotearepresumptivelyinvalid.
InAprahamianv.HBO&Co.,531A.2d1204,(Del.Ch.1987),theCourtsaidthis:
Thecorporateelectionprocess,ifitistohaveanyvalidity,mustbeconductedwithscrupulousfairnessandwithoutanyadvantagebeing
conferredordeniedtoanycandidateorslateofcandidates.Intheinterestsofcorporatedemocracy,thoseinchargeoftheelection
machineryofacorporationmustbeheldtothehigheststandardsinprovidingforandconductingcorporateelections.
Justoneyearlater,inBlasiusIndustries,Inc.v.AtlasCorp.,564A.2d651(Del.Ch.,1988),theChanceryCourtmadeitclearthataboard
cannotrelysolelyonitsbusinessjudgmentiftakesanactionfortheprimarypurposeofpreventingtheeffectivenessofashareholdervote.
Rather,theboardmusthaveacompellingjustification.TheCourtexplained:
Theshareholderfranchiseistheideologicalunderpinninguponwhichthelegitimacyofdirectorialpowerrests....Actiondesigned
principallytointerferewiththeeffectivenessofavoteinevitablyinvolvesaconflictbetweentheboardandashareholdermajority....[I]n
suchacase,theboardbearstheheavyburdenofdemonstratingacompellingjustificationforsuchaction.
Unfortunately,someboardsofdirectorsstilldothingsthatunderminetheshareholderfranchise.Forexample,manyboardshaveadopted
complexadvancenoticebylawsthatrequireashareholderseekingtonominatedirectorsorpresentproposalstofilloutlongformsand
provideproprietaryinformationtotheboard.Thatdetersshareholdersfromexercisingtheirvotingrightsandhasledtocostlylitigation.
Moreover,suchrequirementshavenothingtodowiththelegitimatepurposeofanadvancenoticebylawwhichissimplytoallowacompany
tofullyinformshareholderswhocannotattendthemeetingaboutallmattersthatwillbepresentedforavote.
Ineffect,thisproposalallowsshareholderstoformallyendorsethesamebasicprincipleofshareholderdemocracythatournationsmost
respectedbusinesscourtalreadyenforces.Ifthisproposalisapproved,webelievetheboardwillbemorerespectfuloftheshareholder
franchiseandcautiousabouttakinganyactionthatadverselyimpactsit.
92/111
10/28/2016
PRE14A
COMPANYSTATEMENTINOPPOSITION
TheBoardiscommittedtofulfillingitsfiduciarydutiestoourshareholders,andsupportstheobjectivebehindthisProposaltoensurethat
shareholdershaveeffectivemeansofexercisingallvotingrightsprovidedbyourgoverningdocumentsandapplicablelaw.Indeed,our
shareholdershaverobustrightsrelatingtothevotingfranchise.
OurArticlesofIncorporationandBylawscontainnosupermajorityvotingprovisions.
Ourdirectorsareelectedannuallybymajorityvote.
Shareholdersmaysubmitdirectorcandidatesforelectioninourproxystatementthroughourproxyaccessbylaw.
ShareholdersmayrecommenddirectorcandidatestoourGovernanceandNominatingCommittee,whichconsidersthose
recommendationsinthesamemannerasrecommendationsreceivedfromothersourcestonominatedirectorsfortheBoards
consideration.
Shareholdersmaydirectlynominatedirectorcandidatesandsolicitproxiesfortheelectionofthosecandidatesinaccordancewithour
Bylawsandfederalsecuritieslaws.
68
TableofContents
ShareholdersmayvoteonlineduringourAnnualShareholdersMeetingthroughourvirtualannualmeetingpresentedconcurrentlywith
thelivemeeting.
However,webelievetheProposalitselfisunworkablebecause,insteadofrecommendingaspecificaction,itseekstoprohibittheCompany
fromtakinganunspecifieduniverseofactions.TheProposalissovaguewewouldhavedifficultyknowingwhatactionsitseekstoprohibit.
Further,webelievetheProposalprovidesinsufficientguidancetoallowshareholdersvotingforit,ortheCompanyinimplementingit,to
determinewhatconductwouldfallwithinitsscope.AlthoughthesupportingstatementreferstotheCompanysadvancenoticebylaw,itdoes
notrequesttheBoardtakeanyactionwithrespecttothatbylaworanyofitsBylaws,ArticlesofIncorporation,orotherspecificgovernance
policyorpractice.
Awiderangeofroutinecorporateactionscouldbeviewedaspotentiallyadverselyimpactingtheeffectivenessofshareholdervote,and
thereforepotentiallybesubjecttothejudiciallydevelopedprimarypurposeandcompellingjustificationtests.Thesecouldinclude
establishingthevotingrecorddatefortheannualmeetingofshareholders,selectingthedate,time,andplaceoftheannualmeeting,
determiningwhethertelephonicorelectronicsubmissionofproxieswillbeavailableforshareholders,establishingadmissionproceduresfor
ashareholdermeeting,anddeterminingwhentoclosethepollsforvotingatashareholdermeeting.BecausetheDelawarecourtdecisions
referredtointheProposalareappliedonlyinnarrowcircumstancesandinvolvefactspecificdeterminations,wewouldhavenocertainty
whetherorunderwhatcircumstancesanyoftheseactionswouldactuallybewithinthescopeoftheProposal,orwhetherourshareholders
wouldreachthesameconclusionastothescopeoftheProposal.
BecausetheProposalfailstoidentifyanyspecificactiontobetakenordefectintheCompanysshareholdervotingrightsthatshouldbe
remedied,andbecausewebelievetheProposalwouldbeimpracticabletoimplementitifpassed,theBoardrecommendsavoteagainstthe
Proposal.
93/111
10/28/2016
PRE14A
TableofContents
7.Informationaboutthemeeting
Date: November30,2016
Time: 8:00a.m.PacificTime
Place: MeydenbauerCenter
11100NE6thStreet
Bellevue,Washington98004
ThisProxyStatementwasfirstmailedtoshareholdersonoraboutOctober18,2016.Itis
furnishedinconnectionwiththesolicitationofproxiesbytheBoardofDirectorsofMicrosoft
CorporationtobevotedattheAnnualMeetingforthepurposessetforthinthe
accompanyingNoticeofAnnualMeeting.
Shareholderswhoexecuteproxiesretaintherighttorevokethematanytimebeforethe
sharesarevotedbyproxyatthemeeting.Ashareholdermayrevokeaproxybydelivering
asignedstatementtoourCorporateSecretaryatorpriortotheAnnualMeetingorbytimely
executinganddelivering,byInternet,telephone,mail,orinpersonattheAnnualMeeting,
anotherproxydatedasofalaterdate.

ProxymaterialsareavailableontheInternet
WearefurnishingproxymaterialstoourshareholdersprimarilyviatheInternet,insteadofmailingprintedcopiesofthosematerialstoeach
shareholder.Bydoingso,wesavecostsandreducetheenvironmentalimpactofourAnnualMeeting.OnOctober18,2016,wemaileda
NoticeofInternetAvailabilityofProxyMaterialstocertainofourshareholders.TheNoticecontainsinstructionsabouthowtoaccessourproxy
materialsandvoteonlineorvotebytelephone.Ifyouwouldliketoreceiveapapercopyofourproxymaterials,pleasefollowtheinstructions
includedintheNoticeofInternetAvailabilityofProxyMaterials.Ifyoupreviouslychosetoreceiveourproxymaterialselectronically,youwill
continuetoreceiveaccesstothesematerialsviaemailunlessyouelectotherwise.
Proofofownershiprequiredforattendingmeetinginperson
YouareentitledtoattendtheAnnualMeetingonlyifyouareashareholderasofthecloseofbusinessonSeptember30,2016,therecord
date,orholdavalidproxyforthemeeting.InordertobeadmittedtotheAnnualMeeting,youmustpresentproofofownershipofMicrosoft
stockontherecorddate.Thiscanbe:
abrokeragestatementorletterfromabankorbrokerindicatingownershiponSeptember30,2016,
theNoticeofInternetAvailabilityofProxyMaterials,
aprintoutoftheproxydistributionemail(ifyoureceivedyourmaterialselectronically),
aproxycard,
avotinginstructionform,or
alegalproxyprovidedbyyourbroker,bankornominee.
94/111
10/28/2016
PRE14A
Anyholderofaproxyfromashareholdermustpresenttheproxycard,properlyexecuted,andacopyoftheproofofownership.Shareholders
andproxyholdersmustalsopresentaformofphotoidentificationsuchasadriverslicense.Wewillbeunabletoadmitanyonewhodoesnot
presentidentificationorrefusestocomplywithoursecurityprocedures.
Participatinginelectronicmeeting
YoumayalsoattendthisyearsAnnualMeetingviatheInternet.Theaccompanyingproxymaterialsincludeinstructionsonhowtoparticipate
inthemeetingandhowyoumayvoteyoursharesofCompanystockifyouparticipateelectronically.Tosubmityourquestionsduringthe
AnnualMeeting,pleaselogontowww.microsoft.onlineshareholdermeeting.com.Youwillneedtoenterthe12digitcontrolnumberreceived
withyourProxyorNoticeofInternetAvailabilityofProxyMaterialstoenterthemeeting.
70
95/111
10/28/2016
PRE14A
TableofContents
Solicitingproxies
TheBoardofDirectorsissolicitingtheproxyaccompanyingthisProxyStatement.Proxiesmaybesolicitedbyofficers,directors,and
employeesofMicrosoft,noneofwhomwillreceiveanyadditionalcompensationfortheirservices.D.F.King&Co.,Inc.maysolicitproxiesata
costweanticipatewillnotexceed$15,000.Thesesolicitationsmaybemadepersonallyorbymail,facsimile,telephone,messenger,email,
ortheInternet.Microsoftwillpaypersonsholdingsharesofcommonstockintheirnamesorinthenamesofnominees,butnotowningsuch
sharesbeneficially,suchasbrokeragehouses,banks,andotherfiduciaries,fortheexpenseofforwardingsolicitationmaterialstotheir
principals.Microsoftwillpayallproxysolicitationcosts.
ShareholdersofrecordatthecloseofbusinessonSeptember30,2016willbeentitledtovoteatthemeetingonthebasisofonevotefor
eachshareheld.OnSeptember30,2016,therewere7,784,060,262sharesofcommonstockoutstanding,heldofrecordby106,098
shareholders.
Householding
ToreducecostsandreducetheenvironmentalimpactofourAnnualMeeting,asingleProxyStatementandAnnualReport,alongwith
individualproxycardsorindividualNoticesofInternetAvailability,willbedeliveredinoneenvelopetocertainshareholdershavingthesame
lastnameandaddressandtoindividualswithmorethanoneaccountregisteredatourtransferagentwiththesameaddress,unlesscontrary
instructionshavebeenreceivedfromanaffectedshareholder.Shareholdersparticipatinginhouseholdingwillcontinuetoreceiveseparate
proxycards.Ifyouarearegisteredshareholderandwouldliketoenrollinthisserviceorreceiveindividualcopiesofthisyearsand/orfuture
proxymaterials,pleasecontactourtransferagent,AmericanStockTransfer&TrustCompany,LLC,bymailatP.O.Box2362,NewYork,NY
102722362,byphoneat(800)2857772,option1,orbyemailatmsft@amstock.com.Ifyouareabeneficialshareholder,youmaycontact
thebrokerorbankwhereyouholdtheaccount.
Electionofdirectors
ElevendirectorsaretobeelectedattheAnnualMeetingtoholdofficeuntilthenextAnnualMeeting,anduntiltheirrespectivesuccessorsare
electedandqualified.If,foranyreason,thedirectorsarenotelectedatanAnnualMeeting,theymaybeelectedataspecialmeetingof
shareholderscalledforthatpurposeinthemannerprovidedbyourBylaws.Theaccompanyingproxywillbevotedinfavorofthenominees
presentedinPart2BoardofDirectorsOurdirectornomineestoserveasdirectorsunlesstheshareholderindicatestothecontraryon
theproxy.Allthenomineesarecurrentdirectors.
TheBoardofDirectorsexpectsthateachofthenomineeswillbeavailableforelection,butifanyofthemisunabletoserveatthetimethe
electionoccurs,theproxywillbevotedfortheelectionofanothernomineedesignatedbyourBoard.
Votingprocedures
Tabulationofvotes
Ourindependentelectioninspector,BroadridgeFinancialServices,willtabulatevotescastbyproxyorinpersonatthemeeting.Weexpectto
publishthefinalvotetabulationonourwebsite,www.microsoft.com/investor/votingresults,withinonebusinessdayaftertheAnnualMeeting.
WewillalsoreporttheresultsinaForm8KfiledwiththeSECwithinfourbusinessdaysoftheAnnualMeeting.
Majorityvotestandardforelectionofdirectors
Inanuncontestedelection,eachdirectorwillbeelectedbyavoteofthemajorityofthevotescast.Amajorityofvotescastmeansthenumber
96/111
10/28/2016
PRE14A
Inanuncontestedelection,eachdirectorwillbeelectedbyavoteofthemajorityofthevotescast.Amajorityofvotescastmeansthenumber
ofsharescastforadirectorselectionexceedsthenumberofvotescastagainstthatdirector.Wewillnottreatascastanyshare(a)whose
ballotismarkedaswithheld,(b)thatisotherwisepresentatthemeetingbutforwhichthereisanabstention,or(c)thatisotherwisepresentat
themeetingastowhichashareholdergivesnoauthorityordirection.Inacontestedelection,thedirectorswillbeelectedbyapluralityofthe
votescast,meaningthedirectorsreceivingthelargestnumberofforvoteswillbeelected.
97/111
10/28/2016
PRE14A
TableofContents
Acontestedelectionisoneinwhich:
asofthelastdayforgivingnoticeofashareholdernominee,ashareholderhasnominatedacandidatefordirectoraccordingtothe
requirementsofourBylaws,and
asofthedatethatnoticeofthemeetingisgiven,theBoardofDirectorsconsidersthatashareholdercandidacyhascreatedabonafide
electioncontest.
Inanuncontestedelection,anomineewhodoesnotreceiveamajorityvotewillnotbeelected.Exceptasexplainedinthenextparagraph,
anincumbentdirectorwhoisnotelectedbecauseheorshedoesnotreceiveamajorityvotewillcontinuetoserveasaholdoverdirectoruntil
theearliestof:(a)90daysafterthedateonwhichtheelectioninspectordeterminesthevotingresultsastothatdirector,(b)thedateonwhich
theBoardofDirectorsappointsanindividualtofilltheofficeheldbythatdirector,or(c)thedateofthatdirectorsresignation.
TheBoardofDirectorsmayfillanyvacancyresultingfromthenonelectionofadirectorasprovidedinourBylaws.TheGovernanceand
NominatingCommitteewillconsiderpromptlywhethertofilltheofficeofanomineewhofailstoreceiveamajorityvoteandmakea
recommendationtoourBoardaboutfillingtheoffice.
TheBoardofDirectorswillactontheGovernanceandNominatingCommitteesrecommendationandwithin90daysaftercertificationofthe
shareholdervotewilldisclosepubliclyitsdecision.
AdditionaldetailsaboutthisprocessarespecifiedinourBylaws,whichareavailableonourwebsiteatwww.microsoft.com/bylaws.
Voterequiredeffectofabstentionsandbrokernonvotes
Thesharesofashareholderwhoseballotonanyorallproposalsismarkedasabstainwillbeincludedinthenumberofsharespresentat
theAnnualMeetingtodeterminewhetheraquorumispresent.Ifyouarethebeneficialownerofsharesheldbyabrokerorothercustodian,
youmayinstructyourbrokerhowtovoteyoursharesthroughthevotinginstructionformincludedwiththisProxyStatement.Ifyouwishtovote
thesharesyouownbeneficiallyatthemeeting,youmustfirstrequestandobtainalegalproxyfromyourbrokerorothercustodian.Ifyou
choosenottoprovideinstructionsoralegalproxy,yoursharesarereferredtoasuninstructedshares.Whetheryourbrokerorcustodianhas
thediscretiontovotethesesharesonyourbehalfdependsontheballotitem.Thefollowingtablesummarizesthevotesrequiredforpassage
ofeachproposalandtheeffectofabstentionsanduninstructedsharesheldbybrokers.
Brokersandcustodianscannolongervoteuninstructedsharesonyourbehalfindirectorelections.Foryourvotetobecounted,youmust
submityourvotinginstructionformtoyourbrokerorcustodian.
Proposal
number
Item
Votesrequired
forapproval
Electionofdirectors
Notvoted
Notvoted
7.
Majorityofsharescast
Notvoted
Discretionary
vote
AmendmenttoArticlesofIncorporation
Majorityofsharesentitled
tovote
Countedasagainst
6.
Notvoted
ApprovalofFrenchSubPlanunderour
2001StockPlan
Advisoryvoteonexecutivecompensation
(sayonpay)
5.
Notvoted
4.
Uninstructed
shares
Ratificationofindependentauditor
Abstentions
Countedas
against
Notvoted
Notvoted
ShareholderProposal1:Requestingcertain
proxyaccessbylawamendments
Notvoted
Notvoted
ShareholderProposal2:Restrictingactions
thatimpairtheeffectivenessofshareholdervotes
Notvoted
Notvoted
Voteconfidentiality
Wemaintaintheconfidentialityofthevotesofindividualshareholders.Ballots,proxyforms,andvotinginstructionsreturnedtobrokerage
firms,banks,andotherholdersofrecordarekeptconfidential.Onlytheproxysolicitor,theproxytabulator,andtheinspectorofelectionhave
accesstotheballots,proxyforms,andvotinginstructions.Theproxysolicitorandtheproxytabulatorwilldiscloseinformationtakenfromthe
ballots,proxyforms,andvotinginstructionsonlyifthereisaproxycontest,iftheshareholderauthorizesdisclosure,todefendlegalclaims,or
asotherwiserequiredbylaw.Ifyouwritecommentsonyourproxycardorballot,managementmaylearnhowyouvotedinreviewingyour
comments.
98/111
10/28/2016
comments.
PRE14A
72
TableofContents
99/111
10/28/2016
PRE14A
Wheretofindmoreproxyvotinginformation
TheSECwebsitehasavarietyofinformationabouttheproxyvotingprocessatwww.sec.gov/spotlight/proxymatters.shtml.
ContacttheMicrosoftInvestorRelationsdepartmentthroughourwebsiteatwww.microsoft.com/investor/contacts/default.aspxorbyphone
at425.706.4400.
Youmayviewourannualreportandvoteyoursharesatwww.proxyvote.com.
Contactthebrokerorbankthroughwhichyoubeneficiallyownyourshares.
Wheretofindourcorporategovernancedocuments
CopiesofourBoardcommitteechartersandothergovernancedocumentslistedinPart1canbefoundat
www.microsoft.com/investor/corporategovernance.Wewillprovideanyoftheforegoinginformationtoashareholderwithoutchargeupon
writtenrequesttoMSC123/9999,OfficeoftheCorporateSecretary,MicrosoftCorporation,OneMicrosoftWay,Redmond,WA980526399.
Proposalsbyshareholdersfor2017annualmeeting
Shareholderswho,inaccordancewithSECRule14a8,wishtopresentproposalsforinclusionintheproxymaterialstobedistributedfor
nextyearsannualmeetingmustsubmittheirproposalssotheyarereceivedbytheCorporateSecretaryofMicrosoft,byoneofthemeans
describedbelow,nolaterthanthecloseofbusiness(5:30p.m.PacificTime)onJune20,2017.AstherulesoftheSECmakeclear,simply
submittingaproposaldoesnotguaranteethatitwillbeincluded.
Inordertobeproperlybroughtbeforethe2017AnnualMeeting,ashareholdersnoticeofnominationofoneormoredirectorcandidatesto
beincludedintheCompanysproxystatementandballotpursuanttoSection1.14ofourBylaws(aproxyaccessnomination)mustbe
receivedbytheCorporateSecretaryofMicrosoft,byoneofthemeansdescribedbelow,noearlierthanMay19,2017andnolaterthanthe
closeofbusinessonJune20,2017.(i.e.,notlaterthanthecloseofbusinessonthe120thdaynorearlierthanthecloseofbusinessonthe
150thdaypriortothefirstanniversaryofthedatethedefinitiveproxystatementwasfirstreleasedtoshareholdersinconnectionwiththe
precedingyearsannualmeetingofshareholders).Ifthedateofthe2017AnnualMeetingismorethan30daysbeforeormorethan60days
aftersuchanniversarydate,noticebytheshareholdertobetimelymustbesodeliverednotearlierthanthecloseofbusinessonthe120th
dayandnotlaterthanthecloseofbusinessonthelaterofthe90thdaypriortothe2017AnnualMeetingorthe10thdayfollowingthedayon
whichpublicannouncementofthedateofthe2017AnnualMeetingisfirstmadebytheCompany.
Inordertobeproperlybroughtbeforethe2017AnnualMeeting,ashareholdersnoticeofanymattertheshareholderwishestopresentother
thanamatterbroughtpursuanttoSECRule14a8oraproxyaccessdirectornomination,orthepersonorpersonstheshareholderwishesto
nominateasadirector,mustbereceivedbytheCorporateSecretaryofMicrosoft,byoneofthemeansdescribedbelow,noearlierthan
August2,2017,andnolaterthanthecloseofbusiness(5:30p.m.PacificTime)onSeptember1,2017(i.e.,notlessthan90normorethan
120daysbeforethefirstanniversaryofthedateofthe2016AnnualMeeting).IfourAnnualMeetingdateoccursmorethan30daysbeforeor
60daysafterNovember30,2017,wemustreceiveproposalsnotearlierthanthecloseofbusinessonthe120thdaypriortothedateofthe
2017AnnualMeetingandnotlaterthanthecloseofbusinessonthelaterofthe90thdaypriortothedateoftheAnnualMeetingor,ifthefirst
publicannouncementofthedateoftheAnnualMeetingislessthan100dayspriortothedateofthemeeting,the10thdayfollowingtheday
onwhichwefirstmakeapublicannouncementofthedateofthemeeting.
Tobeinproperform,ashareholdersnoticemustincludetheinformationabouttheproposalornomineeasspecifiedinourBylaws.A
shareholderwhowishestosubmitaproposalornominationisencouragedtoseekindependentcounselaboutourBylawandSEC
requirements.MicrosoftwillnotconsideranyproposalornominationthatisnottimelyorotherwisedoesnotmeettheBylawandSEC
requirementsforsubmittingaproposalornomination.
Noticesofintentiontopresentproposalsornominatedirectorsatthe2017AnnualMeeting,andallsupportingmaterialsrequiredbyour
Bylaws,mustbesubmittedbyoneofthefollowingmeans:
ByMail:MSC123/9999,OfficeoftheCorporateSecretary,MicrosoftCorporation,OneMicrosoftWay,Redmond,Washington980526399.
Electronically:askboard@microsoft.com.
Wereservetherighttoreject,ruleoutoforder,ortakeotherappropriateactionwithrespecttoanyproposalthatdoesnotcomplywiththese
andotherapplicablerequirements.
TableofContents
100/111
10/28/2016
PRE14A
Otherbusiness
TheBoardofDirectorsdoesnotintendtobringanyotherbusinessbeforetheAnnualMeeting,andsofarasisknowntoourBoard,no
mattersaretobebroughtbeforethemeetingotherthanasspecifiedinthenoticeofmeeting.Inadditiontothescheduleditemsofbusiness,
themeetingmayconsiderothershareholderproposalsandmattersrelatingtotheconductofthemeeting.Astoanyotherbusinessthatmay
properlycomebeforethemeeting,proxieswillbevotedinaccordancewiththejudgmentofthepersonsvotingsuchproxies.
RepresentativesofDeloitte&Touche,independentauditorforMicrosoftforfiscalyear2016andthecurrentfiscalyear,willbepresentatthe
AnnualMeeting,willhaveanopportunitytomakeastatementiftheydesiretodoso,andwillbeavailabletorespondtoappropriate
questions.
DATED:Redmond,Washington,October18,2016.
74
TableofContents
AnnexAreconciliationofnonGAAPandGAAPfinancialmeasures
ThefollowingtablereconcilesfinancialresultsreportedinaccordancewithaccountingprinciplesgenerallyacceptedintheUnitedStatesof
America(GAAP)tononGAAPfinancialresults.ThisnonGAAPfinancialinformationhasbeenprovidedtoaidinvestorsinbetter
understandingthecompanysperformance.Infiscalyear2016,thefinancialresultsincludedthenetimpactfromWindows10revenue
deferralsandimpairment,integration,andrestructuringcharges.Infiscalyear2015,thefinancialresultsincludedimpairment,integration,
andrestructuringcharges.Presentingthesemeasureswithouttheimpactoftheseitemsgivesadditionalinsightintooperationalperformance
andhelpsclarifytrendsaffectingthecompanysbusiness.Forcomparabilityofreporting,managementconsidersthisinformationin
101/111
10/28/2016
PRE14A
andhelpsclarifytrendsaffectingthecompanysbusiness.Forcomparabilityofreporting,managementconsidersthisinformationin
conjunctionwithGAAPamountsinevaluatingbusinessperformance.ThesenonGAAPfinancialmeasuresshouldnotbeconsideredasa
substitutefor,orsuperiorto,themeasuresoffinancialperformancepreparedinaccordancewithGAAP.
FiscalyearendedJune30,
Diluted
earnings
Net
income pershare
($inmillions,exceptpershareamounts)
Revenue
Operating
income
$93,580
$18,161
$12,193
2015asreported(GAAP)
Impairment,integration,andrestructuringcharges
2015asadjusted(nonGAAP)
2016asreported(GAAP)
NetimpactfromWindows10revenuedeferrals
Impairment,integration,andrestructuringcharges
2016asadjusted(nonGAAP)
PercentagechangeY/Y(GAAP)
PercentagechangeY/Y(nonGAAP)
10,011
$1.48
9,494
1.15
$93,580
$28,172
$21,687
$2.63
$85,320
$20,182
$16,798
$2.10
6,643
6,643
4,635
0.58
1,110
895
0.11
$2.79
$91,963
$27,935
$22,328
(9)%
11%
38%
42%
(2)%
(1)%
3%
6%
NonGAAPExecutiveOfficerIncentivePlan(EIP)performancemetricsinCompensationDiscussandAnalysis
WeusecertainnonGAAPfinancialperformancemetricsinourincentivecompensationprogramforourseniorleadershipteam.Theseare
EIPRevenue,EIPOperatingIncome,andEIPGrossMargin.WecalculatetheseEIPmeasuresbyadjustingthecorrespondingGAAP
financialmetricRevenue,OperatingIncome,andGrossMarginfor(1)impairment,integration,andrestructuringcharges,(2)thenet
impactofWindows10revenuedeferrals,and(3)theeffectofforeigncurrencyratefluctuations.Weexcludetheeffectofforeigncurrencyrate
fluctuationsonaconstantdollarbasisbyconvertingcurrentperiodnonGAAP(i.e.,adjustedforitems(1)and(2)intheprecedingsentence)
resultsforentitiesreportingincurrenciesotherthanUnitedStatesdollarsintoUnitedStatesdollarsusingconstantexchangerates,whichare
determinedattheoutsetofthecurrentperiod,ratherthantheactualexchangeratesineffectduringtherespectiveperiods.TheseEIP
financialmeasuresdifferfromthenonGAAPfinancialresultswereportinourquarterlyandannualearningsreleasematerials,whichare
reportedusingconstantcurrency.Theyshouldnotbeconsideredasasubstitutefor,orsuperiorto,themeasuresoffinancialperformance
preparedinaccordancewithGAAP.
TableofContents
AnnexBFrenchSubPlan
RulesoftheMicrosoftCorporation2001stockplanforstockawardsgrantedtoemployeesinFrance
1.Introduction.
TheBoardofDirectors(theBoard)ofMicrosoftCorporation(theCompany)hasestablishedtheMicrosoftCorporation2001StockPlan(as
amendedandrestated)(the2001Plan)forthebenefitofcertainemployeesoftheCompanyanditsaffiliatedcompanies,includingits
Frenchaffiliate(s)(each,aFrenchEntity),ofwhichtheCompanyholdsdirectlyorindirectlyatleast10%ofthecapital.
Sections4and17(b)ofthe2001PlanauthorizethecommitteeappointedbytheBoard(theCommittee)toadoptsuchrulesandprocedures
(includingasubplantothe2001Plan)astheBoardorCommitteedeemsnecessaryordesirabletoimplementthe2001Planinany
102/111
10/28/2016
PRE14A
jurisdictionoutsidetheU.S.(includingforstockawardsgrantedinFrance).
TheCommitteehasdeterminedthatitisdesirabletoestablishspecificrulesforthepurposesofpermittingstockawardsgrantedto
employeesofaFrenchEntitytoqualifyforthespecificlocaltaxandsocialsecuritytreatmentavailableforsuchgrantsinFrance.The
Committee,therefore,intendstoestablishspecificrulestothe2001Plan(theFrenchRules)forthepurposeofgrantingstockawardswhich
qualifyforthespecifictaxandsocialsecuritytreatmentinFranceapplicabletosharesgrantedfornoconsiderationunderSectionsL.225
1971toL.2251976oftheFrenchCommercialCode,asamended(theFrenchqualifiedStockAwards),toqualifyingemployeesofa
FrenchEntitywhoareresidentinFranceforFrenchtaxpurposesand/orsubjecttotheFrenchsocialsecurityregime(theFrenchSA
Recipients).
UndertheFrenchRules,FrenchSARecipientswillbegrantedonlystockawardsasdefinedinthe2001Plan.TheprovisionsofSections6
and8ofthe2001PlanpermittingthegrantofoptionsandstockappreciationrightsarenotapplicabletograntsmadeundertheFrench
Rules.
2.Definitions.
Capitalizedtermsnototherwisedefinedhereinshallhavethesamemeaningsassetforthinthe2001Plan.Inaddition,thetermssetout
belowwillhavethefollowingmeanings:
(a)ThetermClosedPeriodshallbeasprovidedforbySectionL.2251971oftheFrenchCommercialCode,asamended,andas
interpretedbytheFrenchadministrativeguidelines,andshallmean:
(i)tenquotationdaysprecedingandthreequotationdaysfollowingthedisclosuretothepublicoftheconsolidatedfinancialstatements
ortheannualstatementsoftheCompanyor
(ii)anyperiodduringwhichthecorporatemanagementoftheCompanypossessesconfidentialinformationwhichcould,ifdisclosedto
thepublic,significantlyimpactthequotationoftheCommonShares,untiltenquotationdaysafterthedaysuchinformationisdisclosedto
thepublic.IftheFrenchCommercialCodeisamendedafteradoptionoftheFrenchRulestomodifythedefinitionand/orapplicabilityof
theClosedPeriodstoFrenchqualifiedStockAwards,suchamendmentsshallbecomeapplicabletoanyFrenchqualifiedStockAwards
grantedundertheFrenchRules,totheextentrequiredorpermittedbyFrenchlaw.
(b)ThetermDisabilityshallbedefinedinaccordancewithcategories2and3underSectionL.3414oftheFrenchSocialSecurityCode,as
amended.
(c)ThetermStockAwardsshallmeanapromisebytheCompanytoafutureissuanceattheVestingDateofaCommonShareperunit
grantedtoeachFrenchSARecipient,andsubjecttospecifictermsandconditions.StockAwardsgrantedundertheFrenchRuleswillnot
giverisetodividendsordividendsequivalentpaymentspriortotheVestingDatenorshallaFrenchSARecipientbeentitledtoreceiveon
vestinganamountincashinlieuofCommonShares.
(d)ThetermVestingDateshallmeanthedateonwhichtheCommonSharesunderlyingtheStockAwardsshallbeissuedtotheFrenchSA
RecipienttheCommitteemayprovideintheapplicableStockAwardAgreementthatCommonSharesunderlyingtheStockAwardswillbe
issuedonlyonadateoccurringaftertheVestingDate.
3.Entitlementtoparticipate.
(a)SubjecttoSection3(c)below,anyFrenchSARecipientwho,onthedateofgrantoftheStockAwardandtotheextentrequiredunder
Frenchlaw,iseitheremployedunderthetermsandconditionsofanemploymentcontract(contratdetravail)withaFrenchEntityorwhoisa
corporateofficerofaFrenchEntity(subjecttoSection3(b)below),shallbeeligibletoreceive,atthediscretionoftheCommittee,French
qualifiedStockAwardsundertheFrenchRulesprovidedheorshealsosatisfiestheeligibilityconditionsofSection5ofthe2001Plan.
76
TableofContents
(b)FrenchqualifiedStockAwardsmaynotbeissuedtocorporateofficersofaFrenchEntity,otherthanthemanagingdirectors(i.e.,Prsident
duConseildAdministration,DirecteurGnral,DirecteurGnralDlgu,MembreduDirectoire,GrantdeSocitsparactions),unless
thecorporateofficerisemployedbyaFrenchEntity,asdefinedbyFrenchlawandisotherwiseeligibletoreceiveStockAwardsunder
Section5ofthe2001Plan.
(c)FrenchqualifiedStockAwardsmaynotbeissuedundertheFrenchRulestoemployeesorcorporateofficersowningmorethanten
percent(10%)oftheCompanyssharecapitalortoindividualsotherthanemployeesandcorporateofficersofaFrenchEntity.Grantsof
FrenchqualifiedStockAwardsundertheFrenchRulesshallnotresultinanyFrenchSARecipientsowningmorethantenpercent(10%)of
theCompanyssharecapital.
(d)TheaggregatenumberofCommonSharesunderlyingFrenchqualifiedStockAwardsshallnotexceed10%oftheCompanysshare
capital.
4.Conditionsofthestockawards.
(a)Vestingofstockawards.
ThefirstVestingDateofStockAwardsshallnotoccurpriortotheexpirationoftheminimummandatoryvestingperiodapplicabletoFrench
103/111
10/28/2016
PRE14A
ThefirstVestingDateofStockAwardsshallnotoccurpriortotheexpirationoftheminimummandatoryvestingperiodapplicabletoFrench
qualifiedStockAwardsunderSectionL.2251971oftheFrenchCommercialCode,asamended,therelevantsectionsoftheFrenchTax
CodeortheFrenchSocialSecurityCode,asamended.However,notwithstandingtheabove,intheeventofterminationofaFrenchSA
RecipientsContinuousStatusasaParticipantduetodeath,allofhisorheroutstandingFrenchqualifiedStockAwardsshallvestand
CommonSharesunderlyingFrenchqualifiedStockAwardsshallbecomeissuableassetforthinSection6oftheFrenchRules.
(b)Holdingofshares.
ThesaleofCommonSharesissueduponvestingoftheFrenchqualifiedStockAwardstotheFrenchSARecipientsshallnotoccurpriorto
theexpirationoftheminimumholdingperiodapplicabletoCommonSharesunderlyingFrenchqualifiedStockAwardspursuanttoSection
L.2251971oftheFrenchCommercialCode,asamended,ortherelevantsectionsoftheFrenchTaxCodeandFrenchSocialSecurity
Code,asamended,tobenefitfromthespecificFrenchtaxandsocialsecurityregime,eveniftheFrenchSARecipientisnolongeran
employerorcorporateofficerofaFrenchentity.
InadditiontothisrestrictionofthesaleoftheCommonSharesissuedtotheFrenchSARecipients,theCommonSharesmaynotbesold
duringaClosedPeriod,solongasClosedPeriodareapplicabletoCommonSharesunderlyingFrenchqualifiedStockAwards.
(c)Corporateofficers.
TotheextentandaslongasrequiredforFrenchqualifiedStockAwardsgrantedbytheCompany,specificholdingperiodfortheCommon
SharesissuedpursuanttotheFrenchqualifiedStockAwardsshallbeimposedintherelevantagreementforFrenchSARecipientswho
qualifyasamanagingdirectorunderFrenchlaw(mandatairessociaux)asdefinedinSection3(b)above.
(d)FrenchSArecipientsaccount.
TheCommonSharesissuedtotheFrenchSARecipientpursuanttotheStockAwardsshallberecordedinanaccountinthenameofthe
FrenchSARecipientwiththeCompany,abrokerorinsuchothermannerastheCompanymayotherwisedetermineinordertoensure
compliancewithapplicablelawincludinganyrequiredholdingperiodsapplicabletoFrenchqualifiedStockAwards.
5.Adjustments.
IntheeventofacorporatetransactionassetforthinSection14ofthe2001Plan,adjustmentstothetermsandconditionsoftheStockAwards
orunderlyingCommonSharesmaybemadeonlyinaccordancewiththe2001PlanandpursuanttoapplicableFrenchlegalandtax
rules.Nevertheless,theBoardortheCommittee,atitsdiscretion,maydeterminetomakeadjustmentsinthecaseofatransactionforwhich
adjustmentsarenotauthorizedunderFrenchlaw,inwhichcasetheStockAwardsmaynolongerqualifyasFrenchqualifiedStockAwards.
6.Deathanddisability.
IntheeventofterminationofaFrenchSARecipientsContinuousStatusasaParticipantduetodeath,allFrenchqualifiedStockAwardsheld
bytheFrenchSARecipientatthetimeofhisorherdeath(whethervestedorunvestedatthetimeofdeath)shallimmediatelybecome
transferabletotheFrenchSARecipientsheirs,unlessvestingofsuchFrenchqualifiedStockAwardsisalsosubjectto
TableofContents
performancevestingconditionsinwhichcasetheunderlyingCommonSharesshallnotbecomevestedandtransferabletotheFrenchSA
Recipientsheirsunlessanduntiltheperformancevestingconditionsaresatisfied.TheCompanyshallissuetheunderlyingCommonShares
totheFrenchSARecipientsheirsonlyiftheyrequestsuchissuancewithinsixmonthsfollowingthedeathoftheFrenchSARecipient.The
FrenchSARecipientsheirsshallnotbesubjecttotherestrictiononthesaleofCommonSharessetforthinSection4(b)above,ifany.
IfaFrenchSARecipientceasestobeemployedbytheCompanyoraFrenchEntitybyreasonofhisorherDisability,theFrenchSA
RecipientshallnotbesubjecttotherestrictionsonthesaleofCommonSharessetforthinSection4(b)above,ifany.
7.Nontransferabilityofstockawards.
Exceptinthecaseofdeath,theFrenchqualifiedStockAwardsmaynotbeassignedortransferredtoanythirdparty.Inaddition,theFrench
qualifiedStockAwardsmayvestonlyforthebenefitoftheFrenchSARecipientduringhisorherlifetime.
8.Disqualificationofstockawards.
IfthetermsandconditionsoftheoutstandingFrenchqualifiedStockAwardsaremodifiedduetoanyrequirementsundertheapplicablelaws
ofincorporationoftheCompany,orbydecisionoftheCompanysshareholders,theBoardortheCommittee,StockAwardsmaynolonger
qualifyasFrenchqualifiedStockAwards.IftheStockAwardsnolongerqualifyasFrenchqualifiedStockAwards,theBoardorCommittee
may,initssolediscretion,determinetolift,shortenorterminatecertainrestrictionsapplicabletothevestingortothetransferoftheCommon
SharesunderlyingtheStockAwardswhichhadbeenimposedundertheFrenchRulesand/orintheStockAwardAgreementdeliveredtothe
FrenchSARecipientinordertoachievethespecifictaxtreatmentforFrenchqualifiedStockAwards.
104/111
10/28/2016
PRE14A
FrenchSARecipientinordertoachievethespecifictaxtreatmentforFrenchqualifiedStockAwards.
9.Employmentrights.
TheadoptionoftheFrenchRulesshallnotconferupontheFrenchSARecipientsoranyemployeesofaFrenchEntity,anyemployment
rightsandshallnotbeconstruedasapartofanyemploymentcontractsthataFrenchEntityhaswithitsemployeesorcreateanyemployment
relationshipwiththeCompany.
10.Interpretation.
ItisintendedthatStockAwardsgrantedundertheFrenchRulesshallqualifyforthespecifictaxandsocialsecuritytreatmentapplicableto
StockAwardsgrantedunderSectionsL.2251971toL.2251976oftheFrenchCommercialCode,asamended,andinaccordancewith
therelevantprovisionssetforthbyFrenchtaxandsocialsecuritylaws.ThetermsoftheFrenchRulesshallbeinterpretedaccordinglyandin
accordancewiththerelevantGuidelinespublishedbyFrenchtaxandsocialsecurityadministrationsandsubjecttothefulfilmentoflegal,tax
andreportingobligations,ifapplicable.However,certaincorporatetransactions,certainmodificationsorchangesmayimpactthe
qualificationoftheStockAwardsandunderlyingCommonSharesforthespecificregimeinFrance.
11.Amendments.
Subjecttothetermsofthe2001Plan,theCommitteereservestherighttoamendorterminatetheFrenchRulesatanytimeinaccordance
withapplicableFrenchlaw.
12.Delegationofauthority.
AnyreferencestotheCommitteeintheFrenchRulesencompasstheSeniorVicePresident,HumanResourcesoftheCompanytowhomthe
Committeehasdelegatedtheauthoritytoadoptoramendanyrulesandproceduresnecessaryordesirabletoimplementthe2001Planin
anyjurisdictionoutsidetheU.S.,includingtheadoptionandamendmentoftheFrenchRules.
13.Adoption.
TheFrenchRulesareeffectiveasofthedateoftheirapprovalbytheCompanysshareholders.
78
TableofContents
DowntownBellevuedrivingdirectionsandparking
MeydenbauerCenter
11100NE6thStreet
Bellevue,WA98004
425.637.1020
www.meydenbauer.com
105/111
10/28/2016
PRE14A
BellevueTransitCenter
Drivingdirections
FromSeattleviaSR520
TakeSR520easttoI405south.
TakeExit13AwesttoNE4thStreetwestbound.
Turnrightonto112thAvenueNE.
TurnleftontoNE6thStreettoMeydenbauerCentersparkinggarageontheright.
FromSeattleviaI90
TakeI90easttoI405north.
TakeExit13AwesttoNE4thStreetwestbound.
Turnrightonto112thAvenueNE.
TurnleftontoNE6thStreettoMeydenbauerCentersparkinggarageonright.
Parking
Duetolimitedparkingavailability,weencourageyoutoexploreMetroTransitscommuterservices.TheBellevueTransitCenteris
convenientlylocatedlessthanablockfromMeydenbauerCenter.
ParkingvalidationforMeydenbauerCentergaragewillbeavailableatthemeeting.
TableofContents
Microsoft
corporatesocial
responsibility
Ourcustomers
andsocietyexpect
ustomaximizethe
valueoftechnology
whilealsopreserving
thevaluesthatare
timeless.Microsofts
commitmentsto
Ethicalbusinessconduct
MicrosofthasbeenincludedontheEthisphere
InstituteslistoftheWorldsMostEthical
Companieseveryyearsincethelistsinception
in2011.
Ourpeople
InMicrosoftsanonymousglobalemployee
survey,87%saidtheywouldrecommend
Microsoftasagreatplacetowork.
Privacy
Microsoftwasthefirstmajorcloudprovider
independentlyverifiedformeetingtheworlds
firstinternationalstandardforcloudprivacy
(ISO/IEC27018).Wewerealsoamongthefirst
companiescertifiedundertheEUUSPrivacy
Shieldprogram.
Environment
Microsoftdatacentersare100%carbonneutral.
Thisyearwecommittedtoalsohavingthem
relyonmorewind,solar,andhydropower
electricityovertime.Todaynearly45%of
106/111
10/28/2016
commitmentsto
corporatecitizenship
helpusmeetthese
expectations.
PRE14A
SatyaNadella,CEO
electricityovertime.Todaynearly45%of
electricityusedbyourdatacenterscomesfrom
thesesources.Ourgoalistopassthe50%
milestonebytheendof2018,top60%earlyin
thenextdecade,andthentokeepimproving
evenfurther.
Communities
MicrosoftPhilanthropiesisinvestingour
greatestassetsourtechnology,people,grants
andvoicetoadvanceamoreequitableworld
wherethebenefitsoftechnologyare
accessibletoeveryone.Wevebeenhardat
workatthismissionforthepast30years,and
recentlymadea$1billionpledgetodonateour
cloudservicestoservethepublicgood.
Formoreinformation:
OurCorporateSocialResponsibilitywebsite:www.microsoft.com/csr
Nonprofitsoftwaredonations:www.microsoft.com/nonprofit
107/111
10/28/2016
PRE14A
TableofContents
C/OPROXYSERVICES
P.O.BOX9163
FARMINGDALE,NY11735
VOTEBYINTERNET
BeforeTheMeetingGotowww.proxyvote.comorscantheQRcodeabove
UsetheInternettotransmityourvotinginstructionsandforelectronicdeliveryof
informationupuntil11:59p.m.EasternTimethedaybeforethecutoffdateor
meetingdate.Haveyourproxycardinhandwhenyouaccessthewebsiteandfollow
theinstructionstoobtainyourrecordsandtocreateanelectronicvotinginstruction
form.
DuringTheMeetingGotomicrosoft.onlineshareholdermeeting.com
YoumayattendtheMeetingviatheInternetandvoteduringtheMeeting.Havethe
informationthatisprintedintheboxmarkedbythearrowavailableandfollowthe
instructions.
VOTEBYPHONE18006906903
Useanytouchtonetelephonetotransmityourvotinginstructionsupuntil11:59p.m.
EasternTimethedaybeforethecutoffdateormeetingdate.Haveyourproxycard
inhandwhenyoucallandthenfollowtheinstructions.
VOTEBYMAIL
Mark,signanddateyourproxycardandreturnitinthepostagepaidenvelopewe
haveprovidedorreturnittoVoteProcessing,c/oBroadridge,51MercedesWay,
Edgewood,NY11717.
TOVOTE,MARKBLOCKSBELOWINBLUEORBLACKINKASFOLLOWS:
E13597TBDKEEPTHISPORTIONFORYOURRECORDS
DETACHANDRETURNTHISPORTIONONLY
108/111
10/28/2016
PRE14A
DETACHANDRETURNTHISPORTIONONLY
THISPROXYCARDISVALIDONLYWHENSIGNEDANDDATED.
MICROSOFTCORPORATION
TheBoardofDirectorsrecommendsavoteFOREACHOFTHE
FOLLOWINGNOMINEES,FORPROPOSAL2,FOR
PROPOSAL3,FORPROPOSAL4,FORPROPOSAL5,
AGAINSTPROPOSAL6,andAGAINSTPROPOSAL7.
1. ElectionofDirectors:(TheBoardrecommendsa
voteFOReachnominee)
For Against Abstain
01.WilliamH.GatesIII
For Against Abstain
02.TeriL.ListStoll
09.JohnW.Stanton
03.G.MasonMorfit
10.JohnW.Thompson
04.SatyaNadella
11.PadmasreeWarrior
05.CharlesH.Noski
06.HelmutPanke
07.SandraE.Peterson
08.CharlesW.Scharf
Foraddresschangesand/orcomments,pleasecheckthisbox
andwritethemonthebackwhereindicated.
2. Advisoryvoteonexecutivecompensation
(TheBoardrecommendsavoteFORthisproposal)
3. RatificationofDeloitte&ToucheLLPasour
independentauditorforfiscalyear2017
5. ApprovalofFrenchSubPlanunderthe2001StockPlan
6. ShareholderProposalRequestingcertainproxyaccess
bylawamendments
(TheBoardrecommendsavoteAGAINSTthis
proposal)
7. ShareholderProposalRestrictingactionsthatimpair
theeffectivenessofshareholdervotes
4. ApprovalofAmendmenttoourAmendedandRestated
ArticlesofIncorporation
(TheBoardrecommendsavoteAGAINSTthis
proposal)
Note: PleasesignexactlyasyournameornamesappearonthisProxy.Whensharesareheldjointly,eachholdershouldsign.Whensigning
asexecutor,administrator,attorney,trusteeorguardian,pleasegivefulltitleassuch.Ifthesignerisacorporation,pleasesignfull
corporatenamebydulyauthorizedofficer,givingfulltitleassuch.Ifsignerisapartnership,pleasesigninpartnershipnameby
authorizedperson.

Signature[PLEASESIGNWITHINBOX]
Date
Signature(JointOwners)
Date
109/111
10/28/2016
PRE14A
TableofContents
AnnualShareholdersMeetingInformation:
Location: MeydenbauerCenter
11100NE6thStreet
Bellevue,WA98004
Date: November30,2016
Time: 8:00AMPT
InordertobeadmittedtotheAnnualShareholdersMeeting,youmustpresentoneofthefollowingasproofofownershipof
Microsoftstockontherecorddate.
NoticeofInternetAvailabilityofProxyMaterials
Proxycard
Legalproxyprovidedbyyourbank,broker,ornominee
Votinginstructioncard
Ifyoureceivedyourproxymaterialsbyemail,aprintoutoftheemail
Brokeragestatementorletterfromabankorbrokerindicatingownershipontherecorddate
ImportantNoticeRegardingtheAvailabilityofProxyMaterialsfortheAnnualShareholdersMeeting:
TheNoticeandProxyStatementandAnnualReportareavailableatwww.proxyvote.com.
E13598TBD
MICROSOFTCORPORATION
ThisProxyisSolicitedonBehalfoftheBoardofDirectors
TheundersignedherebyappointsJOHNW.THOMPSONandSATYANADELLA,andeachofthem,withfullpowerof
substitution,asproxiestovoteallthesharestheundersignedisentitledtovoteattheAnnualShareholdersMeetingofthe
CompanytobeheldattheMeydenbauerCenter,11100NE6thStreet,Bellevue,Washington,November30,2016at8:00a.m.
PacificTimeandatanyadjournmentsthereof.Suchsharesshallbevotedasindicatedwithrespecttotheproposalslistedonthe
reversesidehereofandinthediscretionoftheproxiesonsuchothermattersasmayproperlycomebeforethemeetingorany
110/111
10/28/2016
PRE14A
reversesidehereofandinthediscretionoftheproxiesonsuchothermattersasmayproperlycomebeforethemeetingorany
adjournmentthereofinaccordancewithandasdescribedintheNoticeandProxyStatementoftheAnnualShareholdersMeeting.
Thisproxy,whenproperlyexecuted,willbevotedinthemannerdirectedherein.Ifnosuchdirectionismadeastoany
item,thisproxywillbevotedinaccordancewiththeBoardofDirectorsrecommendations.
AddressChanges/Comments:
(IfyounotedanyAddressChanges/Commentsabove,pleasemarkcorrespondingboxonthereverseside.)
Continuedandtobesignedonreverseside
111/111

Pre 14a

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Pre 14a

Uploaded by

Copyright:

Available Formats

10/28/2016

Age since Independent

6,325 101,124 404,496

3,498 55,925 223,700

2,396 38,304 153,216

3,115 49,796 199,184

5,031 80,439 321,756

For Against Abstain

You might also like