Marta Kierek

Strategic Management I

Corporate Governance in MICROSOFT

- Separation between shareholders and managers (executives)

The separation between managers and shareholders in Microsoft is a result of the

company's corporate governance structure. Microsoft is a publicly-traded company,

meaning it is owned by shareholders who have purchased its stock. The shareholders

have ownership rights over the company, but they do not manage its day-to-day

operations. Instead, a board of directors and executive management team, headed by

the CEO, make important decisions about the company. The board of directors

represents the shareholders and is responsible for making sure that the company is

run in an efficient and responsible manner. By separating management from

ownership, Microsoft is able to focus on creating value for shareholders without

worrying about the owners' day-to-day decisions.

- The role of the Board of Directors

The Board oversees business affairs and integrity, works with management to

determine the Company’s mission and long-term strategy, oversees risk

management, performs the annual Chief Executive Officer (“CEO”) evaluation,

 oversees CEO succession planning, and oversees internal control over financial

reporting and external audit. In addition, Board committees focus on the following:

- Financial reporting; internal and external audit; cybersecurity, including with the

Regulatory and Public Policy Committee; certain other risks not otherwise

assigned

- Compensation and benefits; success and development plans; human capital

management, including with the Regulatory and Public Policy Committee

- Board effectiveness, director qualifications, continuing education, shareholder

engagement, governance framework

- Corporate social responsibility; government relations activity and political

activities and expenditures; certain legal, regulatory, and compliance matters

When it comes to the structure of the Board of Directors, it consists of an independent

Chairman of the Board (who is chosen annually by other independent members of the

Board). What is worth mentioning is that the firm’s CEO’s and Chairman’s

responsibilities are kept separate ever since the year 2000.

While the CEO’s responsibilities include operational leadership and strategic direction

of the firm, the Chairman on the other hand is responsible for facilitating the Board’s

oversight of management, promoting communication between management and the

Board, engaging with the firm’s shareholders, and leading the Board’s consideration of

key governance matters.

The Board of Directors, except for the Chairman, as well consists of the Independent

Board.
 - Code of good governance

1. Respect and Dignity: Microsoft is committed to creating an environment of respect

and dignity for all employees. This includes a commitment to providing equal

opportunities for all employees, regardless of race, gender, sexual orientation, religion,

and other personal characteristics.

2. Integrity: Microsoft is committed to operating with honesty and integrity in all of its

business activities. This includes the commitment to treating all customers, vendors, and

partners with respect and to upholding all laws and regulations.

3. Transparency: Microsoft is committed to providing transparency in all of its

operations and activities. This includes making information available to the public in a

timely and accurate manner.

4. Accountability: Microsoft is committed to being accountable for its actions and

decisions. This includes ensuring that all employees are held accountable for their

actions and ensuring that the company is held accountable for its performance.

5. Innovation: Microsoft is committed to fostering creativity and innovation in its

products and services. This includes investing in research and development and

encouraging employees to share their ideas and pursue their passions.

6. Safety and Security: Microsoft is committed to providing a safe and secure work

environment for all employees. This includes providing training on security protocols

and ensuring that all employees are aware of their rights and responsibilities when it

comes to safety and security.

 - Incentives schemes for aligning the objectives (interests) of top managers

and owners

1. Profit Sharing: Profit-sharing programs can help align the interests of top managers

and owners by offering a percentage of profits to managers and owners based on their

contributions to the success of the company. This incentive will encourage managers to

focus on the long-term success of the company, rather than short-term gains.

2. Performance-Based Bonuses: Performance-based bonuses reward top managers and

owners for achieving specific goals and objectives. By tying a bonus directly to

performance, it encourages both managers and owners to strive for success.

3. Stock Options: Stock options allow managers and owners to purchase company stock

at a discounted price. This allows them to benefit financially from the success of the

company, as the stock price increases.

4. Long-Term Incentives: Long-term incentives, such as restricted stock awards, can be

used to align the interests of owners and managers. These awards are typically tied to

specific performance metrics, such as revenue growth or profitability, and allow

managers and owners to benefit financially when the company meets its goals.

5. Employee Stock Ownership Plans (ESOPs): ESOPs allow employees to purchase

company stock at a discounted price. This encourages employees to think and act like

owners, making sure that their decisions are beneficial to the long-term success of the

company.
 - Social responsibility

Microsoft’s social responsibility is to create a positive impact in the world and to

empower people everywhere. Microsoft is committed to using the power of technology

to create a better future for everyone. To their social commitments, they include:

 Supporting inclusive economic growth – by increasing access to digital skills and

opportunities, extending to closing the data divide, and supporting public

healthcare

 Protecting fundamental rights – by unequivocally supporting the fundamental

rights of people, coming from defending democracy and protecting human rights,

through addressing racial injustice and inequity, ending on ensuring access to

broadband and accessible technology (without which people would lack access

and possibilities for the education, job, and healthcare options)

 Creating a sustainable future – by outlining numerous ambitious commitments

and detailed plans to achieve a successful deal with a major issue of our current

generation, which is climate change. This includes aiming to be carbon negative,

water positive, zero waste, and protecting and preserving ecosystems.

 Earning trust – by being optimistic about the benefits of the technology, yet at the

same time being clear about the real challenges. In order to fully enjoy and

further drive a positive impact with the use of technology, it is important that

people trust the used technologies and companies behind them.

- Ethical code, code of conduct

Code of Ethics: Microsoft's Code outlines six values to guide employee conduct:
 integrity and honesty;
  passion for customers, partners and technology;
 being "open and respectful with others and dedicated to making them better";
 a "willingness to take on big challenges and see them through";
 being "self-critical, questioning, and committed to personal excellence and self-
improvement";
 being "accountable for commitments, results, and quality to customers,
shareholders, partners, and employees."

Examples of behavior that contributes to a positive environment for the Microsoft

community include:

 Demonstrating empathy and kindness toward other people

 Being respectful of differing opinions, viewpoints, and experiences

 Giving and gracefully accepting constructive feedback

 Accepting responsibility and apologizing to those affected by our mistakes, and

learning from the experience

 Focusing on what is best not just for us as individuals, but for the overall

community

Examples of unacceptable behavior include:

 The use of sexualized language or imagery, and sexual attention or advances of

any kind

 Trolling, insulting or derogatory comments, and personal or political attacks

 Public or private harassment

 Disruptive behavior
  Publishing others' private information, such as a physical or email address,

without their explicit permission

 Other conduct which could reasonably be considered inappropriate in a

professional setting

Sources:

https://opensource.microsoft.com/codeofconduct/

https://www.microsoft.com/en-us/corporate-responsibility

https://www.microsoft.com/en-us/Investor/corporate-governance/overview.aspx

https://sites.google.com/a/email.vccs.edu/bus100irfan/microsoft-code-of-ethics