Blog: Microsoft is perfect example why executive pay is broken
- 09 November, 2009 08:43
- Comments 2
Text message this morning from CNN: US unemployment hit 10.2% in October. Microsoft announced earlier this week another 800 employee layoffs to the 5,000 previously announced employee layoffs. If you look at Microsoft's financials you see why, a 14% revenue and 18% net income drop for the last reported quarter, on top of disappointing prior quarters. Meanwhile, Microsoft's top five executives are set to earn an estimated $US31 million in total pay for 2009. One the plus side, Microsoft's stock is starting to make a climb back, having come back from $US14.97 in March 09 to a close of $US28.47 in Thursday's trading. (Keep in mind the 52 week high is only $US29.35.) Much of that though is attributed to "efficiency gains", e.g. millions in cost cutting measures, a.k.a. layoffs, and a successful Windows 7 beta and launch.
It's easy to point at Wall Street, AIG and the banking sector and call foul when execs lavish themselves with big bonuses after receiving billions in taxpayer money to keep them afloat. But the same issues are present in the board rooms of our corporations. How can executives at corporations lavish themselves with huge payoffs when thousands of their employees are losing their jobs and stockholders are still smarting from record losses. Clearly our board of directors system in business is broken too, perpetuating the "executive club" mentality that their executives are too valuable to lose.
Where has any sense of social consciousness gone in our corporations? Many small businesses see part of the their role to employ people within the community they work and live. If that sentiment was ever present in our large corporations it's surely long gone now. Our biggest export from Corporate America these days seems to be jobs, not goods and services. We may be pulling out of this deep recession but improvements to many company's bottom lines are due to reduction in staff more than an increase in revenue.
Microsoft is facing its most grave threats ever, with Google Apps, Google Docs and Open Office swinging business users away from Microsoft Office, Apple Macs and Linux boxes more prevalent than ever, the iPhone long ago dethroned Windows Mobile and Google Android is ramping up, and open source is fueling so much of our Internet cloud infrastructure. Windows 7 may at least get Microsoft back on track with a decent end user OS, but that's merely to regain ground and make up for past mistakes. It will be a long time before Microsoft has truly recovered from Vista.
Should the top five executives at Microsoft really be pulling in $US31 million when the company is in the midst of layoffs and still hemorrhaging from competition that's stronger than ever? Maybe I'm being a idealist but nothing will change if we continue to keep our opinions to ourselves. Maybe what we need is just a little bit more idealism and care for each other.
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Comments
Cheryl Kenmore
Microsoft is losing relevance
I think you can blame Microsoft's woes squarely on its CEO Steve Ballmer. He has made catastrophic decisions that will plunge Microsoft into irrelevancy, yet his pay keeps rising.
Just as computers downsized from industrial mainframes to personal computers in the 1980s, a new era is dawning, as all predictions say that the handheld device will become the most common platform to access the internet. The new internet era will be ruled by Google's Android platform (which will become the dominant generic OS), and Apple's iPhone.
IBM lost the personal computer era, and now Microsoft has lost the handheld era to more nimble competitors. Steve Ballmer did not foresee the importance of the new era, and Microsoft's Windows Mobile only attracts an 8.8% share of the smartphone market, and its share is shrinking fast.
Big-pay executives like Ballmer actually hinder a company's progress. Smaller frugal companies spend their limited cash more wisely (Palm's WebOS was created on a shoe-string, and performs better than Windows Mobile).
Microsoft's big-pay execs have been living off the fat of the past (ie Microsoft's desktop and office monopoly), and going to all lengths to protect the profits of the older era (and thus their wages). In doing so, they inhibited Microsoft from moving to the new era of smartphones and web-based services, such as Google is offering with its Android phones.
Microsoft is now in an unrecoverable position in the smartphone market. It can't attract many new software developers to write new applications, and its Windows Mobile phones are years behind the competition. Many analysts (Gartner included) speculate that Windows Mobile may be discontinued within the next year or two. The whole business model for Windows Mobile, of charging licence fees was wrong and stuck in a previous era, as Google does not charge handset makers to use its Android OS.
The ramifications of the failure of Windows Mobile are immense. For example, the Internet Explorer web browser will rapidly lose more market share, as most of the smartphones use WebKit-based browsers (open-source browsers will dominate the market). Microsoft's office formats will also lose relevance, as people move to formats (such as OpenDocument) that are usable across multiple platforms, rather than being welded to the Windows desktop PC. Half Microsoft's income is dependant upon sales of its Office software, which will be eroded, as it is tethered too much to the Windows destkop.
For all this, the executives have raised their salaries again and again. The shareholders have been taken for a ride, and are the real losers.
Paul Perry
Executive vs employee pay
I certainly think those Microsoft execs could do with a cut - but, even if they gave their entire annual wages to the almost 6000 who have been sacked recently, that is only $5000 per employee.
If I were a shareholder, I'd like to know why these people were employed in the first place, if it is so easy to let them go now.
The trouble is really on a larger scale: I think that Microsoft's prime time is up. All companies have a finite lifespan. Artificially prolonging it just brings tears.
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