Gates and Ballmer get pay raises

Bill Gates and Steve Ballmer each received total compensation of $901,667 in Microsoft Corp.'s 2004 fiscal year, up 4.4 percent from $863,447 one year ago.

Gates, Microsoft's chairman and chief software architect, and Ballmer, the software maker's chief executive officer, each received a base salary of $591,667 and a $310,000 bonus for the 12-month period ended June 30, according to documents filed Monday with the U.S. Securities and Exchange Commission (SEC).

In line with Microsoft policy, Gates and Ballmer did not receive any stock options or stocks. Both executives hold significant stakes in the company; Gates held 10.09 percent of Microsoft shares as of Sept. 10 and Ballmer held 3.78 percent, according to the filing. Gates has topped Forbes magazine's list of the world's richest people for several years.

Gates and Ballmer are not Microsoft's highest paid executives. Group Vice President Jeff Raikes, responsible for Microsoft's Office products, received $962,500 in bonus and base pay in the 2004 fiscal year, according to the filing.

Microsoft also disclosed in the annual proxy filing how two key executives gained from the company's move last year to cancel its employee stock option plan and grant stock awards instead. As part of the move, employees were given the opportunity to sell stock options.

Group Vice Presidents Jim Allchin and Kevin Johnson received $1.46 million and $1.04 million respectively by selling stock options. The amounts are one-third of total payment for the options, the remainder will be paid in two installments in November 2005 and November 2006, provided the executives remain at Microsoft.

Allchin, responsible for Windows; Johnson, head of sales, marketing and services; and Raikes are also among those who can receive stock awards as part of a new program to reward executives based on metrics that include customer satisfaction. Allchin and Raikes are eligible to receive as many as 1.17 million shares while Johnson can earn a maximum of 480,000 shares. The awards will be determined on June 30, 2006.

Microsoft in the filing also said that long-time board of directors member Wm. G. (Gary) Reed Jr. will retire and not to seek re-election to the board at the company’s November shareholder meeting. Reed joined the Microsoft board in 1987. The board has authorized a reduction in size from 10 to nine members upon Reed’s retirement.