Updated: September 21, 2010
Purpose of the Guidelines
The Board has adopted director independence guidelines to assist in affirmatively determining that a director has no relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The guidelines include, and either meet or are more restrictive than, the independence requirements of the NASDAQ listing standards and SEC rules. The guidelines also identify categories of relationships that the Board has determined would not affect a director’s independence, and therefore are not considered by the Board in determining director independence. The Board considers relevant facts and circumstances of any relationship bearing on independence of a director or nominee that are outside the categories permitted under the director independence guidelines.
Definition of Independent Director
"Independent director" means a director who meets each of the following standards listed in (1) through (7) below—(and additionally (8), in the case of audit committee members):
(1) The director has no relationship that, in the opinion of Microsoft’s Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.
Relationships not affecting independence: Relationships of the following types will not be considered material relationships that would impair a director’s independence:
(a) a director who is, or has a Family Member (as defined below) who is, a director or trustee of a charitable organization to which the Company has made in the Company's last complete fiscal year discretionary charitable contributions that do not exceed the greater of:
(i) $5,000,000, or
(ii) 5 percent of that organization’s annual consolidated gross revenues.
The Company’s automatic matching of employee charitable contributions will not be included in the amount of the Company’s contributions for this purpose;
(b) a director who is a current employee, or has a Family Member who is a current executive officer of, any organization to which the Company made, or from which the Company received, payments, if such payments are less than the threshold set forth in Section (5) below;
(c) a director who has a membership in, or association with, the same professional association or social, educational, fraternal, or religious organization, club, or institution, as an executive officer or another director of the Company; or
(d) a director who serves on the board of another company at which an executive officer or another director of the Company also serves as a board member, except as set forth in Section (6) below.
(2) The director is not, and has not been at any time during the past three years, an employee or executive officer of the Company.
(3) The director has no Family Member who is, or at any time during the past three years was, employed by the Company as an executive officer.
(4) The director has not accepted and no Family Member has accepted any compensation from the Company in excess of $120,000 during any period of twelve consecutive months within the three years preceding the determination of independence, other than the following:
(a) compensation for Board or board committee service;
(b) compensation paid to a Family Member who is an employee (other than an executive officer) of the Company; or
(c) benefits under a tax-qualified retirement plan, or non-discretionary compensation.
(5) Neither the director nor any Family Member is a partner in, or a controlling shareholder or an executive officer of, any organization to which the Company made, or from which the Company received, payments for property or services in the current or any of the past three fiscal years that exceed the greater of:
(a) 5 percent of the recipient's consolidated gross revenues for that year, or
(b) $200,000 in each case, excluding:
(i) payments arising solely from investments in the Company's securities; or
(ii) payments under non-discretionary charitable contribution matching programs.
(6) Neither the director nor any Family Member is employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the Company serve on the compensation committee of such other entity.
(7) Neither the director nor any Family Member is a current partner of the Company's outside auditor, or was a partner or employee of the Company's outside auditor who worked on the Company's audit at any time during any of the past three years.
(8) Additional independence requirements for audit committee members: Audit committee members may not, other than in the capacity as a member the board of directors or any board committee:
(a) accept directly or indirectly any consulting, advisory, or other compensatory fee from the Company or any subsidiary, other than fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the Company (provided that such compensation is not contingent on continued service); or
(b) be an affiliated person of the issuer or any subsidiary.
Definition of Family Member
"Family Member" means any child, stepchild, parent, stepparent, spouse, sibling, mother-in law, father-in-law, daughter-in-law, brother-in-law, or sister-in-law, and any person (other than a tenant or employee) sharing a person’s household. For the purpose of this definition, an "in-law" is limited to a person related by blood to the person or his/her spouse.