Unfortunately, the HN title misses (probably because of the char limit) the fact that his total compensation still went up:
> Microsoft CEO Nadella asked for pay reduction after security slip, but total comp still rose 63%
> Nadella received $79.1 million for the fiscal year that ended June 30, up from $48.5 million in the prior year, according to a proxy filing Thursday. Most of his pay is in the form of stock. The board’s compensation committee said Nadella asked that the cash incentive portion reflect the security issues.
The ongoing sentiment remains true: There are no real punishments for security failures
For reference, he cut his total comp for 2024 from $84.6 million to $79.1 million. That's 6.5% of his TC he gave up, and it wasn't a discretionary bonus. I wouldn't call this a symbolic gesture. Everyone here would feel a 6.5% cut to their TC.
I don't believe anyone would ask their boss to cut their already vested RSUs because of a mistake. Especially when those RSUs went up 50% in value.
Yes, there is no real punishment for CEOs anymore. That's why great leaders punish themselves. He beat his KPIs, looked at corporate output, and still rated himself as needs improvement. I respect anyone that does that.
While a minimum wage worker would feel giving up $200, I wouldn’t notice giving up $1k-2k. While that’s less than 5 for me%, the utility of money diminishes as one’s money increases. I’m certain no one making >$50M feels any difference from another $5M-6M.
If you got "needs improvement" on your performance review and missed your target bonus, but the company's stock went up 30% meaning your total compensation still increased, what would you expect? Would you consider that to be a fair punishment?
The standard Nadella is setting is that cash bonuses needs to be determined by cybersecurity impact, and that expectation needs to be in every part of the company. So he cut his (non-discretionary) cash bonus by 50%.
He could've cut his stock package as well, but you're not going to work at a company where meteoric increases in the stock price can be clawed back if your performance was bad. People would freak out and ask if their stock would be cut if a cybersecurity incident occurred.
A "needs improvement" is a kiss of death for a normal tech worker. For him, it makes him look humble and deserving of the tens of millions he'll get anyway. Gosh, he might even brag about it.
Yes, why would it not be? It’s still skin in the game.
If we think it’s a symbolic gesture, which it may well be, it is still a gesture that most CEOs would not have made. Unlike most here, I don’t think with this he’s saying please punish me for wrongdoing, but more I take responsibility for this failure (which could have happened many levels below him) and will take the loss personally.
Sounds like HN folks would love for Nadella to completely reduce his salary compared to last year. I don’t know that I agree. I’d say, let’s see you do it.
> Yes, why would it not be? It’s still skin in the game. [...] and will take the loss personally.
Because there isn't any loss overall? His compensation went up 63%, what are these losses you're talking about?
If his total compensation actually went down, I'd totally agree with you. But it didn't, which is why I don't understand how this is seen as "great leaders punish themselves".
So if I’m hearing you right, it sounds like you’re looking for net loss to justify the statement that “good CEOs punish themselves”, a statement made by another HNer and not by Nadella himself?
He did take a loss but not a net loss, so it didn’t go far enough is what I’m sensing?
Thus it’s an empty gesture devoid of any commitments to improve?
For me when I see gestures like this, I’m like oh ok. At some level I know it’s symbolic but it still sends a good signal. It doesn’t scream hypocritical to me.
Please elaborate on how he feels his 6.5% cut vs. someone in the middle class. I think it would be a useful exercise to see if the situations are at all similar.
You're solidly upper class if you work at big tech. Nadella isn't trying to lead people making $42,800/year where a 6.5% decrease in salary can literally be the difference in homelessness. He is trying to lead wealthy software developers where $20k is painful but not life-altering.
It's a bigger issue that the median American salary leaves practically no room for someone to cut their income due to performance. If the only way to survive is to constantly lie about your performance to get an extra couple of bucks, people will do that regardless of what the CEO says or does.
Ideally, we would live in society where everyone had slack in their compensation. This would let more CEOs lead by example.
Your link shows seniors making $241k, not sure where you got $332k from.
The point is, even people making $241k will feel a 6.5% decrease in pay astronomically more than someone going from $84m to $79m. At that level there is negligible drop in quality of life, and the concept of "cutting back" pretty much does not exist.
This is still a performative act, the intention is nice, but it's performative nonetheless.
Sorry, I had it set to Canadian loonies and got inflated numbers.
Economists assume utility of money is logarithmically proportional to the amount, so losing a certain % of one's wealth hurts the same at every level.[1] Nadella made $84 million and is worth $1.4 billion according to the internet. For a $20k pay cut to hurt the same as a $5 million one, you'd need to have a net worth of x where (5000000/1400000000)x=20000 -> x=$5,600,000. For a $2772 pay cut---which is 6% of the median US salary---to hurt as much, you'd need $776,000 in wealth.
The median net worth is actually more like $192,700. So Nadella would have to give up (2772/192,700)*1400000000=$20 million to feel the pain of the median American giving up 6% of their income. That's quadrice what he actually did give up, but it still wouldn't result in his TC declining, since his pay rose by $30 million this year.
This is a performance. His total compensation still rose 60% because like most CEOs, his real money comes from stock. You have CEOs taking 1 dollar salaries because the real money is in stock.
> In June, Microsoft said it would consider employees’ cybersecurity efforts when determining their compensation.
The reason for the performance, a way of saying "look I'm accountable too!" except not at all.
If he expects cybersecurity to be a factor for determining the compensation of other Microsoft employees, at least he's leading by example, even if it's not a really meaningful amount for him one way or another.
This is a weird one. Does the $5m theoretical pay cut (a $30m real terms pay bump actually) reflect his personal commitment to security? Or does it reflect his massive massive personal wealth that means he can shrug off a $5m dent in his compensation? Or that taking the security problems seriously amounts to a dent in his pay so small that it still went up by $30m? Just strange. Good for the PR though - getting Microsoft in every newspaper next to the words "security slip" is great for the brand.
That's all well and good, but I think the reduction should be put in the proper context. From the article:
> Nadella received $79.1 million for the fiscal year that ended June 30, up from $48.5 million in the prior year, according to a proxy filing Thursday. Most of his pay is in the form of stock. The board’s compensation committee said Nadella asked that the cash incentive portion reflect the security issues... It was originally supposed to be $10.66 million, but the full board approved a $5.2 million cash incentive instead.
I personally do believe effective executives are often easily worth their salaries. Not moral worth of course but pure economics. For instance, consider when Nike hired CEO John Donahoe, their stock jumped 10% which was around $16bn. Now either Nike shareholders are stupid (maybe), or the strategic move to appoint Donahoe was worth billions even above his salary of ~$30 million.
Total compensation. To me how its split up is irrelevant although the board often prefers stock to have their incentives more in line with long term stock performance.
Yeah I figured the same, just wanted to make sure because the stocks are a massive portion of the total compensation, so it's a more controversial stance to take!
Unfortunately, the HN title misses (probably because of the char limit) the fact that his total compensation still went up:
> Microsoft CEO Nadella asked for pay reduction after security slip, but total comp still rose 63%
> Nadella received $79.1 million for the fiscal year that ended June 30, up from $48.5 million in the prior year, according to a proxy filing Thursday. Most of his pay is in the form of stock. The board’s compensation committee said Nadella asked that the cash incentive portion reflect the security issues.
The ongoing sentiment remains true: There are no real punishments for security failures
Also missing that he oversaw layoffs of 2550 https://www.eurogamer.net/microsoft-ceos-pay-rises-63-to-73m...
For reference, he cut his total comp for 2024 from $84.6 million to $79.1 million. That's 6.5% of his TC he gave up, and it wasn't a discretionary bonus. I wouldn't call this a symbolic gesture. Everyone here would feel a 6.5% cut to their TC.
I don't believe anyone would ask their boss to cut their already vested RSUs because of a mistake. Especially when those RSUs went up 50% in value.
Yes, there is no real punishment for CEOs anymore. That's why great leaders punish themselves. He beat his KPIs, looked at corporate output, and still rated himself as needs improvement. I respect anyone that does that.
While a minimum wage worker would feel giving up $200, I wouldn’t notice giving up $1k-2k. While that’s less than 5 for me%, the utility of money diminishes as one’s money increases. I’m certain no one making >$50M feels any difference from another $5M-6M.
> That's why great leaders punish themselves
Is it still a punishment if you still end up with a higher compensation compared to previous year?
If you got "needs improvement" on your performance review and missed your target bonus, but the company's stock went up 30% meaning your total compensation still increased, what would you expect? Would you consider that to be a fair punishment?
The standard Nadella is setting is that cash bonuses needs to be determined by cybersecurity impact, and that expectation needs to be in every part of the company. So he cut his (non-discretionary) cash bonus by 50%.
He could've cut his stock package as well, but you're not going to work at a company where meteoric increases in the stock price can be clawed back if your performance was bad. People would freak out and ask if their stock would be cut if a cybersecurity incident occurred.
A "needs improvement" is a kiss of death for a normal tech worker. For him, it makes him look humble and deserving of the tens of millions he'll get anyway. Gosh, he might even brag about it.
Yes, why would it not be? It’s still skin in the game.
If we think it’s a symbolic gesture, which it may well be, it is still a gesture that most CEOs would not have made. Unlike most here, I don’t think with this he’s saying please punish me for wrongdoing, but more I take responsibility for this failure (which could have happened many levels below him) and will take the loss personally.
Sounds like HN folks would love for Nadella to completely reduce his salary compared to last year. I don’t know that I agree. I’d say, let’s see you do it.
> Yes, why would it not be? It’s still skin in the game. [...] and will take the loss personally.
Because there isn't any loss overall? His compensation went up 63%, what are these losses you're talking about?
If his total compensation actually went down, I'd totally agree with you. But it didn't, which is why I don't understand how this is seen as "great leaders punish themselves".
He would've had 5 million more dollars this year if he didn't ask the board to change the terms of his contract to give him less money.
https://en.wikipedia.org/wiki/Opportunity_cost
Yeah, so he would have gotten $84.1 million instead of what he really got, only $79.1 million. Imagine being a CEO yet so poor.
So if I’m hearing you right, it sounds like you’re looking for net loss to justify the statement that “good CEOs punish themselves”, a statement made by another HNer and not by Nadella himself?
He did take a loss but not a net loss, so it didn’t go far enough is what I’m sensing?
Thus it’s an empty gesture devoid of any commitments to improve?
For me when I see gestures like this, I’m like oh ok. At some level I know it’s symbolic but it still sends a good signal. It doesn’t scream hypocritical to me.
Please elaborate on how he feels his 6.5% cut vs. someone in the middle class. I think it would be a useful exercise to see if the situations are at all similar.
A Senior SDE at Microsoft makes ~~$332k/year~~ US$241k/year. Median income per person in the USA is $42,800/year.
https://www.levels.fyi/companies/microsoft/salaries/software...
You're solidly upper class if you work at big tech. Nadella isn't trying to lead people making $42,800/year where a 6.5% decrease in salary can literally be the difference in homelessness. He is trying to lead wealthy software developers where $20k is painful but not life-altering.
It's a bigger issue that the median American salary leaves practically no room for someone to cut their income due to performance. If the only way to survive is to constantly lie about your performance to get an extra couple of bucks, people will do that regardless of what the CEO says or does.
Ideally, we would live in society where everyone had slack in their compensation. This would let more CEOs lead by example.
Your link shows seniors making $241k, not sure where you got $332k from.
The point is, even people making $241k will feel a 6.5% decrease in pay astronomically more than someone going from $84m to $79m. At that level there is negligible drop in quality of life, and the concept of "cutting back" pretty much does not exist.
This is still a performative act, the intention is nice, but it's performative nonetheless.
Sorry, I had it set to Canadian loonies and got inflated numbers.
Economists assume utility of money is logarithmically proportional to the amount, so losing a certain % of one's wealth hurts the same at every level.[1] Nadella made $84 million and is worth $1.4 billion according to the internet. For a $20k pay cut to hurt the same as a $5 million one, you'd need to have a net worth of x where (5000000/1400000000)x=20000 -> x=$5,600,000. For a $2772 pay cut---which is 6% of the median US salary---to hurt as much, you'd need $776,000 in wealth.
The median net worth is actually more like $192,700. So Nadella would have to give up (2772/192,700)*1400000000=$20 million to feel the pain of the median American giving up 6% of their income. That's quadrice what he actually did give up, but it still wouldn't result in his TC declining, since his pay rose by $30 million this year.
[1]https://economics.stackexchange.com/questions/23952/is-the-u...
Someone making ~$80M who "feels" a 6.5% difference in TC is somehow doing the millionaire version of "living paycheck to paycheck."
> $84.6 million to $79.1 million. ... Everyone here would feel a 6.5% cut to their TC.
Snort! Yes I'm sure he's having to cut-back on eating out and is doing more coupon cutting to makes ends meet.
Can't buy Avocado toast anymore .. /s
This is a performance. His total compensation still rose 60% because like most CEOs, his real money comes from stock. You have CEOs taking 1 dollar salaries because the real money is in stock.
> In June, Microsoft said it would consider employees’ cybersecurity efforts when determining their compensation.
The reason for the performance, a way of saying "look I'm accountable too!" except not at all.
If he expects cybersecurity to be a factor for determining the compensation of other Microsoft employees, at least he's leading by example, even if it's not a really meaningful amount for him one way or another.
This is a weird one. Does the $5m theoretical pay cut (a $30m real terms pay bump actually) reflect his personal commitment to security? Or does it reflect his massive massive personal wealth that means he can shrug off a $5m dent in his compensation? Or that taking the security problems seriously amounts to a dent in his pay so small that it still went up by $30m? Just strange. Good for the PR though - getting Microsoft in every newspaper next to the words "security slip" is great for the brand.
Good on him, he’s getting ahead of bad PR before it can catch up to him and his company. That sounds like great leadership.
Why did he need to punish himself? Isn't that the board's job?
That's all well and good, but I think the reduction should be put in the proper context. From the article:
> Nadella received $79.1 million for the fiscal year that ended June 30, up from $48.5 million in the prior year, according to a proxy filing Thursday. Most of his pay is in the form of stock. The board’s compensation committee said Nadella asked that the cash incentive portion reflect the security issues... It was originally supposed to be $10.66 million, but the full board approved a $5.2 million cash incentive instead.
I personally do believe effective executives are often easily worth their salaries. Not moral worth of course but pure economics. For instance, consider when Nike hired CEO John Donahoe, their stock jumped 10% which was around $16bn. Now either Nike shareholders are stupid (maybe), or the strategic move to appoint Donahoe was worth billions even above his salary of ~$30 million.
> I personally do believe effective executives are often easily worth their salaries.
Did you literally mean "salaries" here, or total compensation?
Total compensation. To me how its split up is irrelevant although the board often prefers stock to have their incentives more in line with long term stock performance.
Yeah I figured the same, just wanted to make sure because the stocks are a massive portion of the total compensation, so it's a more controversial stance to take!