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Thursday, October 5, 2006 - Page updated at 12:00 AM

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Human rights up for vote at Microsoft annual shareholders meeting

Seattle Times technology reporter

Microsoft's posture toward China and other countries with questionable human-rights records will be put to a vote next month, as some observers see political and social activism gaining momentum among shareholders in corporate America.

In its annual proxy statement Wednesday, Microsoft outlined three shareholder proposals — the most in at least a decade — that will go before the company's ownership at its annual meeting Nov. 14 in Bellevue. It also disclosed compensation for executives, including Chairman Bill Gates and Chief Executive Officer Steve Ballmer, both of whom took pay cuts.

Under one shareholder proposal, Microsoft would "no longer sell products or services to any foreign government ... that knowingly can be used to deny basic human or labor rights" as outlined in a United Nations human-rights declaration.

John Harrington is a Napa, Calif., investor-activist behind this and three Microsoft shareholder proposals floated in the early 2000s regarding principles for doing business with China.

The current proposal, which Harrington acknowledges has little chance of passing, notes that in 2005, "Microsoft closed down the blog of a Chinese dissident at the request of the Chinese government."

"Instead of Microsoft moving in the right direction to address human-rights violations in China, they've actually been complicit ... with a totalitarian government," Harrington said in an interview.

Microsoft and Boeing gave Chinese President Hu Jintao a warm welcome during his April visit to the United States, and Microsoft has pushed for stronger intellectual-property protections in China.

Human rights on the agenda


Proposals involving human-rights policies have been raised by shareholders of at least 16 companies this year. Here are nine companies that saw shareholder votes on human-rights policies and the percent of votes cast in favor of the proposals.

Boeing 25.0%

Chevron 23.9%

Halliburton 23.3%

IBM 9.7%

3M 7.1%

Freeport-McMoRan Copper & Gold 7.1%

Illinois Tool Works 6.5%

Coca-Cola 5.7%

Hershey 1.9%

Source: Proxy Governance

The company's board recommended a vote against the Harrington proposal.

"We believe the availability of our products and services has increased the ability of citizens worldwide to engage in free expression and has helped transform the economic, cultural, and political landscape of nations throughout the world," the board said.

It added that the company can't control how its products are used and pointed to other initiatives meant to address human-rights concerns, including a code of conduct for its vendors.

The proposal comes at a time some investors are turning their attention from corporate governance and compensation to human rights and political issues, said Paul Hodgson, senior research associate at the Corporate Library, which assesses business and boardroom behavior.

"There has been an increase in human-rights proposals this year," he said.

Michael Pryce-Jones, social-research analyst at Proxy Governance, which serves institutional investors, counted at least 16 major U.S. public companies that have seen some type of human-rights-related shareholder proposal this year.

One such proposal at Boeing drew 25 percent of votes cast by shareholders, up from 21 percent for a similar measure in 2005. Proposals at Chevron and Halliburton gathered more than 23 percent of votes each this year, which Pryce-Jones described as "remarkable votes."

"Getting mid-20 percent [support] is somewhat of a new phenomenon," he said.

At Microsoft, the previous proposals activist Harrington brought forward got less than 10 percent of Microsoft shareholder votes.

"It's always an uphill fight," he said.

The proxy statement also disclosed that Microsoft's top two leaders, Gates and Ballmer, saw their base salaries rise slightly to $616,667 each for 2006. But their total compensation dropped because their annual bonuses shrank by $50,000 to $350,000 each.

Meanwhile, 900 other top executives saw handsome rewards under the company's shared performance stock-awards program. Gates and Ballmer do not participate in the shared stock-award program.

The two headmen hold between them 13.88 percent of Microsoft's outstanding shares, worth $38.16 billion at Wednesday's closing price of $27.94, up 57 cents, or 2.1 percent.

The modest compensation given to Gates and Ballmer earns Microsoft high marks from groups such as the Corporate Library.

"Microsoft's compensation policies in the past and in this proxy have been amongst the most moderate and restrained in their sector," Hodgson said.

Big incentives given to Chief Operating Officer Kevin Turner did catch Hodgson's attention, however.

Turner was lured away from Wal-Mart last year. At Microsoft this past year, he received $464,205 in salary; a $375,000 bonus; $8.2 million in stock, which vests over the next several years, to compensate for what he forfeited by leaving Wal-Mart; a $7 million signing bonus; and $82,557 in relocation expenses.

Benjamin J. Romano: 206-464-2149 or bromano@seattletimes.com

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