BELLEVUE – Microsoft Corp. shareholders on Tuesday approved changes to the company’s stock compensation plans, clearing the way for the software giant to award a one-time, $3-a-share dividend.
The dividend, which will cost the company an estimated $32 billion, is part of plans to give a substantial portion of Microsoft’s cash hoard back to investors. The cash holdings are currently about $64 billion and growing.
The dividend will be paid Dec. 2 to shareholders of record Nov. 17.
The company wasn’t willing to hand out the cash unless shareholders approved changes to the company’s stock compensation plans so employees who hold stock options and stock awards wouldn’t be hurt by the dividend payout.
A one-time dividend could hurt people holding stock options or stock grants because the stock price could be expected to fall by the amount of the dividend. For shareholders, that drop is offset by the dividend itself, but people who hold only grants or options won’t get the dividend.
Therefore, Microsoft asked shareholders for permission to employ a formula that would decrease the strike price – the price at which stock can be bought at a certain point in the future – of employees’ options while also increasing the number of options the employee receives. Microsoft recently switched from offering stock options to stock grants; employees who hold stock grants would simply see the amount of the stock grant increased to counterbalance the expected stock price drop.
Shareholder Janet Gilkey, 61, of Seattle said she was concerned about the effect of giving employees more shares than they previously had. But in the end, she voted for the change because she thought the dividend was worth it.
“It’s a positive thing for shareholders,” Gilkey said.
Chairman Bill Gates has said he plans to give his share of the one-time payout, which will amount to about $3 billion, to the Bill &Melinda Gates Foundation, his philanthropic organization.
Microsoft executives were peppered with questions from shareholders about the stock price at Tuesday’s annual meeting in Bellevue.
Microsoft’s stock price has remained relatively stagnant for several years. Microsoft’s shares rose 49 cents to close at $29.77 Tuesday on the Nasdaq Stock Market. That approached its 52-week high of $29.89 in July.
Chief financial officer John Connors said one reason for the stagnation might have been that the stock was correcting after being overvalued during the tech bubble of the late 1990s. He noted the stock has performed better than some other tech stocks, which fell much more sharply when the bubble burst.
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