Ballmer Bags Big Raise, But Board Says He's 'Underpaid'

Microsoft CEO Steve Ballmer, whose stock in the software giant is valued at about $11.7 billion, saw his salary and bonus compensation last year jump to $1.27 million from $967,000 a year earlier -- a raise of 32 percent during a year when the company began shipping its Vista operating system after long delays, according to Microsoft's proxy statement filed Friday with the U.S. Securities and Exchange Commission.

But his company said Ballmer's pay still lagged the average for similar U.S. executives and said Ballmer was "underpaid."

Ballmer, 51, has been a top executive of the company almost since its inception and remains its second-largest shareholder after co-founder Bill Gates. According to the proxy, Gates himself still owns about $25.1 billion worth of shares of Microsoft stock, but since he was not one of the highest-paid executives of the company during its 2007 fiscal year the company did not report Gates' salary.

Following Ballmer on Microsoft's best-compensated executives list were COO Kevin Turner, who saw a combined compensation of salary, bonus and stock awards total $8.45 million; Kevin Johnson, president of Microsoft's Platforms and Services Division, with $7 million in compensation; Jeff Raikes, president of Microsoft's Business Division, with $6.1 million; and CFO Christopher Liddell with $4.7 million.

Raikes holds about $440 million worth of shares of Microsoft stock; Johnson about $41 million; and Liddell about $2.8 million.

The proxy explained in painstaking detail the reasons for Ballmer's raise and what was behind his compensation, which included no stock awards.

"Mr. Ballmer has for many years been a significant shareholder of Microsoft," the company wrote. "Because his interests are already closely aligned with shareholders' interests, the Compensation Committee and Mr. Ballmer agree that he should not receive equity compensation." And, despite his raise, the company said his compensation was actually "below competitive levels" for the IT industry and big U.S. companies, where the average was $1.4 million in salary and $5.5 million in bonuses. "The average chief executive officer total compensation for the peer group companies was $13.9 million," the company wrote.

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