Microsoft Adds Two To Board

The world's largest software company on Thursday said it had invited BMW chief Helmut Panke to join its board, along with Charles H. Noski, former vice chairman and chief financial officer of AT&T.

Panke, chairman of the board of management of BMW Bayerische Motoren Werke AG of Frankfurt, Germany, since May 2002, would be the first Microsoft board member from outside the United States.

'Helmut will bring a valuable global perspective to our board,' chairman Bill Gates said in a news release. 'His experience as chairman of one of Europe's most successful companies will be invaluable.'

Also Thursday, in a filing with the Securities and Exchange Commission, Microsoft said its top two executives earned $865,114 in salaries and bonuses for the 2003 fiscal year, up 15 percent from the year before. Gates and CEO Steve Ballmer each earned salaries of $551,667 and bonuses of $313,447.

The proxy statement said Gates holds about 10.75 percent of Microsoft's outstanding shares, or 1.16 billion. Ballmer has 3.8 percent, or 441 million shares.

A committee of three Microsoft directors sets Gates' and Ballmer's compensation. The two are eligible to receive bonuses of up to 100 percent of their salaries.

The filing also noted that a Microsoft senior vice president, Richard Emerson, surrendered 1.13 million vested options to repay a $12 million advance he got in November 2000. Microsoft declined to disclose the value of the surrendered options. Such financial arrangements are now illegal under a 2002 federal law designed to foster corporate governance reforms.

Shareholders are to vote on the new directors, as well as the re-election of the company's existing eight directors, at Microsoft's annual meeting in November. Three of the board members are current or former Microsoft executives.

From a shareholder's perspective, Microsoft hasn't been criticized for lacking accountability or having a lax board, analysts said.

'I don't think there is a specific need on their part to either improve the reality or the perception of (its) corporate governance,' said Drew Brosseau, with SG Cowen. But the overall climate on Wall Street may have contributed to Microsoft's decision, he said.

The company remains mired in a four-year long inquiry by the European Union into allegations that it tried to monopolize the market for server software and for its audio and video playing software. The company faces potential changes to its business practices as well as possible fines.

In addition, its antitrust settlement with the Justice Department and 18 states still faces a challenge by Massachusetts.

With all that as a backdrop, 'there's a need to be even more public or (have more) non-insiders on the board,' said Peter Misek, with Scotia Capital.

Ballmer said last year that the company hoped to add an international board member to broaden its perspective. The company also has acted over the past several months to address corporate governance, including adopting guidelines for board oversight of the company and establishing a committee to oversee compliance with the U.S. antitrust settlement.

Although Panke won't necessarily affect Microsoft's dealings with the EU, his presence is still valuable for the company, he said.

'Anytime you get senior executives who are familiar with the landscape and who bring the quality of a BMW chief _ I think that's a good thing,' Misek said.

Panke holds a doctorate in physics and has been with BMW since 1982. His presence on the board could bolster Microsoft's standing in Europe amid a four-year European Union antitrust investigation and threat of fines.

Noski was president of Hughes Electronics Corp., a publicly traded subsidiary of General Motors Corp., before joining AT&T in 1999. He retired from AT&T after completion of a corporate restructuring last November.

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