Chapter 9 Microsoft Analysis

Brandon Hayes, David Jacobs, Mark Piechalak

Microsoft uses information control as there type of strategic control. The book states that

this strategy is primarily concerned with whether or not organization is “doing the right things”.

Microsoft fits under this category of informational control because as a company they gather

and analyze information from the internal and external environment in order to obtain the best fit

between the organization’s and the strategic environment. This is a very effective choice for

them as they are the leading leaders in their industry.

Microsoft has many kinds of corporate governance mechanisms that are in place. For

instance, Microsoft does sell stock, so they have shareholders. The shareholders are in charge of

electing the board of directors. Then the board of directors of Microsoft makes policies to make

sure that Microsoft’s management does not abuse their power. Microsoft’s management needs to

then fulfill all requests of the shareholders. Having a board of directors at Microsoft can be very

effective because they are a large corporation and need people to make sure they are making the

right business choices. But having a board can cause some problems.

One example of a mechanism that is making trouble is shareholder activism. It means

“​A person who attempts to use his or her rights as a shareholder of a publicly-traded corporation

to bring about social change” (Investopedia). ​ An example of shareholder activism recently is

“Members of Microsoft Corp's board have held talks with ValueAct Capital Management LP in

recent days over the activist shareholder's demands to secure a seat on the company's board”

(Damouni). ValueAct Capital has ownership in Microsoft and they are wanting a position on the

board because shareholders are upset with Microsoft’s management. Also their stock price is
 Chapter 9 Microsoft Analysis
Brandon Hayes, David Jacobs, Mark Piechalak

going down because of weak demand. The current CEO has been around for over a decade.

“The software company has said there is a CEO succession plan in place, but declined to give

details of it” (Damouni). So shareholders want plans for a new CEO because the current one is

making them lose their money. We think that is great that shareholders are protecting their

interests. If the current CEO is not making Microsoft successfully we think they should

definitely start find a new CEO.

Another mechanism is the management. Bill Gates who co founded Microsoft is only a chairman

and not the CEO. But he has a huge proportion of stock ownership. Management also had to

change was when the Dodd Frank Act went into law. “Provisions of Dodd-Frank forced

companies to make new executive-compensation disclosures in proxy statements and authorized

shareholders to hold nonbinding advisory (or ​“say on pay”​) votes on the proposed pay packages

of five executives: the chief executive officer, the CFO, and the three other most highly paid

officers” (McCann). Microsoft had to change some of their corporate governances. “Microsoft

worked with a number of shareholders to develop its say-on-pay shareholder vote approach” (

www.microsoft.com​). This has been very effective because executives were making tons of

money.

We think the Dodd Frank Act helped change some of the corporate governance

mechanisms for the better. Now they can oversee how much executives can make.

Overall, Microsoft has many governance mechanisms in place to make sure their company is

doing everything ethical.

 Chapter 9 Microsoft Analysis
Brandon Hayes, David Jacobs, Mark Piechalak

Works Cited Page

Damouni, Nadia & Rigby, Bill. “​Activist Shareholders are demanding A board seat at

Microsoft.”​ Reuters 19 Jul, 2013. Web 20, Jul, 2013.

http://www.businessinsider.com/microsoft-valueact-board-seat-2013-7

www.Investopedia.com

McCann, David. “ ​Third Wave of Exec-Pay Suits Roils.​” CFO 13 March, 2013. Web 18 Jul,

2013.

http://www3.cfo.com/article/2013/3/governance_shareholder-say-on-pay-lawsuits-dodd-frank-fa
 Chapter 9 Microsoft Analysis
Brandon Hayes, David Jacobs, Mark Piechalak

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