Microsoft’s board adopts board tenure policy

Microsoft has a longstanding commitment to pursue good governance in a way that is thoughtful, proactive and constructive. We evaluate our governance framework on a routine basis to ensure our policies meet the needs of our company and expectations of a diverse set of stakeholders. For example, last August we updated proxy access for director nominations.

Since we first adopted our Corporate Governance Guidelines, it has been our intention to maintain a board with diverse backgrounds and experiences that matches the evolution of the company. In keeping with this mindset, our Board of Directors recently adopted a board tenure policy that targets an average tenure of 10 years or less for the board’s independent directors. This policy formalizes a practice we have been following for some time, and applies to the total years of service collectively for independent directors rather than individual years of service.

Director tenure has received increasing attention among investors. Through our shareholder engagement, we know that some are concerned that extended service risks eroding director independence by producing an overly close relationship between long-serving directors and management. Others note longer service can help bridge management transitions by providing historical context and perspective, and longer-serving directors may be better positioned to oppose management.

While some have argued for bright-line term limits for outside directors, we believe the appropriate approach for Microsoft is a framework that balances a board composed of directors with extensive knowledge about Microsoft, those who can provide a fresh perspective and those with business experience relevant to our strategic ambitions. Our decision was influenced by the perspective of our investors who actively promote board refreshment and diversity at their portfolio companies. We are proud that our board is more diverse than ever, with women and ethnic minorities holding five of 12 board positions. In recent years we’ve welcomed three new directors: Padma Warrior, Sandi Peterson and Reid Hoffman.

The revised policy, included in Section 7 of our Corporate Governance Guidelines, highlights that directors should not expect to be re-nominated annually. In determining whether to recommend a director for re-election, the Governance and Nominating Committee considers the director’s participation in and contributions to the activities of the board, the results of the annual board evaluation and past meeting attendance.

We deeply value continued feedback from our shareholders, and are committed to maintaining active dialogue with our investors to ensure a diversity of perspectives are thoughtfully considered by the board.

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